Problem
Dental Professionals, PLC (DP) is considering a contract from the Student Health Services department to provide dental services for 10,000 university students. The health services department has done a thorough records scan and provided DP with the following annual utilization information.
Service Number of services per year
Checkup and cleaning 5,000
Filling and/or Cavity repair visits 1,500
Wisdom Tooth Extractions 100
Crowns 75
Service Variable Cost Per Service
Checkup and Cleaning $25
Filling and/or Cavity repair visits $150
Wisdom Tooth Extractions $750
Crowns $900
Dental Professionals fixed costs are $12,000 per month ($144,000 per year). Health Services is offering Dental Professionals a Contract for $5.25 PMPM. What would the Profit and Loss Statement for Dental Professionals, PLC accepting this contract look like? Should DP accept the contract? Why or why not?
A year has passed, and the university is again looking for dentists to provide care for their students. Assume the new contract with the university would include the same number of enrollees. The dental hygienists atDental Professionals have just renegotiated their contracts so the variable cost for performing a check-up and cleaning has increased to $30. What PMPM should DP demand in a 2023 contract to make a $60,000 annual profit?