As HolyFamily Hospital prepares its budget for the upcoming year, it istrying to determine where to set its average inpatient charge percase. Consider the following data on volume, payer mix, andfinances.
Volume
Medicare and Medicaidcases 1,000
Charity care and bad-debtcases 200
Commercial-payingcases 1,900
Full-charge-payingcases 100
FinancialData
Budgeted operatingexpenses $10,000,000
Debt principalpayment 400,000
Increases in currentassets 500,000
Increases in currentliabilities 300,000
Capitalexpenditures 500,000
Assume that the average payment percase for the Medicare and Medicaid patients is $3,500. Assume thatHoly Family realizes no payment on its charity care and bad debtcases. Holy Family's contracts with commercial payers arenegotiated based on a percentage discount off of full charges. Forthe coming year, the average negotiated discount with commercialpayers is 15%.
1. What are the hospital's total financialrequirements for the coming year?
2. What should be Holy Family's average charge per case inorder to meet the total financial requirements (round to thenearest dollar)?