Part D: Break-Even Analysis

Background: RN-BSN students in the Division of Nursing at Winston-Salem State University have developed a proposal for a nurse manage center. The financial officer and dean have asked the group to provide evidence of fiscal feasibility. The team provides calculations based on a 1 year period. All donated costs are included. Staff Salaries and benefits are $158,750.00. Donated practice faculty time equals 84,000.00. Equipment purchases, contracts, and rent costs are in the table below. Variable costs identified in the figure below come to $51,000.500. Information concerning the Average Price per visit, the estimated annual visit volume, and the variable cost per visit are included in figure below.

1.Using the information in the table below, the team will need to calculate the Break-even Analysis to determine the number of visits necessary to break even.Show formula and computation. (5pts)

Fixed Costs

Staff salaries and benefits $158,750.00

Faculty practice salaries & benefits 84,000.00

Equipment purchases 27,800.00

Contracts for pharmacist & med director 17,000.00

Rent 12,000.00

Sub-total $299,550.00

Variable Costs

Supplies purchased $15,200.00

Supplies donated 25,000.00

Medications and chemicals 4,800.00

Consultant evaluations 6,500.00

Sub-total $51,500.00

Average price per visit= $60.50

Estimated annual visit voloume = 4,250 visits

Variable cost per visit =$51,500/4,250=$12.12/visit

Background: The RN-BSN Student group presented their findings to the board. The board informed the group that additional information would be needed since the proposal included the use of Nurse Practitioner that would bill according toCPT codes. Since reimbursement is dependent upon coding, the RN-BSN team was asked to project the break- even analysis for visits when considering reimbursement for each CPT code, the variable costs associated with each type of visit and the estimated percentage of visits for each CPT code for both new and existing patients.The RN-BSN team historical data and partnered with the Health Care Management students and faculty to develop the table below.

Visit CPT Code Visit Price Variable Cost Contribution Margin Percentage of Weight Contribution

per visit () = loss Visits Margin

New patient

99201 $30 $35* ($5) 10% (0.5)

99202 45 20 25 11 2.75

99203 65 30 35 9 3.15

99204 80 32 48 14 6.75

99205 90 40 50 10 5.0

Existing patient

99211 20 22 (2) 10 (0.2)

99212 40 20 20 9 1.8

99213 50 25 25 8 2.0

99214 75 35 40 10 4.0

99215 110 40 70 12 8.4

32.90

2.Based on the total weighted contribution margin, recalculate the break-even analysis for the required number of visits each year.(AKA-The number of visits needed to break even based on the projection of patient type) (5 pts)

3.How can the information from questions Part D1 and Part D 2 be used together to help the team make organizational and practice model decisions concerning the center? Provide a rationale with supporting evidence. (5 pts)