SCENARIO 11-11 A Physician and President of a Tampa Health Maintenance Organization

question 3

Multiple Choice

SCENARIO 11-11
A physician and president of a Tampa Health Maintenance Organization (HMO) are attempting to
show the benefits of managed health care to an insurance company.The physician believes that
certain types of doctors are more cost-effective than others.One theory is that Primary Specialty is an
important factor in measuring the cost-effectiveness of physicians.To investigate this, the president
obtained independent random samples of 20 HMO physicians from each of 4 primary specialties -
General Practice (GP) , Internal Medicine (IM) , Pediatrics (PED) , and Family Physicians (FP) - and
recorded the total charges per member per month for each.A second factor which the president
believes influences total charges per member per month is whether the doctor is a foreign or USA
medical school graduate.The president theorizes that foreign graduates will have higher mean
charges than USA graduates.To investigate this, the president also collected data on 20 foreign
medical school graduates in each of the 4 primary specialty types described above.So information on
charges for 40 doctors (20 foreign and 20 USA medical school graduates) was obtained for each of
the 4 specialties.The results for the ANOVA are summarized in the following table.
-Referring to Scenario 11-11, what assumption(s) need(s) to be made in order to conduct the
Test for differences between the mean charges of foreign and USA medical school graduates?

• A) There is no significant interaction effect between the area of primary specialty and the medical school on the doctors' mean charges.
• B) The charges in each group of doctors sampled are drawn from normally distributed populations.
• C) The charges in each group of doctors sampled are drawn from populations with equal variances.
• D) All of the above are necessary assumptions.

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Definitions:

Interest Receivable

The amount of interest that has been earned but not yet received in cash or recorded by the recipient company.

Effective Interest Rate

The real rate of interest earned or paid on an investment, loan, or other financial product, accounting for the effects of compounding.

Bank Discounts

An interest deduction from the face value of a note, payable by the borrower at the time a loan is issued.

Reversing Entry

An accounting method used to reverse the impact of certain journal entries made in the previous accounting period for the sake of simplicity in future record keeping.