Multiple Payer Breakeven

AVC = $2,700

TFC = $1,100,000

Net Income = $100,000

Pi = _________ internally set, ((10%*$5100) + (10%*0.90*$5100))/20%

Pe = _________ externally set, ((55%*$2500) + (5%*$0))/60%

CO = 20%

CH = 20% 10% pay 100% of charges and 10% pay 90% of charges

FP = 60% 55% pay $2,400 per case and 5% pay nothing

a. Calculate the breakeven volume and create an income statement proving your calculated volume produces the desired net income, revenue should be calculated for each payer.

b. Calculate the profitability index. What will happen to net income if volume increases by 10 cases?

c. A PPO has approached the hospital with an offer to increase volume by 150 cases in return for a per case rate of $3,000, create pro forma income statement assuming the offer is accepted and rejected. Should the offer be accepted?

Pi         = Profitability index

Pe        =   price/earnings ratio