SERVICE LINE COSTING AND PRICING / FINANCIAL PLANNING & BUDGETING

HW3.xlsx

3.1

CHAPTER 7: SERVICE LINE COSTING AND PRICING
Homework 3.1, Chapter 7
a. Your hospital is considering offering a new outpatient service. Using the data below, determine the price needed to breakevn.
RELEVANT DATA:
Variable cost per visit	$8
Annual direct fixed costs	$650,000
Annual overhead allocation	$70,000
Expected utilization (visits)	10,000
b. Assume now that the CEO is requesting to know what price must be set in order to earn a $100,000 profit. What price must be set in order to meet this desired profit level?

CHAPTER 7: SERVICE LINE COSTING AND PRICING
Homework 3.2, Chapter 7
Allied Laboratories is combining some of its most commom tests into a bundled, one-price package called TEST X that contains three tests (A, B, and C) with the variable costs as stated below. When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are requried).
DATA:
	A	B	C
Syringe	$3.50	$3.50	$3.50
Blood Vial	1.25	1.25	1.25
Forms	0.25	0.25	0.25
reagents	2.00	0.85	1.25
Bandage	0.15	0.15	0.15
Breakage/loss	0.10	0.10	0.10
Using the above information, complete the following table and answer the questions below:
Supplies	A	B	C	# Supplies needed for TEST X	Combined supply costs for TEST X
Syringe
Blood Vial
Forms
reagents
Bandage
Breakage/loss
a. What is the price of the combined test?				a.
b. What price is needed to obtain a $10				b.
contribution margin?

CHAPTER 7: SERVICE LINE COSTING AND PRICING
Homework 3.3, Chapter 7
Assume that a primary care physician practice performs only physical examinations, with three different levels, depending upon the depth and complexity of each exam. An RVU analysis determined the required RVUs for each exam as indicated below. The total costs to run the practice, including diagnostic, as well as the annual projected number of examinations for each level are also listed below.
Exam	RVU's	# Exams
Level I	25	3,000
Level II	30	1,500
Level III	45	750
Total exams		5,250
Total costs	$800,000
a. Using RVU methodology, what is the estimated cost per RVU?
Cost per RVU
b. What is the estimated cost per type of exam?
	Cost/Exam
Level I
Level II
Level III
c. Based on the cost per exam, what is the estimated annual cost for each exam?
	Total Costs
Level I
Level II
Level III
TOTAL

CHAPTER 8: FINANCIAL PLANNING & BUDGETING
Homework 3.4, Chapter 8
Chelsea Clinic projected the following budget information for 2021:
Total FFS Visits Volume	70,000	visits
Payer Mix:
Blue Cross	60%
Highmark	40%
Reimbursement Rates:
Blue Cross	$45	per visit
Highmark	$50	per visit
Variable Costs
Resource Inputs:
Labor	0.7	total hours
Supplies	1.3	total units
Resource Input Prices:
Labor	$22.00	per hour
Supplies	$1.25	per unit
Fixed Costs	$800,000
Using Exhibit 8.3 as a guide (excluding the capitated numbers since payers in this homework problem are all FFS) construct Chelsea Clinic's operating budget for 2021, including projections for volume, revenues, costs, and a P&L statement