Calibri (Body) 11 A A copy Format BI U Paste 1 CHAPTER &:FINANCIAL PLANNING& BUD

Question

Calibri (Body) 11 A A copy Format BI U Paste 1 CHAPTER &:FINANCIAL PLANNING& BUDGETING 2 Homework 3.5, Chapter 8 Chelsea Clinic projected the following budget information for 2018 6 Total FFS Visits Volume 7 Payer Mbc 8 Blue Cross 9 Highmark 10 Reimbursement Rates: 11 Blue Cross 12 Highmark 13 Variable Costs 14 Resource Inputs 15 Labor 16 Supplies 17 Resource Input Prices: 18 Labor 19 Supplies 20 Fbed Costs 21 80,000 visits 55% 45% $25 per vist $30 per visit 0.5 hours pervisit 1.2 units per visit $25.00 per hour 1.50 per unit $750,000 Using Exhibit 8.3 as aguide (excluding the capitated numbers since payers in this 24 homework 23 k problem are all FFS) construct Chelsea Clinic's operating budget for 2018 Including projections for volume, revenues, costs, and a P&L statement 25 26 27 28 30 32 36 37 39 41 43 45 46 47 3.5 3.4 3.3 3.1 3.2

Explanation / Answer

Chelsea is expecting a total volume of 80,000 units with a mix of Blue Cross 55% and Highmark 45%

So, total volume from blue cross is 80,000*55% = 44,000 units and same way total volume for Highmark is 36,000 unit.

Reimbursement rate is $25 per visit for Blue cross which means total revenue from blue cross will be 44,000*25 = $1,100,000

Same way Revenue from Highmark will be 36,000*30 = $1,080,000

So, now total revenue is $1,100,000+1,080,000 = $2,180,000

We are expecting to incur 0.5 labour hour per visit and the total visit is 80,000 so that means we are about to incur 0.5*80,000 = 40,000 labour hour and the hourly rate of labour is $25

So, total labur cost is 40,000*25 = $1,000,000.

We are expecting to incur 1.2 units of supplies per visit and the total visit is 80,000 so that means we are about to incur 80,000*1.2 = 96,000 units of supplies with per unit of supplies cost $1.5.

So, now total supplies cost is 96,000*1.5 = $144,000

Total fixed cost is 750,000.

Now we can create the Budgeted P&L Statement for Chelsea as :-

Total Projected volume 80,000

Revenue $2,180,000

Fixed Cost $750,000

Labour Cost $1,000,000

Supplies Cost $144,000

Total Variable Cost : $1,144,000

Net Profit $(2,180,000-750,000-1,144,000) = $286,000

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