General Hospital, a not for profit acute care facility, has the following cost structure for inpatient services:
Fixed costs $10,000,000
Variable costs per inpatient day $200
Charge (revenue) per inpatient day $1,000
The hospital expects to have a patient load of 15,000 inpatient days next year.
a. Construct the hospitals base case projected P & L statement.
b. What is the hospitals breakeven point?
c. What volume is required to provide a profit of $1,000,000? A profit of $500,000?
d. Now assume that 20% of the hospital’s inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?
You are considering starting a walk-in clinic. Your financial projections for the first year of operations for the first year of operations are as follows:
Revenues (10,000 visits) $400,000
Wages and benefits $220,000
Depreciation $ 30,000
Medical Supplies $50,000
Administrative supplies $10,000
Assume that all costs are fixed, except supply costs, which are variable. Furthermore, assume that the clinic must pay taxes at a 30% rate.
a. Construct the clinics projected P and L statement.
b. What number of visits is required to break even ?
c. What number of visits is required to provide you with an after-tax profit of $100,000?