Problem 1

Tallahassee Clinic projected the following budget information for 2018:

Total FFS Visit Volume	90,000 visits
Payer Mix:
Blue Cross	40%
Celtic Insurance Company	60%
Reimbursement Rates:
Blue Cross	$25 per visit
Celtic Insurance Company	$20 per visit
Variable Costs Resource Inputs:
Labor	48,000 total hours
Supplies	100,000 total units
Variable Costs Input Prices:
Labor	$25 per hour
Supplies	$1.50 per unit
Fixed Costs (overhead, plant, and equipment)	$500,000

Construct Tallahassee Clinics static operating budget for 2018. (See Exhibit 8.3, page 283. Note that there are four components that need to be included: Volume Assumptions, Revenue Assumptions, Cost Assumptions, and the Pro Forma Profit and Loss or P&L projected Statement.)

EXHIBIT 8.3 PAGE 283:

1. Volume assumptions:

1. FFS 36,000 visits
2. Capitated lives 30,000 members

Number of member-months 360,000

Expected utilization per

Member-month 0.15

Number of visits 54,000 visits

3. Total expected visits 90,000 visits

2. Revenue Assumptions:

1. FFS $25 per visit

X 36,000 visits

$900,000

2. Capitated lives 3 PMPM

X 360,000 actual member months

$1,080,000

3. Total expected revenues $1,980,000

3. Cost Assumptions:

1. Variable costs:

Labor $1,200,000 (48,000 hrs at $25/hr)

Supplies 150,000 (100,000 units at $1.50/unit)

Total variable costs $1,350,000

Variable cost per visit $ 15 ((1,350,000/90,000)

2. Fixed costs:

Overhead, plant, & equip $500,000

3. Total expected costs $1,850,000

4. Pro Forma Profit and Loss (P&L) Statement:

Revenues:

FFS $900,000

Capitated 1,080,000

Total $1,980,000

Costs:

Variable:

FFS $540,000

Capitated 810,000

Total $1,350,000

Contribution Margin $630,000

Fixed Costs 500,000

Projected profit $130,000