BHS 427 Health Care Finance (Module 2CBT) - Essay Example

b. The second alternative is for R Squared to try to reduce the variable cost per scan by improving operational efficiency or replacing experienced staff with relatively inexperienced employees (but ensuring the same quality of work). If variable cost can be reduced to $1,100, the breakeven volume will be 113 and target profit of $10,000 will be achievable (refer to following calculations). . Since R Squared must charge $200 less than the community price of $2,100 to get the contract, the second alternative may be pursued.5. Approximately how many patients will have to be scanned for General Hospital to make a profit of $20,000 per monthLet,V = Variable cost per scan = $1,200F = Fixed cost = $90,000NI = Targeted net income = $20,000Pi = Internally set price paid by charge payers = $1,200Pe = Externally set fixed price = $1,500CO = Proportion of cost payers = 30%CH = Proportion of charge payers = 45%FP = Proportion of fixed-price payers = 25%The required patient volume is calculated using the following formula:Volume = [(1 - CO) F + NI] / [(CH x Pi) + (FP x Pe) - (1 - CO) V]Volume = [(1 - 0.3) x 90,000 + 20,000] / [(0.

45 x 1,200) + (0.25 x 1,500) - (1 - 0.3) x 1,200]Volume = [63,000 + 20,000] / [540 + 375 - 840]Volume = 83,000 / 75Volume = 1,106 patientsHence, out of total 1,318 patients (482 in-patient and 836 out-patient) per month, 1,106 patients will have to be scanned for General Hospital to make a profit of $20,000 per