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Healthcare Finance Solved
Referencing Styles : APA | Pages : 8
Assume that a radiologist group practice has the following cost structure:
Fixed Costs $500,000
Variable cost per procedure $25
Charge (revenue) per procedure $100
Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.
a. Construct the group’s base case projected P&L statement,b. What is the group’s contribution margin? What is its breakeven point?c. What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000?d. Sketch out a CVP analysis graph depicting the base case situation.e. Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Redo questions a, b, c, and d under these circumstances.
Problem 5.7 Breakeven & Profit Behavior (Capitation)
Grandview Clinic has fixed costs of $2million and an average variable cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates the population served will average two visits per year.
a. Construct the base case projected P&L statement on the contract.b. Sketch two CVP analysis graphs for the clinic – one with number of visits on the X axis. Compare and contrast these graphs with the value in Problem 5.3.d?c. What is the clinic’s contribution margin on the contract? How does this value compare with the value in Problem 5.3.b?d. What profit gain can be realized if the clinic can lower per-member utilization to 1.8 visits?
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