Tulsa Memorial Hospital Break-Even Analysis

932 Words Mar 2nd, 2016 4 Pages
Break-Even Analysis
1. 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 2014 assuming the status quo. With no change in volume (utilization), is the clinic projected to make a profit?
-No, the clinic is projected to experience a loss. 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 | | |
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Recast the pro forma (forecasted) profit and loss statement developed in
Question 1 for an average month in 2019, five years hence, assuming that volume is constant over time. (Hint: You must consider likely changes in revenues and costs due to inflation and other factors. The idea here is to see if the clinic can "inflate" its way to profitability even if volume remains flat.)
-see excel Q5
-the clinic cannot inflate its way to profitability because revenues and costs inflate simultaneously.

6. Although you are basically satisfied with the analysis thus far, you are concerned about the uncertainties inherent in the revenue and expense data supplied by the clinic's director. Assess each element in your Question 1 pro forma profit and loss statement. Are there any items that are more uncertain than the others? How could uncertainty be worked into the analysis? Is there any additional information that you might want to get from the clinic's director?
-Net revenue per month/net revenue per visit is uncertain (influence the monthly margin)
-historical net revenue per visit

7. Suppose you just found out that the $3,215 monthly malpractice insurance charge is based on an accounting allocation scheme that divides the hospital’s total annual malpractice insurance costs by the total annual number of inpatient days and outpatient visits to obtain a per episode charge. Then, the per episode value is multiplied by each department's