WEEK 4 AAPLICATION-General Hospital a not-for-profit acute care facility, has the following cost structure…..
1. General Hospital a not-for-profit acute care facility, has the following cost structure for its inpatient services.
| Fixed costs | $10,000,000 |
| Variable cost 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 hospital’s base case projected P&L statement.
b. What is the hospital’s breakeven point
c. What volume is required to provide a profit of $1,000,000? A profit of $500,000?
d. Assume 20% of the hospital’s inpatient days come from a managed care plan that wants a 25% discount from charges. Should the hospital agree to the discount proposal?
2. You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:
| Revenues (10,000) visits | $400,000 |
| Wages and benefits | $220,000 |
| Rent | $ 5,000 |
| Depreciation | $ 30,000 |
| Utilities | $ 2,500 |
| 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 clinic’s projected P&L statement.
b. What number of visits is required to breakeven?
c. What number of visits is required to provide you with an after tax profit of $100,000?
