Since most of the nurses work part-time in this portion of the business, assume that no home health nurse will reach the maximum annual wages for any of the payroll taxes. Therefore, each visit would have these taxes paid by the Agency. Management and Office staff would be subject to the maximum limitations of these payroll taxes.
Dade Home Health Agency was incorporated to do business in the State of Nevada in 2015. The for-profit agency provides private duty nursing services and home health visit services to high- risk pediatric patients in the Las Vegas area. The Agency has experienced substantial growth in the past year. The owners, Melody and Donna, feel they spend an enormous amount of time on home health visit matters and that the revenue billed in relation to that of private duty nursing is very small. Indeed, they don't know if they are making any money on this part of their business. In 2018, the agency generated 4,800 home health visits. You have been retained by the Agency to prepare a cost analysis of the home health visit portion of their practice. You have promised them you would provide them with the following information: A break-even analysis of the home health visit practice A schedule of annual visits listing the projected profits/losses for various levels of activity Your recommendations to improve this portion of the business (if they wish to continue the home health visit portion of their business) After you visit to the Agency, you have compiled the following information: 1. The Agency bills $160.00 for each home health visit 2. It is estimated that 13% of the billed rate will be written off to contractual allowances and free care 3. For each home health visit, the home health nurse receives a visit salary of $65.00 plus employee benefits 4. Home health nurses are considered to be employees of the Agency. The Agency, in addition to the $65.00 visit fee pays the following payroll taxes for each nurse: Medicare Tax Social Security (FICA) Federal Unemployment (FUTA) State Unemployment (SUI) .0145 of salary .062 of the first $128,400 of salary .008 of the first $7,000 of salary .0600 of the first $12,000 of salary 5. Salaried management and office personnel keep a detailed log of time spent on the Home Visit portion of the Agency's business. Their logs reveal the following percentage of time spent and their annual 100% salary paid them in 2018: Director Biller Payroll Coordinator Secretary Nurse Supervisor Nurse Scheduler TIME SPENT dollar. 30% 50% 35% 20% 100% ANNUAL SALARY $135,000 40,000 32,000 26,000 72,000 35,000 30% Note: These employees will have worked the full year. Therefore the maximum amounts of the payroll related tax expenses in item 4 would apply. Use the payroll tax percentages/maximums in item 3 to compute these overhead salaries. Round to the nearest 6. Bad debt expenses have been estimated to be $20,000 for the home visit portion of the Business. 7. The Agency incurs an average of $3.45 in supplies expenses per visit. These expenses are included in the billing rate and are not chargeable to the patient. 8. The interest and principal portion of the Agency's mortgage allocated to the home visit portion of the business of $29,000. 9. For lack of better information, other overhead expenses for office supplies, equipment leasing expenses, travel reimbursement, etc. for the home health visit portion of the business are estimated to be $48,000 for the year. TO DO: 1. Complete the payroll calculations. Complete the break-even analysis. NOTE: you may need to add or delete lines to complete your analysis. Round to the nearest whole visit. 2. Complete the schedule of annual visits, showing the profit/loss at various levels of activity. Round to the nearest dollar. 3. Write your recommendation(s) regarding the continuation of the home health visit portion of the business. How could this agency increase the number of visits rendered and/or decrease operating costs? At various levels of activity, what would be the profit/loss annually? Indicate a loss by using brackets (e.g. ($1,000) around the numbers. Show all calculations below: A. 5,000 visits per annum $ B. 7,500 visits per annum $ C. 9,500 visits per annum $ (profit/loss) (profit/loss) (profit/loss) Dade Home Health Agency was incorporated to do business in the State of Nevada in 2015. The for-profit agency provides private duty nursing services and home health visit services to high- risk pediatric patients in the Las Vegas area. The Agency has experienced substantial growth in the past year. The owners, Melody and Donna, feel they spend an enormous amount of time on home health visit matters and that the revenue billed in relation to that of private duty nursing is very small. Indeed, they don't know if they are making any money on this part of their business. In 2018, the agency generated 4,800 home health visits. You have been retained by the Agency to prepare a cost analysis of the home health visit portion of their practice. You have promised them you would provide them with the following information: A break-even analysis of the home health visit practice A schedule of annual visits listing the projected profits/losses for various levels of activity Your recommendations to improve this portion of the business (if they wish to continue the home health visit portion of their business) After you visit to the Agency, you have compiled the following information: 1. The Agency bills $160.00 for each home health visit 2. It is estimated that 13% of the billed rate will be written off to contractual allowances and free care 3. For each home health visit, the home health nurse receives a visit salary of $65.00 plus employee benefits 4. Home health nurses are considered to be employees of the Agency. The Agency, in addition to the $65.00 visit fee pays the following payroll taxes for each nurse: Medicare Tax Social Security (FICA) Federal Unemployment (FUTA) State Unemployment (SUI) .0145 of salary .062 of the first $128,400 of salary .008 of the first $7,000 of salary .0600 of the first $12,000 of salary 5. Salaried management and office personnel keep a detailed log of time spent on the Home Visit portion of the Agency's business. Their logs reveal the following percentage of time spent and their annual 100% salary paid them in 2018: Director Biller Payroll Coordinator Secretary Nurse Supervisor Nurse Scheduler TIME SPENT dollar. 30% 50% 35% 20% 100% ANNUAL SALARY $135,000 40,000 32,000 26,000 72,000 35,000 30% Note: These employees will have worked the full year. Therefore the maximum amounts of the payroll related tax expenses in item 4 would apply. Use the payroll tax percentages/maximums in item 3 to compute these overhead salaries. Round to the nearest 6. Bad debt expenses have been estimated to be $20,000 for the home visit portion of the Business. 7. The Agency incurs an average of $3.45 in supplies expenses per visit. These expenses are included in the billing rate and are not chargeable to the patient. 8. The interest and principal portion of the Agency's mortgage allocated to the home visit portion of the business of $29,000. 9. For lack of better information, other overhead expenses for office supplies, equipment leasing expenses, travel reimbursement, etc. for the home health visit portion of the business are estimated to be $48,000 for the year. TO DO: 1. Complete the payroll calculations. Complete the break-even analysis. NOTE: you may need to add or delete lines to complete your analysis. Round to the nearest whole visit. 2. Complete the schedule of annual visits, showing the profit/loss at various levels of activity. Round to the nearest dollar. 3. Write your recommendation(s) regarding the continuation of the home health visit portion of the business. How could this agency increase the number of visits rendered and/or decrease operating costs? At various levels of activity, what would be the profit/loss annually? Indicate a loss by using brackets (e.g. ($1,000) around the numbers. Show all calculations below: A. 5,000 visits per annum $ B. 7,500 visits per annum $ C. 9,500 visits per annum $ (profit/loss) (profit/loss) (profit/loss)
