Assume the local Children\'s Hospital implements an outpatient asthma interventi

Question

Assume the local Children's Hospital implements an outpatient asthma intervention to improve the health outcomes of children with asthma. As a result, the hospital sees a dramatic reduction in the number of inpatient admissions for children with asthma but little change in the total cost of operating the hospital. Which of the following statements describes the most likely reason for the lack of cost savings?

A)The hospital's cost structure primarily consists of variable costs.

B)The hospital's cost structure primarily consists of fixed costs.

C) The hospital's cost structure consists of an equal mix of variable and fixed costs.

D) The hospital reduced its capacity (i.e., downsized) following the drop in admissions.

E) The hospital has a high variable cost per admission.

Explanation / Answer

C) The hospital's cost structure consists of an equal mix of variable and fixed costs.

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