Question

You are a financial consultant and have been asked to forecast how much revenue your client organization must generate per case to meet its financial requirements. Your client has provided you with the information below. You need to provide the following information to your client:

The target case rate

AND

A brief analysis of the impact of a 5% reduction in the budgeted expense.

Annual Case Volume
Medicare	1,500
Cost-paying cases	600
Charge-paying cases	750
Charity care cases	150
Total cases	3,000
Financial data
Budgeted expense	$7,290,000
Debt principal payment	$350,000
Working capital increase	$425,000
Capital expenditure	$515,000
Current payment structure
Medicare pays $3,150 per case for a total of $4,725,000
Cost payers pay their full share of existing expenses

Answer 1

Case -1
Particulars	Annual Case Volume	Rate/Case	Total Revenue Generation
Medicare	1,500	3150	4725000
Cost-paying cases	600	2860	1716000
Charge-paying cases	750	2376.66666	1782499.995
Charity care cases	150	2376.66666	356499.999
	3,000		8,580,000
Budgeted Exp	7290000
Debt Principal Repayment	350000
Working Capital	425000
Capital Exp	515000
Total Required Amount	8580000
Amount / Case required	2860
Amount required from Carge Paying Cases and Charity Care Cases	0
Amount / Case required	0.00
Case -2
Particulars	Annual Case Volume	Rate/Case	Total Revenue Generation
Medicare	1,500	3150	4725000
Cost-paying cases	600	2739	1643100
Charge-paying cases	750	2053	1539500
Charity care cases	150	2053	307900
	3,000		8,215,500
Working :-
Budgeted Exp	6925500
Debt Principal Repayment	350000
Working Capital	425000
Capital Exp	515000
Total Required Amount	8215500
Amount / Case required	2738.5
Amount required from Carge Paying Cases and Charity Care Cases	0
Amount / Case required	0.00