Using the example of “From the Front Lines” in Chapter 6 of your text, calculate the break even for the number of procedures. Use an electronic spreadsheet to show how you computed the break even and embed the spreadsheet in your paper. Discuss the impact of the various reimbursements (e.g., Medicare, Medicaid, private, or self-pay). Think about your upcoming capital proposal and how you might use the break-even analysis in your Capital Investment Plan Proposal. Your paper should be one to two double-spaced pages in length.
Here is the example:
We recently purchased an endoscopic ultrasound (EUS), which allows doctors to examine the linings of the esophagus and stomach, as well as the walls of the gastrointestinal tract. It is a necessary, but expensive, piece of equipment, which cost us $20,000 ($11,000 to purchase, plus $9,000 for renovations). Our fixed costs are four full-time equivalent employees at $336,000. Medicare payments are $885 per procedure, and each procedure requires $175 in average variable costs. It has been estimated that we will complete 500 procedures in the first year and 850 procedures in years 2 to 5.
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Using the example of “From the Front Lines” in Chapter 6 of your text, calculate the break even for the number of procedures. Use an electronic spreadsheet to show how you computed the break even and embed the spreadsheet in your paper. Discuss the impact of the various reimbursements (e.g., Medicare, Medicaid, private, or self-pay). Think about your upcoming capital proposal and how you might use the break-even analysis in your Capital Investment Plan Proposal. Your paper should be one to two double-spaced pages in length.
To calculate the break-even point for the number of procedures in the example, we need to consider the fixed costs, variable costs, and revenue generated from each procedure. Let's break down the calculations using an electronic spreadsheet.
1. Open a spreadsheet program such as Microsoft Excel or Google Sheets.
2. Create the following columns: Procedures, Revenue, Fixed Costs, Variable Costs, Total Costs, and Profit/Loss.
3. In the "Procedures" column, enter the number of procedures for each year. In this case, it would be 500 for the first year, and 850 for years 2 to 5.
4. In the "Revenue" column, multiply the number of procedures by the Medicare payment per procedure ($885) for each respective year.
5. In the "Fixed Costs" column, enter the fixed costs for the full-time equivalent employees ($336,000) for each year.
6. In the "Variable Costs" column, multiply the number of procedures by the average variable cost per procedure ($175) for each year.
7. In the "Total Costs" column, sum the fixed costs and variable costs for each respective year.
8. In the "Profit/Loss" column, subtract the total costs from the revenue for each year.
Once you have filled in the data, you can calculate and observe the break-even point in the spreadsheet. The break-even point is where the profit/loss becomes zero, indicating that the revenue covers all costs.
Now, let's discuss the impact of various reimbursements (such as Medicare, Medicaid, private, or self-pay) on the break-even analysis in your capital investment plan proposal:
Different payers may have different reimbursement rates, which can significantly impact the break-even point. In the example, we only considered Medicare payments, which were $885 per procedure. However, if you have multiple payers, you will need to factor in their payment rates, as well as the patient mix and the volume of procedures covered by each payer.
For example, if Medicaid has a lower reimbursement rate compared to Medicare, it might result in a higher break-even point. Similarly, if private payer rates are higher, they can contribute to a lower break-even point.
In your capital investment plan proposal, you can use the break-even analysis to assess the financial viability of the investment. It will help you understand the number of procedures required to cover all costs and achieve profitability.
You can also utilize this analysis to evaluate the potential impact of changes in reimbursement rates or anticipated procedural volumes on the break-even point. It allows you to assess the financial risks and benefits associated with the investment.
Embedding the spreadsheet in your paper can be done by exporting the file as a PDF or taking screenshots of the spreadsheet and including those images within your paper.
Remember to provide explanations in your paper about how you calculated the break-even point, considered different reimbursements, and how this analysis influences your capital investment plan proposal.