Reference no: EM131997100

Question - Use the following information to answer questions.

You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

Budgeted Procedures 10,000

Budgeted Cost $400,000

Desired Profit $80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure.

Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer Volume % Discount %

Blue Cross 20 4

Unity 15 10

Kaiser 10 10

Self-Pay 5 40

50%

1. What rate must be set to generate the required $80,000 in profit in the preceding example?

2. If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?

3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?