Question
Finkler Residential Treatment Facility anticipates that it will have 25,000 patient-days next year. This is substantially below its capacity of 35,000 patient-days per year. The
Finkler Residential Treatment Facility anticipates that it will have 25,000 patient-days next year. This is substantially below its capacity of 35,000 patient-days per year. The facility has variable costs of $75 per patient-day. Its fixed costs are $1,500,000 per year. a. Calculate the average cost per patient-day for Finkler Residential Treatment Facility at a volume of 25,000 patient-days and at 30,000patient-days. b. Assume that an HMO offers to generate 5,000 patient-days per year. It currently sends no patients to Finkler Residential Treatment Facility. It is willing to pay a maximum flat amount of $90 per patient-day. Assuming that its case mix is similar to the current 25,000 patient-days, should Finkler accept its business?
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