General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:

The hospital expects to have a patient load of 15,000 inpatient days next year.

a. Construct the hospital’s base case projected P&L statement.

b. What is the hospital’s breakeven point?

c. What volume is required to provide a profit of $1,000,000? A profit of $500,000?

d. Now, assume that 20 percent of the hospital’s inpatients come from a managed care plan that wants a 25 percent discount from charges.
Should the hospital agree to the discount proposal?

Transcribed Image Text:

Fixed costs Variable cost per inpatient day Charge (revenue) per inpatient day $10,000,000 $200 $1,000