Accounting in Healthcare


A plastic surgery center performs a procedure whose gross charge is $7,000 of which $3,350 is collected. The variable cost per procedure is $1,600. The monthly fixed cost assigned to doing this procedure is $31,000. The center wants to generate a $25,000 profit each month in doing this procedure. a. How many procedures per month, rounding up to the next highest whole number if necessary, would it need to do to achieve its profit target? b. How many procedures per month, rounding up to the next highest whole number, would it need to perform to break-even? c. On your Excel spreadsheet note the algebraic formula you used to solve these two problems. Using the Excel skills developed in the program so far, make your spreadsheet so that it prints on one page, and is readable. Use virtual cell references so that your work can be easily adapted to test other assumptions.

A healthcare provider offers a single service to its patients, and the patients are covered by only two different third parties. Payer 1, Medicare, represents 50% of the patients and pays a fixed fee of $315 per patient. Payer 2, a Commercial Insurer, represents 45% of the patients and pays 80% of the provider’s gross charge. The remaining patients are Charity Care patients who do not pay for their services. The provider treats 3,700 patients per month. The fixed costs of the provider each month is $97,000, and their variable cost per patient is $282. The provider desires to set its gross charge per patient to achieve a profit, or net income, of $68,000 for the month. a. Set up an Algebraic expression, with “p” being the gross charge (price) of the service to each patient being seen in the month, to solve this problem. Show this expression on your spreadsheet. b. Solve the problem finding the Gross Price to be charged to achieve the profit target. c. How many charity patients does the organization treat per month? d. What is the grand total sum of payments that the Commercial Insurer pays for all its patients in a month? (Note, this is not the total for one patient, but instead it is the total for all their patients together in the month)

Your understanding cost/volume/profit concepts in a health care setting. 2. Your Quantitative Literacy abilities to solve problems. 3. Your use of Excel as a tool for calculations and communicating information.

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