Question

You represent the Executive team for Mountainside Medical Center and have the following operating results for the year ended 12/31/2016.

Item		Actual 2016
Revenues
Patient Care Revenues
	Gross Revenue
	Inpatient Revenue	359,826,750
	Outpatient Revenue	138,190,000
	Total Gross Revenue	$498,016,750
	Deductions & Allowances	$287,728,213
	Bad Debt	22,410,754
	Charity Care	8,715,293
	Net Patient Revenue	$179,162,491
	Other Operating Revenue	147,300
	Total Operating Revenue	$179,309,791
Expenses
	Salaries & Wages	$57,200,000
	Employee Benefits	18,161,000
	Supplies	53,748,747
	Purchased Services	19,707,874
	Depreciation & Amortization	17,122,000
	Other Operating Expenses	4,479,062
	Total Operating Expenses	$170,418,683
Operating Profit		$8,891,107
Net Income		$8,891,107

You are asked to make a quick estimate of income for 2017. You believe that the volume of services will remain the same from 2016 to 2017, but expect the following changes:

Net revenues will increase by 2%;

Bad debts will increase by 1% over the rate seen in 2016 (take bad debt as a % of gross for 2016 and increase it by 101%). Charity will remain at the same rate as in 2016.

Salaries will increase by 3%. Benefits will remain at the same percentage of salaries as in 2016;

Supplies will increase by 4% over the rate seen in 2016 (take supplies as a % of net for 2016 and increase it by 104%) ;

The hospital will add one item of capital equipment that will add $262,775 in depreciation in 2017.

All other items are expected to remain the same as in 2016.

Your task is to create an income projection for the Medical Center for 2017 given the changes described above.

Answer 1

Income Statement :
	Actual 2016	additions	Estimate 2017
Revenues	Amount$		Amount$
Patient Care revenues
Gross Revenue
Inpatient Revenue	359826750	101.0076%	362577640
Outpatient Revenue	138190000	101.0076%	139246468
Total Gross Revenue	498016750		501824108
Deductions and Allowances	287728213		287728213
Bad Debt	22410754	101%	22634862
Charity Care	8715293		8715293
Net Patient Revenue	179162491	102%	182745740
Other Operating Revenu	147300		147300
Total Operating Revenue	179309791		182893040
Expenses:
Salaries and Wages	57200000	103%	58916000
employee Benefits	18161000		18161000
Supplies	53748747	104%	55898697
Purchased Services	19707874		19707874
Depreciation & Amortization	17122000	262775	17384775
Other Operating Expenses	4479062		4479062
Total Operating Expenses	170418683		174547408
Operating Profit	8891107		8345633
Net Income	8891107		8345633