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The president of Gentiva Health Services is considering increasing her number of

ID: 2595276 • Letter: T

Question

The president of Gentiva Health Services is considering increasing her number of Medicare patients served next year. However, to do so she must begin to use RNs for client visits, which Medicare reimburses at $45 per visit. An RN costs $35 per hour versus the current cost of $15 for an LPN or nurse’s aide. The president believes she can increase her patient visits by 15% by accepting Medicare patients. She is also aware that if she increases her Medicare patients, the company’s administrative costs will increase by approximately $10,000 per year because of the claims file complexity.

Use the following websites to gather data:

10K Annual Report

10Q Quarterly Report

Use the following volumes for your calculations:

Volume for the year:

Flexible budget: 6,000 visits

Static budget: 5,945 visits

Actual budget: 5,889 visits

Prepare a two-page report that addresses the following:

How many more visits will the company generate if it accepts Medicare patients?

What would be the estimated profit or loss associated with the Medicare service line?

Would you recommend that Gentiva Health Services increase its number of Medicare patients served? Why or why not?

The second task is: Business Plan

Review the quarterly report and develop a business plan for the organization for its upcoming financial year. Be sure to include the following in your organized business plan:

Organization segment

Marketing segment

Financial segment

Projected cash flow statement

Projected income statement

Projected balance sheet

Feel free to take liberties with information needed that is not available in the report.

You may find the quarterly report at

Gentiva® Health Services Reports Third Quarter 2014 Revenue and Adjusted EBITDA Results

Explanation / Answer

Q1) How many more visits will Gentiva Health Services generate?

Ans. Gentiva Health Services will generate roughly 880-900 extra visits:

=15%*5889

=883

883 extra visits are estimated to be generated (this is a probable figure, actual shall vary from estimation).

Q2) What would be the estimated profit or loss associated with the Medicare service line?

Ans. Estimated Profit/Loss= Estimated Revenue-Estimated Cost

Estimated Revenue:

=883*$45

=$39735

Estimated Cost: (assuming each visit to last an hour)

=883*$35+$10000

=$40905

Estimated Loss= $39735-$40905

=-$1170

Q3) Would you recommend? Why or Why not?

Ans: No, I wouldn't recommend Gentiva to enter into this increase of medicare service line due to it's possibility of generating no extra profits for it's organisation and a sure increase in responsibilities.

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