Hello,

I need some help with these practice problems for my Healthcare Financial Management course. I have attached an excel workbook of 5 problems.

1. The Suffolk Hospital is considering opening a new Urgent Care Center in a neighboring town. You have been asked to evaluate the Urgent Care Center's potential profitability and make a recommendation to either pursue or not pursue this project. You have estimated the following data: (10 points) Expected number of annual visits 8,000 Revenue per visit $100 Salaries and benefits $500,000 Drugs 80,000 Rent 70,000 Medical supplies 60,000 Utilities 50,000 Assume that all costs are fixed except drugs and medical supplies, which are variable. a. Prepare the Urgent Care Center's base case projected P&L Statement. b. What is the Urgent Care Center's projected per visit contribution margin and total contribution margin? c. What volume of visits will be required to break even? d. What volume of visits is required to make a $100,000 profit? e. What would the profit be if an insurance company that constitues 10% of the expected visits proposes a 15% discount per visit? f. Explain if you would accept the insurance company's discount proposal. Why? 2. The Suffolk Hospital Emergency Department performs five visit levels that vary in complexity i. e. Levels 1-5. A relative value unit (RVU) analysis indicates the following RVU values. (5 points) Visit Level 1 2 3 4 5 RVU's 30 40 50 60 70 Visits 6,000 10,000 17,000 7,000 2,000 Cost Price The total annual costs to operate the Emergency Department are $5,970,000. a. Using the RVU methodology, what is the cost per visit for each emergency visit level? b. If the goal of the Emergency Department is to earn a 10% profit margin on each visit, what price should be set for each visit level? 3. The Suffolk Hospital has the five following payer groups: (10 points) Payer Medicare Medicaid Blue Cross Harvard Tufts Total Number of Admissions 7,000 1,000 3,000 2,000 2,000 15,000 Avg. Revenue Per Admission $6,000 4,000 5,000 5,300 5,200 Variable Cost Per Admission $5,000 4,000 4,100 4,200 4,300 The Hospital's fixed costs are $12,000,000. a. Prepare the Hospital's P&L Statement. b. Assume that 20% of the Blue Cross 50,000 covered lives move into a capitated plan. All utilization and cost remain the same. What PMPM will the Hospital have to obtain to retain the same profit in part a. c. What profit would be generated if the Blue Cross capitated members admission rate was reduced by 10%? d. Assuming that in addition to the Blue Cross capitated 10% admission rate reduction in c. (above) the remaining Blue Cross capitated admissions achieved a variable cost reduction of 10%. What is the revised Hospital profit? 4. The Suffolk Hospital is setting the price for its new Cardiac Cath Lab. The Cath Lab is expected to have the following cost structure: (10 points) Variable cost per procedure Annual direct fixed costs Annual overhead cost allocation Expected number of procedures $500 $5,000,000 $400,000 2,000 a. What procedure price must be set to breakeven? To earn a $600,000 profit? b. What procedure price must be set to breakeven if the variable cost is reduced to $450 per procedure? To earn a $1,000,000 profit? 5. The Suffolk Homecare Corporation has four revenue producing patient service departments: nursing, pharmacy, physical therapy and social service. The Homecare's cost accountant has decided to allocate the human resource department's $600,000 of direct costs to the patient service departments using the direct allocation method. Two cost drivers were under consideration: department revenue and full-time equivalents (FTE) employees. The patient service departments generated $10,000,000 in revenue and employed 100 FTE's. (5 points) Department Revenue FTE's Nursing $4,000,000 50 Pharmacy 3,000,000 5 Physical Therapy 2,000,000 25 Social Service 1,000,000 20 Total $10,000,000 100 a. What is the value of the cost pool? b. What is the allocation rate if revenue is the cost driver? c. What is the allocation rate if FTE's is the cost driver? d. What is the dollar cost allocation of human resources cost if revenue is the cost driver? e. What is the dollar cost allocation of human resources cost if FTE's is the cost driver? f. What is the difference in the dollar cost allocation to each patient service department between the two cost drivers? g. Which of the two cost drivers is better? Why