Question

The Anacome County Health Department is considering using 300 square feet of excess office space to provide a clinic for Healthchek visits. These visits are reimbursed $75 under a Medicaid program. Variable costs per visit are $45, and providing the service requires an additional physician assistant and nurse with prorated salaries of $85,000 and $65,000 respectively. The state has mandated efforts to increase the utilization of of Medicaid eligibility, so the Department of Social Services is conducting interventions to increase eligibility awareness in the community. As a result, the health department expects 12,000 Healthchek visits in the coming year. Nonavoidable overhead costs for the health department are $300,000 per year and will be allocated to each program based on its proportional share of the health department's total office space of 2,700 square feet.

a) What are the total contribution margin and total product margin for a Healthchek visit?

b) Considering the total product margin, should the health department add the clinic and provide the service ? Enter ADD or NOT ADD as your answer.

Answer 1