M 4 Research Project: Net Operating Income

Determine the total net operating revenue resulting from Weston General Hospital whose payor mix and case volume is as follows.

Be sure you show your work for each step in the problem and each calculation in the process.

Givens:

Hospital charge per case = $2,600

Hospital cost per case = $2,300

Total case volume = 100 cases

Payor mix and expected volume of each:

# of Cases By Payor	Actual Payment Received Per Case
Medicare = 34 cases	$2,200
PPO = 20	95% of charge per case
BC = 21	$2,400
Medicaid = 15	$2,000
Self-pay = 8	100% of charge per case
Charity = 2	0

2)Hints:

Calculate total hospital gross revenue (total cases X charge per case)

Calculate deductions from total hospital gross revenue by payor (total gross revenue total actual payments received)

Calculate total hospital net revenue received

Calculate total hospital cost (total cases X cost per case)

Calculate total hospital net operating revenue (may be a positive or negative number i.e. profit or loss)

3)Answer: $__________________________

In order for Weston General Hospital to achieve a positive net operating revenue (net profit), identify:

Which payor listed above will yield the most revenue per case?

Answer: __________________________

What is the minimum number of additional whole cases (round up) needed from this payor to yield a positive total hospital net operating revenue (net profit)?

Hints:

Calculate net operating revenue per case from this payor (payment per case, minus cost per case)

Calculate the number of cases needed from this payor to make a profit (divide the total hospital net operating revenue [answer 3 for Part A] by the net operating revenue per case from this payor.

Based on the result of this calculation, what is the additional number of whole cases (round up any fractional answer) needed from this payor to create a positive total hospital net operating revenue (profit) for Weston General Hospital?

Answer: __________________________