# Net Revenue Scenario

## Net Revenue Scenario

 Name First Name Last name Question: The profile of your patients is such that the average collection rate is 75%. Assuming you have 100 visits of each type each month, what amount of new revenue will you generate in the next 12 months? Your clinic provides four kinds of services: •       Comprehensive initial medical consultation is priced at \$250 •       Established patient limited visit is priced at \$75 •       Established patient intermediate visit is priced at \$125 •       Established patient comprehensive visit is priced at \$250 Net RevenueScenario Type of Service Price Each Annual Volume Gross Revenue per year Comprehensive initial medical consultant Established patient limited visit Established patient intermediate visit Established patient comprehensive visit Total Gross Revenue Average Collection Rate Total Net Revenue

## FixedVariable

 Name: Assignment: Fixed/Variable Cost Scenario You have performed a cost analysis of your health service organization and have determined the following: based on the latest three years of information, your annual cost of operations is \$1,600,000 with annual volume of 10,000 procedures. You have determined that certain of your supply items are fixed in nature (those marked with an F) while others are variable (marked with a V). Supply Items F/V Average Annual Amount Supply item 1 F \$220,000 Supply item 2 F 180,000 Supply item 3 F 75,000 Supply item 4 F 50,000 Supply item 5 F 25,000 Supply item 6 F 50,000 Supply item 7 V 500,000 Supply item 8 V 300,000 Supply item 9 V 200,000 Annual Cost of Operations 1,600,000 Question: An insurance company that is considering directing its 1,000 units per year of procedure business to your organization has approached you. Your board has mandated that you make \$5 of profit from each of the procedures. You obviously want the highest possible price, but as you enter the negotiations, what is the lowest possible price you would be willing to accept from this payer? Hint: Calculate the variable cost. Fixed/Variable Cost Scenario Variable Fixed Total Supply item 1 Supply item 2 Supply item 3 Supply item 4 Supply item 5 Supply item 6 Supply item 7 Supply item 8 Supply item 9 Total Cost Annual Volume Variable Cost per Unit Profit Target Total (lowest possible price)

## Cash Flow

 Cash Flow Scenario Your new business venture will begin operation on July 1, 20X2. You will hire staff effective January 1, 20X2 with a cost of \$40,000 per month. You know from experience that collections lag billing by 3 months (in other words, once you bill for a service, you must wait 90 days for the payment to be received. Your business volume is projected to be as follows: Month Volume Billing July, 20X2 1,000 \$100,000 August 1,000 \$100,000 September 1,000 \$100,000 October 1,000 \$100,000 November 1,000 \$100,000 December 1,000 \$100,000 January, 20X3 1,000 \$100,000 February 1,000 \$100,000 March 1,000 \$100,000 April 1,000 \$100,000 May 1,000 \$100,000 June 1,000 \$100,000 Question: If you have \$380,000 of cash on hand January 1, 20X2, how much cash will you have at the end of June 20X3? Assume a 100% collection rate. Ending Cash Balance January 20X2 Opening Cash Balance = \$380,000 Monthly Expense Monthly Billing Monthly Collections Month Cash Balance January 20X2 \$380,000.00 February March April May June July * August September October ** November December January 20X3 February March April May June 20X3 Total Cash on Hand June 20X3 *Open for Business ** 90 Billing Cycle

## Volume Budget Scenario

 You manage lab services in a large hospital. You have the following data on both the hospital’s budgeted patient days and visits for budget year 20XX along with the ratio of lab tests to patient days or visits. RAW DATA 2 North Bldg 2 South Bldg ICU OPD Patient Days/Visits Budget 19800 21900 8760 200000 Chemistry 3.6 4.3 2.9 4 Hematology 1.2 2.1 1.4 3.5 Bacteriology 3.2 5.6 3.6 5.5 Cost per test \$20.00 Tests per FTE 200,000 Question: Based on this raw data provided , how many lab tests would you anticipate for the coming budget year? If each test is priced at \$20.00, how much gross revenue would you budget? Assuming each full-time lab technician (FTE) can perform 200,000 tests each year, how many full-time lab technicians would you plan for? TEST COUNT BUDGET 2 North Bldg 2 South Bldg ICU OPD Total Chemistry Hematology Bacteriology Total GROSS REVENUE BUDGET 2 North Bldg 2 South Bldg ICU OPD Total Chemistry Hematology Bacteriology Total Staffing FTE Budget Preliminary Final Chemistry Hematology Bacteriology Total

## Staffing and Suppy Budget

 Staffing and Supply Budget Scenario Calculate the supplies budget necessary to operate your unit for the fiscal year beginning January 1, 20X8. It is your expectation that you will perform 24,820 procedures in the budget year. The following spending data is available for the period January 1 to March 31, 20X7 during which time procedure volume amounted to 3,240. Items marked (F) are considered fixed, those marked (V) are considered variable. Inflation is planned at 4%. Expense Item Amount Billing Supplies (F) \$24,400.00 IV Solutions (V) \$288,108.00 Med/Surg Supplies (V) \$411,480.00 Miscellaneous (F) \$18,400.00 Office Supplies (F) \$42,650.00 Stock Drugs (V) \$570,240.00 In reviewing performance to date, you note that in January, you purchased \$150,000 of D5W fluid replacement charged to IV solutions, which represents an entire year’s supply. In addition, you returned \$2,800 of office supplies for credit from the vendor in February. These supplies were purchased in a previous fiscal year. Expense Account Orig. Base Period Amt Adjustments Adjusted Base Period Amt Base Period Units (Vol or Time) Amount/Unit Budget Period Units Base Amt. Budget Inflation Rate Inflation Amt Final Budget Amt Billing Supplies (F) 4% IV Solutions (V) -\$ 112,500.00 3240 24820 4% Med/Surg Supplies (V) 3240 24820 4% Misc. (F) 3 12 4% Office Supplies (F) \$ 2,800.00 3 12 4% Stock Drugs (V) 3240 24820 4% Total \$ (109,700.00) Total: \$ – 0 You also need to prepare the salary budget for the same fiscal year. You have determined that staff needs are for 6.5 FTEs. The following are the current staff with FTE values and hourly rates of pay as of January 1, 20X8: Position/Incumbent FTE Value Pay Rate Hardy 1.0 \$16.30 Rosetti 0.5 \$16.80 Chang 0.5 \$16.50 Martinez 1.0 \$16.00 Jones 0.5 \$16.75 A pay raise will be given to all staff on October 1st of each year at a rate of 8 percent. In making your calculations, always round to the nearest whole dollar for annual salary amounts, but keep pennies in the hourly pay rates. New staff begins the new fiscal year at \$16.00 per hour. Incumbent FTE Value Pay Rate: Jan 1 20X8 Base Budget Amt Salary Increase% Months of Increase Increase Amt Salary Budget Hardy Rosetti Chang