Benchmarking for Decision-Making
Discuss the following example:
Your nursing home defines output as a patient day. The present volume is 18,000 patient days. The average cost per day is $95.00. Present revenues and costs are presented below.
Patient-Days
Amount
Revenues:
Charge Patients
6,000
$ 750,000
Fixed Price Patients
20,000
$ 1,800,000
Total Revenues
26,000
$ 2,550,000
$ 98.08
Costs:
Fixed Costs
$ 1,170,000
Variable Costs
$ 45.00
$ 1,170,000
Total Costs
$ 2,340,000
Profit or Net Income
$ 210,000
Discussion Prompt:
What is the breakeven inpatient days for this nursing home, assuming no profit is required? If volume goes up 10 percent to 28,600 patient days and payer mix is unchanged, what will net income be? Respond to the following questions:
Calculate the results.
How is understanding the breakeven point helpful for a manager in everyday operations management?
How can Excel be used to automate the calculation process?
What are some of the variables that can be changed in order to alter the breakeven point?
Discuss the breakeven analysis and question responses with at least 2 of your cohort colleagues.
