Green Bay Hospital Break Even Analysis

1. Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement

The break-even analysis relies on computations of several elements such as total cost (TC), total fixed cost (TFC), average net revenue (ANR), average variable cost (AVC),

Effective financial management is the basis of thriving health care organizations. Organizations must make good investment decisions based on objective analysis (Healthcare Financial Management Association [HFMA], 2005). Integration of financial management principles provides decision makers with guidance to make capital decisions maximize mission-based benefits at effective costs (HFMA, 2005). An operating budget is the statement of profit and loss for the entire organization. Various health care entities prepare operating budget for the following year for discussion and approval by top management (Academic Writing Tips, 2011). At the end of the year, departmental managers provide an account for the previous year’s

Moreover, break-even point is useful, simply why firm are making profit. Once the break-even units or break-even revenue is achieved, then the process is openly acceptable. Finally, assumptions, such as sales units are the only cause for cost and revenue changes, linear graph line can be shown when revenue and costs are used, and then single product or service would be analyzed.

The purpose of break-even analysis is to determine the number of units of a product to sell that will

| Within the framework of a break-even analysis, an examination of is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.Answer

In the ever-changing healthcare climate, it has become a necessity to make certain administrative, logistical and fiscal changes needed to maintain a successful medical organization in today’s healthcare environment. To the Hospital Corporation of America (HCA), it is of paramount importance that they provide a diverse range of healthcare services through the most cost-effective means available. Although, one of the largest health care services companies in the United States, HCA must take on the challenges of health care finance and reform through a strong and stable business strategy. In an attempt to combat the many challenges being faced, HCA has committed their resources by promising to establish a strong presence in the existing markets, maintain a high level of performance within the healthcare industry, recruit the necessary physicians to retain a leading level of productivity, strengthen their market position to increase profitability, as well as follow and build a successful, structured development strategy that can grow and prosper (HCA Holdings, Inc., 10-K, 2015).

The healthcare financial executives encounter numerous challenges for their day-to-day operations. Consequently, the health care industry is a highly competitive market and the access to capital is limited, which increases the stakes and the importance of strategic planning (Sussman, Grube, & Samaris, 2009). In addition, there was a variety of financial conditions for the health care industry in 2007 and 2012. Overall, the health care costs tend to consume a significant amount of society 's resources and the ability to control health care costs is a significant issue for health care executives (Coss, 2009). As a result, there has been a variety of changes to the health care industry 's financial management sector. The purpose of this paper is to synthesize the financial management changes.

Breakeven Analysis: A breakeven analysis allows members of management to gauge how much of a product or service they need to sell to recoup operating costs and turn a profit. This involves calculating variable costs, fixed costs and expected sales volumes. Although the calculation is straight-forward in nature, determining the variable and fixed costs takes careful analysis. Administrative costs, rent and insurance are among the expenses that factor into the equation. If a breakeven analysis is performed properly, businesses stand a better chance of generating a

According to Ozcan (2009), health care has continuously evolved into one of the main fields that present a comparatively widened gap in terms of investment. Private entrepreneurs have identified and capitalized on this area as the best sector to make their investments. Despite the reason for the existence of a given healthcare firm, organizational managers have to gain vivid understanding of their healthcare firms as they strive higher to make supernormal profits (Langenbrunner, Cashin, O'Dougherty & World Bank, 2009). In third regard, healthcare organizational mangers have a crucial role of ensuring that they understand vividly the importance of analyzing different calculations as well as ratios that are integrally crucial to the success of the firm.

Break-even analysis calculates the unit or dollar sales needed to generate revenues that exactly match fixed and variable costs to produce net profit of zero. The advantage of break-even is its utility and simplicity.

The healthcare facility industry includes hospitals, ambulatory surgery centers, long-term care and other facilities such as psychiatric centers. Many of the performance drivers are the same for the group as a whole, although hospitals face some unique challenges – they operate in a high fixed-cost environment with profit-loss centers such as emergency rooms that cannot turn away patients and thus rack up bad debt expenses. Surgery centers and long-term care have for-profit business models that have lower fixed costs and negligible bad

This week chapter 1 focused on introducing financial management in healthcare organizations. Financial management provides accounting and finance information to assist managers in making decisions to accomplish the organization goals. Accounting is divided into two sections: financial and managerial. Financial accounting is to provide information to external users, such as the government, lenders, insurers etc. Managerial accounting is to provide information to internal users, such as managers. Both accounting methods are very important to healthcare organizations, as they are both needed. The chapter also discusses the six major objectives of healthcare financial management, quality assessments, and ethical theories.

Health care is an end-less field of possibilities and it’s ever changing as well as adapting to better accounting/ finance practices in health care organizations. One aspect that is relatively same universally is to generate and accumulate operating profits. Also, generate and accumulating profits could be related to borrowing, which will be explained in more detail. Next, the Patient Protection and Affordable Care Act of 2010 is extensive, complex, and deals with accounting and finance which is all worth mentioning. Another factor of health care organizations is not-for profit using health care funding and how it all ties in together for accounting and finance for health care organizations. Lastly, the purpose behind the concepts and

Because both costs and revenues are linear relationships, the break-even point is where the total revenue line crosses the total cost line.