general hospital 497317

5.4.

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?