Activity: You have been asked to establish a pricing structure for radiology on

Question

Activity: You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budget 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 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 PPO 15 10 Kaiser 10 10 Self-pay 5 40 50% Question: #2 What rate must be set to generate the required $80,000 in profit in the preceding example?

Explanation / Answer

Here we will have to recover our cost and profit from only 5000 customer since 40% of total radiology volume will pay only 38$ and 10% of will bear the cost that comes around 40$(400,000/10,000)

Remaning 50% customers are given discount, so lwt us find weighted average Discount

Price to earn $80,000

= {(400,000/10,000) + (80,000/5000) + [(10,000*40%)(40-38) / 5000)} / 1 - 0.106

=40+16 + 1.6 / 0.894

=57.6/0.894

=64.4299$

Payer Volume Weight Discount Wieghted average Blue Cross 20% 40% 4% 1.6% Unity PPO 15% 30% 10% 3.0% Kaiser 10% 20% 10% 2.0% Self Pay 5% 10% 40% 4.0% 50% 10.6%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.