# Help with this health-accounting case study

Nov 4th, 2015
SoccerBoss
Category:
Accounting
Price: \$15 USD

Question description

Case study of a healthcare organization financial health:

Assume the following information about projected cost and charges for a hospital in 2016:

·  Fixed Costs = \$10,000,000

·  Variable Cost per Inpatient Day = \$200

·  Charge per Inpatient Day = \$1,000.

·  Initial Volume of 15,000 Inpatient Days

Review Nowicki Chapter 6 and Gapenski Chapter 5. From what you have learned in these chapters do the following:

1.  Define the contribution margin? What is its economic meaning?

2.  What is the contribution margin of this base case?

3.  Construct the hospital’s base case projected Profit & Loss statement

4.  Break even analysis:

a.  What is the hospital’s breakeven point in unit (volume)? Show your work.  Interpret the result. (Suppose you need to explain to a health services manager)

b.  What is the hospital’s breakeven point in dollar? Show your work. Interpret the result. (Suppose you need to explain to a health services manager)

c.  Yes or No. Will the hospital get profit if it operates in a volume higher than this breakeven point?

5.  What volume is required to provide a profit of \$1 million? Show your work.

6.  What volume is required to provide a profit of \$500,000? Show your work.

7.  Now assume this is a for-profit hospital and the hospital must pay taxes at a 25% rate based on the profit. What volume is required to provide an after-tax profit of \$300,000? Show your work.

8.  Back to the base case. Now assume that 20% of the hospital’s inpatient days come from a managed care plan that wants a 25% discount from charges.

a.  Construct the P&L statement if the hospital accepts the discount.

b.  Should the hospital agree to the discounted proposal? Why?

9.  Back to the base case. Now assume this hospital has a sole payer, an HMO, which proposes an annual capitation payment of \$200 for each of its 75,000 members for the inpatient stays. Past experience indicates the population served will average 0.2 inpatient days per year.

a.  What will be the total revenue on this contract?

b.  What will be the expected annual inpatient days?

c.  Construct the hospitals P&L statement on this contract.

d.  What is the hospital’s breakeven point (volume) on this contract? Show your work. Interpret the result. (Suppose you need to explain to a health services manager)

e.  Yes or No. Will the hospital get profit if it operates in a volume higher than this breakeven point?

(Top Tutor) Daniel C.
(997)
School: UC Berkeley

Studypool has helped 1,244,100 students

## Review from our student for this Answer

Sigchi4life
Nov 9th, 2015
"Thank you, Thank you, for top quality work, this is your guy!!"

1829 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors