Question

Assumptions	Average Charge: $120	Year 1	Year 2	Year 3	Year 4	Year 5
	Contractual Adjustmen is 30%
	Expenses increase by 5% in a year
	Initial capital for equipment supplies and contingency plan is : $275,000
Proforma Format
Revenue:
Gross Revenue	[# of patient visits X average charge]
Contractual Adjustment	[.30 X average charge
Net revenue	[gross revenue - contractual adjustment]

Patient visits: Year 1 = 7000 (assume they will increase by 10% each year),

Answer 1

		1st year	2nd year	3rd year	4th year	5th year
A	Average charge (as expenses are increasing 5% in every year so we assume correspondingly charges also increase by 5% in each year)	120	126	132	138	145
B	Number of patients ( Number of patients are increase by 10% in each year)	7,000	7,700	8,470	9,317	10,248
C	GROSS REVENUE (patient visit*average charge) A*B	840,000	970,200	1,118,040	1,285,746	1,485,960
D	Contractual adjustment. (30% of average charge) C*30%	252,000	291,060	335,412	385,724	445,788
E	NET REVENUE (C-D)	588,000	679,140	782,628	900,022	1,040,172
	*Calculation is done upto the nearest $.

In this question the capital initial equipment and contingency plan assumed as capital expenditure hence not included in above calculation, if we treat this expenditure as revenue expenditure than the net revenue of 1st year would be less than $275,000.