You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

Number of Budgeted Procedures	10,000
Budgeted Cost	$400,000
Desired Profit	$ 80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer	Volume %	Discount %
Blue Cross	20	4
Unity	15	10
Kaiser	10	10
Self-Pay	5	40
	50%

Your supervisor recommends the following method to set the rate per procedure in order to generate the required $80,000 in profit:

Weighted Discount = (0.4 0.04) + (0.30 0.10) + (0.20 0.10) + (0.10 0.40)

= 0.106

Price = ($400,000 10,000) + [($80,000 + 4,000 ($40.00 $38.00)) 5,000]

1 0.106

=($40.00 + $17.60)/.894 = $64.43

3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?