Accounting homework: Healthcare Finance

General Hospital, a not for profit acute care facility, has the following cost structure for inpatient services:

Fixed costs $10,000,000

Variable costs 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 hospitals base case projected P & L statement.

b. What is the hospitals breakeven point?

c. What volume is required to provide a profit of $1,000,000? A profit of $500,000?

d. Now assume that 20% of the hospital’s inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?

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Question 2

You are considering starting a walk-in clinic. Your financial projections for the first year of operations 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 clinics projected P and L statement.

b. What number of visits is required to break even ?

c. What number of visits is required to provide you with an after-tax profit of $100,000?

Accounting homework: Healthcare Finance

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