HCA341

assignment #3

ASSIGNMENT III

HCA 341 Financial Management in Health Care- SPRING 2017

1. Community Hospital, a non-for-profit acute care facility, has the following cost structure for its inpatients services: 7 pts.

Fixed costs $169,300,000

Variable cost per inpatient day $2,900

Charge (revenue) per inpatient day $5,300

The Hospital expects to have a patient load of 104,000 inpatient days next year.

1. Construct the Hospital?s base case projected P&L statement.

1. What is the Hospital?s breakeven point?

c. What volume is required to provide a profit of $65,000,000? A profit of $95,000,000?

Now, assume that 25 percent of the hospital?s 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?

A 20% DISCOUNT MEANS $4,240 CHARGE PER INPATIENT DAY

25% OF INPATIENT DAYS MEANS 26,000 LESS INPATIENT DAYS FROM THE MCO

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

(In thousands of $) pt. each

Sales Total Variable Fixed Total Profit

Costs Costs Costs

a. $7,500 $2,500 ? $5,350 ?

b. ? $3,200 ? $4,750 $2,500

c. $8,100 ? $3,250 ? $3,350

Fill in the missing data where there are question marks.

ASSIGNMENT III HCA 341 Financial Management in Health Care- SPRING 2017 1. Community Hospital, a non-for-profit acute care facility, has the following cost structure for its inpatients services: 7 pts. Fixed costs $169,300,000 Variable cost per inpatient day $2,900 Charge (revenue) per inpatient day $5,300 The Hospital expects to have a patient load of 104,000 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 $65,000,000? A profit of $95,000,000? d. Now, assume that 25 percent of the hospital's 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? A 20% DISCOUNT MEANS $4,240 CHARGE PER INPATIENT DAY 25% OF INPATIENT DAYS MEANS 26,000 LESS INPATIENT DAYS FROM THE MCO 2. Consider the data in the table below for the three independent health services organizations: (In thousands of $) pt. each Sales a. b. c. $7,500 ? $8,100 Total Variable Costs Fixed Costs Total Costs Profit $2,500 ? $5,350 ? $3,200 ? $4,750 $2,500 ? $3,250 ? Fill in the missing data where there are question marks. $3,350