1. Lutheran Regional Hospital uses a planning process to define a new radiology service line. The decision matrix gave it a high priority, and administrators want to evaluate its financial feasibility. Estimated fixed costs are $1,000,000, and the estimated net reimbursement level is $1,500 per procedure. Physician and other provider salaries on a direct basis are $340 each procedure, and total operating expenses will add another $160 per procedure. Calculate the breakeven point for this potential new service line.
2. If Lutheran Regional discovered a way to reduce the total initial investment to $600,000, causing the average pricing level to fall to $1,200, and the other assumptions stay the same, how many procedures would be required to break even?
3. Assuming the hospital feels it can deliver 1,000 procedures conservatively in the first year, which option should be chosen?