Reference no: EM13586995

General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:

Fixed Costs:                                         $10,000,000

Variable cost per inpatient day:              $200

Charge (revenue) per inpatient day:        $1,000

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

1. Construct the hospital's base case projected P&L statement.
2. What is the hospital's breakeven point?
3. What volume is required to provide a profit of $1,000,000? A profit of $500,000?
4. Now assume that 20 percent of the hospital's inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discounted proposal?