Case 4 Questions
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Victoria Vallejo CASE 4 QUESTIONS
TULSA MEMORIAL HOSPITAL
Break-Even Analysis
Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement for the clinic's average month for all of 2022 assuming the status quo. With no change in volume (utilization), is the clinic projected to make a profit?
The below pro forma profit and loss statement states that the clinic is currently operating at a loss of $3,173 per month, considering the subtraction of fixed and variable costs. The contribution margin per month totals $54,888 or divided out equals $40.66 per visit. The hospital is not sustaining itself at this point or even paying for its fixed costs. Pro Forma Average Month:
Number of visits
1,350 Net revenue
$54,888 Salaries and wages
$13,542 Physicians fees
18,000 Malpractice insurance
3,215 Travel and education
602 General insurance
843 Subscriptions
0 Electricity
1,077 Water
139 Equipment rental
105 Building lease
12,500 Other operating expenses
8,038 Total operating expenses
$58,061 Copyright © 2022 Foundation of the American College of Healthcare Executives. Not for sale.
Victoria Vallejo Operating income (loss)
($3,173)
Operating margin (%)
-5.8%
2.
Consider the clinic's situation without the new marketing program. How many additional daily visits must be generated to break even? Construct a break-even graph that can be included in your report.
Without the new marketing plan, the clinic will need an additional 22 patients
each day to break even. 1
3
5
7
9
11
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15
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25
27
29
31
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39
41
-40000
-20000
0
20000
40000
60000
80000
100000
120000
Without New Marketing Program
Incremental visits
Total monthly revenue
Total monthly costs
Series4
Operating income (loss)
Repeat the Question 2 analysis, but now assume that the new marketing program is implemented.
With the new marketing plan, the clinic will need an additional 29 patients each day to break even. Copyright © 2022 Foundation of the American College of Healthcare Executives. Not for sale.
Victoria Vallejo 1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
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39
41
-40000
-20000
0
20000
40000
60000
80000
100000
120000
With New Marketing Program
Incremental visits
Total monthly revenue
Total monthly costs
Series4
Operating income (loss)
Focus solely on the expected profitability of the proposed marketing program. How many incremental daily visits must the program generate to make it worthwhile? (That is, how many incremental visits would it take to pay for the marketing program, irrespective of overall clinic profitability?) Construct a break-even graph.
For the clinic to not operate at more of a loss than they were before the marking program, an additional 26 visits per day are needed. The marketing
costs of $7000 are paid for through the incremental analysis.
1
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25
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29
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-30000
-20000
-10000
0
10000
20000
30000
40000
50000
60000
Expanded Marketing Program Incremental Analysis
Added daily visits
Incremental monthly rev
Incremental monthly costs
Series4
Incremental Operating income (loss)
5.
The analysis has considered the clinic's near-term profitability—that is, an average month in 2022. Recast the pro forma (forecasted) profit and loss Copyright © 2022 Foundation of the American College of Healthcare Executives. Not for sale.
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