This Is For Speccy The Prof To Complete A Handshakeall Calculaitons
This is for Speccy-the-Prof. to complete a handshake. All calculations are needed. Chapter 9 questions 11 and 20 from Zelman, W., McCue, M., & Glick, N. (2009).
Financial management of health care organizations
. (3rd ed). San Francisco, CA: John Wiley & Sons, Inc.
The following paper provides comprehensive calculations addressing the financial analyses required for the specified healthcare scenarios. The first part involves evaluating the feasibility of expanding staffing at Small Imaging Center, focusing on break-even analysis and profit considerations based on imaging service revenue and costs. The second part analyzes the Zack Millman Clinic's contract with high schools, calculating outcomes related to profit, break-even contracts, and pricing to achieve specified profit targets.
Question (a): Monthly Patient Volume to Cover Fixed and Variable Costs
To determine the break-even point, we need to identify the total fixed costs and variable costs per mammography. Fixed costs include equipment costs and maintenance, while variable costs encompass technologist and aide costs and other variable expenses.
Fixed costs: Equipment costs per month = $1,450.00
Equipment maintenance per month (per machine, 4 machines): 4 × $916.66 = $3,666.64
Total fixed costs: $1,450.00 + $3,666.64 = $5,116.64
Variable costs per mammography: Technologist = $15.60, aide = $3.10, other variable = $15.00
Total variable cost per mammogram: $15.60 + $3.10 + $15.00 = $33.70
Reimbursement per screen: $66.05
Calculation:
Break-even patient volume = Total fixed costs / (Reimbursement - Variable cost) = $5,116.64 / ($66.05 - $33.70) = $5,116.64 / $32.35 ≈ 158.21
Thus, approximately 159 patients per month are needed to cover fixed and variable costs.
This requires adding the desired profit to fixed costs before calculating the needed patient volume:
Adjusted fixed costs: $5,116.64 + $5,000 = $10,116.64
Patient volume:
= $10,116.64 / ($66.05 - $33.70) = $10,116.64 / $32.35 ≈ 312.82
Approximately 313 patients per month are required to cover costs and realize a $5,000 profit.
Reimbursement per screen drops to $60. The calculation for break-even (covering fixed and variable costs only):
= $5,116.64 / ($60 - $33.70) = $5,116.64 / $26.30 ≈ 194.49
Approximately 195 patients per month are needed to break even at the lower reimbursement rate.
Assuming that hiring an additional aide increases variable costs, we need to identify how many more patients are needed at original reimbursement to cover variable costs without profit. If the additional aide increases variable cost per mammogram by, say, $3.10 (assuming the same rate), total variable cost becomes:
$15.60 (technologist) + $3.10 (aide) + $15.00 (others) + $3.10 (new aide) = $36.80
Reimbursement remains at $66.05, so new variable profit per mammogram is $66.05 - $36.80 = $29.25.
New patient volume to cover fixed costs ($5,116.64):
= $5,116.64 / $29.25 ≈ 174.87
About 175 patients per month are needed to cover fixed costs with the new aide, at the original reimbursement rate, without profit.
The estimated cost to provide service per athlete is $1,000 + ($12 × 75 athletes) on a 9-month basis.
Total cost over 9 months: $1,000 + ($12 × 75) = $1,000 + $900 = $1,900
Monthly cost: $1,900 / 9 ≈ $211.11
Income from the contract: $10,000 for 75 athletes over 9 months.
The revenue per athlete per month: $10,000 / (75 × 9) ≈ $14.81
Total revenue for the 9 months: $10,000
Total costs: approximately $1,900 over 9 months
Profit/loss over 9 months: $10,000 - $1,900 = $8,100 profit
Therefore, the clinic earns a profit of approximately $8,100 over 9 months if it accepts the bid.
To break even, revenue must equal costs.
Total costs: $1,900 over 9 months for 75 athletes.
Cost per athlete: $1,900 / 75 ≈ $25.33 over 9 months.
Monthly cost per athlete: $25.33 / 9 ≈ $2.82.
Contract price per athlete per month to break even: $2.82
Total revenue needed per month: 75 × $2.82 ≈ $211.50
Total contract price for 75 athletes per month: approximately $211.50
Question (c): Price for $5,000 Profit
Desired profit over 9 months: $5,000
Total revenue needed: $1,900 + $5,000 = $6,900
Monthly revenue requirement: $6,900 / 9 ≈ $767
Per athlete per month: $767 / 75 ≈ $10.23
Annualized: to achieve this profit, the clinic needs to charge each athlete approximately $10.23 per month, totaling around $767 monthly for all athletes to earn a $5,000 profit over the year.
Conclusion
Calculations reveal that staffing an imaging center requires a minimum of approximately 159 patients monthly at the current reimbursement rate, increasing with efforts for profit or decreased reimbursement. Similarly, the Zack Millman Clinic would need to negotiate a contract of at least around $212 per month for 75 athletes to break even, with higher rates necessary to attain targeted profits.
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