Revenue Determination:
Mike Smith who works for a local well star clinic is given the following task: determine the price to charge for patients who are covered by Managed care # 2 plan in order to meet the margin target. Assumptions are listed as the followings:
|
Reimbursement Rate |
||
|
Total Cost |
$100,000 |
|
|
Total Volume |
1000 |
|
|
Patient group |
||
|
Medicare |
40% |
$95/visit |
|
Medicaid |
10% |
$75 |
|
Managed Care #1 plan |
30% |
$110 |
|
Managed Care #2 Plan |
15% |
??? |
|
Uninsured |
5% |
10% of the charge on Managed Care #2 plan |
(Dollar amounts are measured in thousands)
Assume that reimbursement rate from Managed care#2 is 90% of the charges charged by the clinic.
Answer the following questions for Mike:
- What price should the clinic charge for Managed Care #2 plan in order to break even?
- What price should the clinic charge for Managed Care #2 plan in order to make a profit of 5 million dollars?
- How sensitive is the price charge to volume change? (Hint: come up with several scenarios of increased/decreased total volumes, different volume composition in terms of different percentages of client groups etc. BE CREATIVE)