Omni, Inc Manages a Medical-Expense Reimbursement Program for Colleges and Universities

question 65

Essay

Omni, Inc. manages a medical-expense reimbursement program for colleges and universities throughout the United States. University employees submit claims for reimbursement of medical expenses from reimbursement accounts established each year by the employees. Omni then processes reimbursement requests, verifies the legitimacy of each request, computes the deductible and co-payment required, determines whether the employee's expense reimbursement account has adequate funds available, and, if applicable, issues a reimbursement check to the eligible employee.
Omni employs three different types of clerks who manage these reimbursement accounts: managers, clerical staff-1, and clerical staff-2. The managers are each paid $50,000 per year, clerical staff-1 employees are paid $40,000 per year, while clerical staff-2 employees are paid $35,000 per year. Based on prior experience, for every 150,000 claims processed per year, Omni needs to budget for one manager's position, two clerical staff-1 positions, and six clerical staff-2 positions.
Last year, Omni processed 2 million reimbursement claims, and employed 14 managers, 30 clerical staff-1 employees, and 83 clerical staff-2 employees.
Required:
1. Based on the data provided, calculate the cost savings or excess staffing costs for Omni during the most recent year. (Assume that the policy of the company is to hire only full-time employees.)
2. What managerial insights are suggested on the basis of your analysis? If you were attempting to judge the processing efficiency of Omni's staff, what additional information might you want to have?

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Definitions:

Investment Opportunity

An option to invest capital with the expectation of generating a return, including stocks, bonds, real estate, or business ventures.

Required Rate of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Operations

The day-to-day activities required for the business to function, including production, sales, and administration.

Residual Income

The amount of income that an entity has after all personal debts and expenses, including the mortgage, have been paid.