Question

A non-profit health care facility has the following cost structure for its inpatient services:

$10,000,000 (fixed costs)

$200 (variable cost/inpatient day)

$1000 (Charges/Revenue per inpatient day)

The health care facility expects to have a patient load of 15,000 inpatients next year.

• Construct the health care facility’s base case forecasted P & L statement.
• What is the facility’s breakeven point?
• What volume is required to provide a profit of $500,000.00?
• Now assume that 20 percent of the facility’s inpatients come from a managed care plan that wants a 25% discount from charges. Should the facility agree to the discount proposal? Why or Why Not?

Answer 1