Question

Inpatient Facility has a contract with a BCBS Medicare health plan for providing care which pays it Fee-For-Service based on per inpatient day basis. A break-even analysis was conducted and revealed 20,000 rehab days at a $400 rate per inpatient day. Projected volume was 30,000 inpatient days, and bid $400 per day per the original break-even analysis suggestion, and BCBS quickly accepted the offer. However, with inpatient days running at the projected 30,000 inpatient day, the facility struggled to pay bills.

Members - 10,000

Admissions - 2,000

Inpatient Days - 30,000

Revenue per day - $400

Variable cost per day - $300

Fixed cost - $3,500,000

1) What is the current Profit/(Loss) and Break Even point stated in inpatient days given the information above? What is the difference between current Inpatient Days and Break Even Inpatient Days in days and % terms?

After reviewing analysis of 1, various scenarios to improve are recommended. Model suggestions 2-4 separately by calculating the projected Profit/(Loss) given the current volume, the revised Break Even point for each suggestion, and the difference between current volume and the Break Even Point (and the % difference)

2) What is the model and outcome if BCBS agreed to a 5% rate increase?

3) What is the model and outcome of lowering Variable Costs per day by 4%?

4) What is the model and outcome of lowering Fixed Costs by 15%?

Answer 1