Textbook is financial management of healthcare organizations fifth edition.

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Expand-or-reduce decision. Janet Gilbert is director of a lab. She has some extra capacity and has contracted with some small neighboring hospitals to run some of their lab tests. She has recently had a study conducted and has determined that her costs for these contracts are $60,000, of which $10,000 is the variable cost of supplies. The rest is nonavoidable fixed cost. She currently charges an average of $35 per test. She is thinking of lowering her price by 10 percent in hopes of raising her current volume of 30,000 tests by 30 percent. If she does so, she expects her variable cost per test will go up by 5 percent. Determine the current and predicted (a) revenues, (b) variable costs, and (c) total contribution margin and product margin. What should she be recommended to do? Why? Reduce-or-expand decision. The administrator of ABC Hospitat, Mr. Stevens, has luat recelved the latest financial report, and the news is not good. The hospital has been losing money lor. over a year, and if things don't Improve it may lose its AA bond rating. Stevens has met with his vice president of finance, Mr. Sanger, and has asked him to identify areas for cuting conth. beginning with services that are operating at a loss. The following information is for vervices provided at ABC Hospital's ambulatory care clinic: 3. Suppose that all fixed costs are avoldable. What should Sanger recommend to Stevens regarding dropping the clinic? b. What if only $300,000 of the fixed costs were avoldable? Would this change his recommendation? c. Are there any other considerations that shouid be taken into account when making this decision? 1). Break-even. Sure Care Health Maintenance Organization is seeking a managed care contrnct with a local manufacturing plant. Sure Care estimates that the cost of providing preventive and curative care for the 700 employees and their families will be $150,000 per month. The manofacturing company offered Sure Care a premium bid of $350 per employee per month. a. If Sure Care accepts this bid and contracts with the manufacturing firm, will Sure Care eam a profit or loss for the year? How much? b. What premium per employee per month does Sure Care need to break even? c. If Sure Care wants to earn $190,000 in profit for the year, what is the required premlumper employee per month? d. What concerns Sure Care in this analysis