Help with this health-accounting case study

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?

Please add a cover page for this assignment with your name, class/section and instructor’s name.