INPUT DATA: Contractual

Average allowances,

Payer charge discounts,

Payer mix per test bad debts

Medicare $41\%$ $$90040\%$

Medicaid $17\%$ $$70035\%$

Blue Cross $/$ Private insurance $17\%$ $$1,00050\%$

Managed care $14\%$ $$80045\%$

Self$-$pay $5\%$ $$50090\%$

Other $6\%$ $$80030\%$

Total $100\%$

Equipment cost $$300,000$

Equipment installation $$30,000$

Year $1$ number of tests per year $600$

Years $2-5$ test volume growth rate $10\%$

Net patient revenue inflation rate $2\%$

Tests per $1\mathrm{.}0$ nurse FTE $750$

Annual nurse salary & benefits $$100,000$

Nurse salary & ben inflation rate $5\%$

Smith MOB Year $1-5$ rent per year $$39,000$

Omega REIT Year $1-2$ rent per year $$36,000$

Omega REIT Year $3-5$ rent per year $$42,000$

Annual maintenance costs $$50,000$

Supplies cost per test $$20$

Maint & sup cost inflation rate $3\%$

Salvage value $$100,000$

Tax rate $21\%$

Pre$-$tax cost of capital $8\%$

Yr $1$ Yr $2$ Yr $3$ Yr $4$ Yr $5$ Yr $6$

MACRS recovery allowances $20\%32\%19\%12\%11\%6\%$

MODEL$-$GENERATED DATA:

$606672\mathrm{.}672\mathrm{.}679\mathrm{.}9$

Test volume:

$012345$

Total number of tests per year $600660726799879$

Net patient revenue:

Contractual Year $1$

Year $1$ allowances, net

number discounts patient

Payer of tests Charges bad debts revenue

Medicare $246$ $$221,400$ $$88,560$ $$132,840$

Medicaid $102$ $$71,400$ $$24,990$ $$46,410$

Blue Cross $/$ Private insurance $102$ $$102,000$ $$51,000$ $$51,000$

Managed care $84$ $$67,200$ $$30,240$ $$36,960$

Self$-$pay $30$ $$15,000$ $$13,500$ $$1,500$

Other $36$ $$28,800$ $$8,640$ $$20,160$

Total $600$ $$505,800$ $$216,930$ $$288,870$

$012345$

Average net patient revenue per test $$481$ $$481$ $$481$ $$481$ $$481$

Net patient revenue $$288,870$ $$317,757$ $$349,533$ $$384,319$ $$423,195$

Nursing cost:

$012345$

Nursing FTEs $1\mathrm{.}01\mathrm{.}01\mathrm{.}02\mathrm{.}02\mathrm{.}0$

Annual nurse salary & benefits $$100,000$ $$105,000$ $$110,250$ $$115,763$ $$121,551$

Nurse cost $$100,000$ $$105,000$ $$110,250$ $$115,763$ $$121,551$

$$5,000$ $$5,250$ $$5,513$ $$5,788$

Rent:

$012345$

Smith MOB $$39,000$ $$39,000$ $$39,000$ $$39,000$ $$39,000$

Omega REIT $$36,000$ $$36,000$ $$42,000$ $$42,000$ $$42,000$

After$-$tax cost of capital $6\mathrm{.}32\%$

PV cost of rent $($Smith MOB$)$ $$162,862$

PV cost of rent $($Omega REIT$)$ $$164,438$

Maintenance and supplies:

$012345$

Maintenance $$50,000$ $$51,500$ $$53,045$ $$54,636$ $$56,275$

Supplies

Cost per test $$20\mathrm{.}00$ $$20\mathrm{.}60$ $$21\mathrm{.}22$ $$21\mathrm{.}85$ $$22\mathrm{.}51$

Annual cost $$12,000$ $$13,596$ $$15,404$ $$17,462$ $$19,786$

Total maintenance and supplies $$62,000$ $$65,096$ $$68,449$ $$72,098$ $$76,062$

Net cash flows:

$012345$

Equipment cost $$300,000$

Equipment installation $30,000$

Net patient revenues $$288,870$ $$294,647$ $$300,540$ $$306,551$ $$312,682$

Nursing cost $$100,000\mathrm{.}00$ $$105,000\mathrm{.}00$ $$110,250\mathrm{.}00$ $$115,763\mathrm{.}00$ $$121,551\mathrm{.}00$

Rent $$39,000\mathrm{.}00$ $$39,000\mathrm{.}00$ $$39,000\mathrm{.}00$ $$39,000\mathrm{.}00$ $$39,000\mathrm{.}00$

$$36,000\mathrm{.}00$ $$36,000\mathrm{.}00$ $$42,000\mathrm{.}00$ $$42,000\mathrm{.}00$ $$42,000\mathrm{.}00$

Maintenance and supplies $$62,000\mathrm{.}00$ $$65,096\mathrm{.}00$ $$68,449\mathrm{.}00$ $$72,098\mathrm{.}00$ $$76,062\mathrm{.}00$

MACRS Depreciation $60,00096,00057,00036,00033,000$

Operating income $($$$8,130)($$$46,449)($$$16,159)$ $$1,690$ $$1,069$

Taxes $(1,707)(9,754)(3,393)355224$

Net operating income $($$$6,423)($$$36,695)($$$12,766)$ $$1,335$ $$845$

MACRS Depreciation $60,00096,00057,00036,00033,000$

Salvage value $100,000$

Tax on salvage value $($calculated below$)21,000$

Net cash flow $$330,000$ $$53,577$ $$59,305$ $$44,234$ $$37,335$ $$154,845$

Depreciable basis $$200,000$

Years $1-5$ MACRS depreciation $$22,000$ $