ABC Outpatient Clinic is considering a capitated agreement with an insurance company where the clinic would provide outpatient coverage to a 1,000-member plan at $75 per member per month. Variable costs are projected at $150 per clinic visit, and fixed costs allocated to the agreement are $600,000.

REQUIRED:

1. What is the break-even point in the volume of member-clinic visits?

2. What is the utilization rate at break-even point?

3. What is the projected loss if the utilization is 3?

4. What is the projected profit if the utilization is 0.8?

5. Assuming a projected utilization rate of 3, how many members should be enrolled in the capitation agreement to break-even?