Gapenski, L. C. (2012). Healthcare finance: An introduction to accounting and financial management. Chicago, Ill: Health Administration Press.

Solve the following problems, submit the answers in a Word or Excel document

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. Now assume that 20 percent 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?

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 percent rate.

a. Construct the clinic's projected P&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?