Should the hospital agree to the discount proposal

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Reference no: EM13295402

General Hospital, a non-for-profit acute care facility, has the following cost structure for its inpatients services:

Fixed costs $9,000,000

Variable cost per inpatient day $250

Charge (revenue) per inpatient day $1,000

The Hospital expects to have a patient load of 15,000 inpatient days next year.

a. Construct the Hospital's base case projected P&L statement.

b. What is the Hospital's breakeven point?

c. What volume is required to provide a profit of $1,000,000? A profit of $500,000?

d. Now, assume that 20 percent of the hospital's inpatients come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?

Reference no: EM13295402

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