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Healthcare Finance Issues

Question 1

A. What per visit price must be set for the service to break even? To earn an annual profit of $100,000?

(10,000 * 5.00 - $500,000 - 50,000 = 0

(10,000 * 5.00) -$50,000=0

10,000 = $600,000

600,000 + 10,000 = $60.00 per visit break even

600,000 + 100,000=700,000

700,000/10,000=$70 per visit for annual profit of $100,000

B. Repeat part a, but assume that the variable cost per visit is $10.00.

10,000 * 10.00 - $5000,00 - $50,000 =0

10,000*10.00=500,000 -50,000=0

10,000* *10.00=650,000.00

650,000.00 +10,000=$65.00 Break Even Point

650,000.00+100,000.00=750,000.00

750,000.00/10,000.00=$75.00 per visit for annual profit

C. Again repeat part a,but assume that direct fixed costs are$1,000,000.

(10,000.00 * 5.00) - 1,000,000.00 -50,000.00

10,000.00*5.00=1,000,000.00-50,000.00=0

10,000.00*5.00=1,100,000.00

1,100,000.00/10,000.00=$110.00 per visit

1,100,000+100,000=1,200,000.00/10,000.00 =$120,00 per visit for annual profit

D. Repeat Part a assuming both $10..00 in variable costs and $1,000,000 in direct fixed costs.

(10,000.00*10.00)-1,000,000.00-50,000=0

10,000.00*10.00=1,000,000.00-50,000=0

10,000*10.00=1,150,000.00

1,150,000/10,000.00=$115.00 per visit breakeven point

1,150,000.00 +100,000.00=1,250,000.00

1,250,000.00/10,000=$125.00 per visit for annual profit

Question 2:

A. What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs/

Basic Examination

(3,000*Price) ($5*3,000)-$50,000=$0

3,000*Price=$65,000

Price=$65,000/3,000=$22.00

Advanced Examination

(1,500*Price) ($7*1,500)-$30,000=$0

(1,500*Price)-$40,500

Price=$40,5000/1,500=$27.00

Therapy Session

(500*Price)-(10*500)-40,000

(500*Price)-$45,000

Price=$45,000/500=$90.00

B. What is the fee schedule assuming that these overhead costs must be covered?

Basic Examination

(3,000*Price) ($5.00* 3000)-$50,000 - $50,000=$0

(3,000*Price)-$115,000=$0

3,000 * Price=$115,000

Price=$115,000/3,000=$38.00

Advanced Examination

(1,500*Price) ($7*1,500)-50,000-30,000

(1,500*Price)-$90,500=$0

(1,5000 *Price=$90,500

Price=$90,000/1,500=$60.00

Therapy Session

(500*Price)($10*500)-$50,000-$40,000

(500*Price)-$95,000=$0

Question 3:

As a starting point, what is the price of the combined test assuming marginal cost pricing/

A. Test A                                  Test B                 Test C

$3.00                           $3.00                  $3.00

1.00                               1.00                    1.00

.15                                   .15                       .15

.80                                   .60                    1.20

.10                                   .10                      .10

.05                                   .05                      .05

5.10 Total                       4.90 Total           $5.50 Total

B.

Test A $10+5.10=$15.10

Test B $10+4.90=$14.90

Test C $10+5.50=$15.50

C. 

2,000 Test

40,000.00 Overhead

Test A

2,000*5.10=10,200.00

10,000.00+40,000=50,200.00

50,200.00/2,000=$25.10

Test B

2,000*4.90=9,800.00

9,800.00+40,000=49,800.00

49,800.00/2,000=$24.90

Test C

2,000*5.50=11,000.00

11,000.00+40,000=51,000

51,000.00/2,000=$25.50

A. What is the hospitals net income?

Payer                #of Admissions   Avg. Rev   Per Admissions      Rev.By Payer  VC per Adm Total VC.         Contribution Margin

PennCare           1,000      $5,000           $5,000,000.00           3,000           3,000,000.00                2,000,000.00

Medicare            4,000       4,500           18,000,000.00            4,000           16,000,000.00              2,000,000.00

Commercial        8,000    7,000              56,000,000.00            2,500           20,000,000.00              36,000,000.00

Total                13,000   16,500,000.00   79,000,000.00            9,500          39,000,000,00              40,000,000.00

Total Revenues $79,000,000.00

B.Assume that half of the 100,000 covered lives in the commercial payer group will be moved into a capitated plan. What Pmpm rate will the hospital have to charge to retain its Part a net income?

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