ASSIGNMENT III

HCA 341 Financial Management in Health Care-

FALL 2017

1. Consider the data in the table below for the three health services organizations:

(In thousands of $) 1 pt. each

Sales Total Variable Fixed Total Profit

Costs Costs Costs

a. $7,900 $2,875 ? $5,650 ?

b. ? $3,300 ? $4,650 $2,830

c. $8,250 ? $3,550 ? $2,200

Fill in the missing data where there are question marks.

2. Community Hospital, a non-for-profit acute care facility, has the following cost structure for its inpatients services: 19 pts. total

Fixed costs $180,500,000

Variable cost per inpatient day $3,100

Charge (revenue) per inpatient day $5,700

The Hospital expects to have a patient load of 127,750 inpatient days next year.

a. Construct the Hospitals base case projected P&L statement (in 000s). 5 PTS.

b. What is the Hospitals breakeven point? 5 PTS.

c. What volume is required for a profit of $115,000,000? A profit of $97,000,000? 4 PTS.

d. Now, assume that 20 percent of the hospitals inpatients come from a managed care plan that wants a 20 percent discount from charges, or else it will take its patients elsewhere. Should the hospital agree to the discount proposal? (Show all work) 5 PTS.

A 20% DISCOUNT MEANS A $4,560 CHARGE PER INPATIENT DAY

20% OF INPATIENT DAYS MEANS 25,550 LESS INPATIENT DAYS FROM THE MCO