General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:

The hospital expects to have a patient load of 15,000 inpatient days next year.

a. Construct the hospital’s base case projected P&L statement.

b. What is the hospital’s accounting breakeven point?

c. What volume is required to produce a profit of $1,000,000? A profit of $500,000?

d. Now assume that 20 percent of the hospital’s inpatient days come from a managed care plan that wants a 25 percent discount from charges. If the hospital does not agree, assume it will lose the inpatient days to another provider. Should the hospital agree to the discount proposal?

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Fixed costs Variable cost per inpatient day Charge (revenue) per inpatient day $10,000,000 200 1,000