Question - Assume that a radiology group practice has the following cost structure:
Fixed costs: $500,000
Variable costs per procedure: $25
Charge (revenue) per procedure: $100
Assume that the group expects to perform 7,500 procedures in the coming year.
Now, assume that the practice contracts with one HMO and the plan proposes a 20 percent discount from charges. What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000? Make any necessary assumptions about utilization.