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Running Head: HEALTH CARE FINANCE ESSAY
Health Care Finance Essay
HEALTH CARE FINANCE ESSAY
Cost, Volume and Profit Analysis of a Proposed Capitation Contract
General Practice Clinic main has been approached by a proposal by their main payer, Air
Health concerning the medical plan offered by Air Health. Due to the increased population of Air
Health clients, the company is proposing a capitation contract with the clinic. Before accepting the
contract, General Practice Clinic must do a CVP analysis to determine whether the contract will
be a benefit to the clinic financially or not. Cost-Volume and profit analysis is used in determining
the relationship between the revenues, variable cost and fixed cost. From this analysis, it is possible
to identify the break-even point (Kelly,n.d; ACCA, 2017). This paper discusses the project
statement of income for General Practice Clinic under the capitation contract based on both the
number of visits and member numbers and determines the contribution margin and break-even
point in both scenarios in addition to providing a recommendation whether to accept or decline the
contract based on the CVP analysis.
CVP Analysis Based on Number of Visits...