Question
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
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
2. If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?
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