Chapter 4 Problem 1 - Cost Shifting Cost - $1,000 per patient Using the information in the table below 1. Calculate total loss (costs to shift) 2. Compute the new charge 3. Verify that new charge covers the cost Problem 2 - Cost Cutting Costs - $1,000 per patient Using the information in the table below 1. Calculate the loss (amount to cut) 2. Compute the new cost 3. Verify that cost cut will allow facility to break even ABC Healthcare will serve 100 patients broken down as follows. The actual cost of providing service is $1,000 per patient # Patients/Payer Amount will pay 30 Medicare $900 per diagnosis 20 Medicaid $850 per diagnosis 20 MC #1 Pays charges less 10% discount 15 MC #2 Pays charges less 20% discount 5 Private Pay Pay 100% of charges 5 Charity Pay nothing 5 Bad Debts Pay nothing Chapter 6 Problem 3 - Breakeven analysis (see page 167 for formulas) Fixed Cost $ 5,000 Selling Price $ 250 Variable Costs $ 150 Compute the following: 1. Breakeven in units 2. Breakeven in dollars 3. Contribution Margin % 4. Contribution Margin in dollars Chapter 7 Problem 4 - Rate Setting Formula: Total projected cost / total projected hours of use - see page 191 a. Hourly Rate Setting - Calculate the rate to recover costs Total projected cost of PT $150,000 Total projected hours of use 1,600 See page 194 for steps b. Surcharge Rate Setting for Patient Transportation Service - Calculate the rate to charge to recover costs Total projected costs $125,000 Costs of transports billed to patients $ 75,000 Number of patient transports 1,200 Chapter 8 Problem 5 - Effective Annual Interest Rate in Trade Credit (see page 217 for example) HS Group makes a $100 purchase on the 1st day of the month and must pay a $2 late charge if it does not pay within the first 10 days. What is the interest rate if HC Group pays on Day 1? On Day 30? On Day 45? Problem 6 - Future Value (see page 219 of text for example) Formula: FV = PV (1 + i)n HS Group invests $1,200,000 at 5% compounded quarterly. How much will the investment be worth after 10 years? Chapter 13 Problem 7 - Payback Period - see page 317 for formulas HS Group plans to purchase a new piece of equipment for $200,000 with estimated annual cash flows of $15,000 and salvage value of $5,000. Compute the payback period? Chapter 14 Problem 8 - Ratios Pick any 4, for each explain what the ratio is telling us about the financial condition of the healthcare organization. Is the ratio a cause for concern or comfort? Current ratio of 4.2 Operating margin of .85 Days cash on hand, short-term sources ratio of 7.6 Total asset turnover ratio of 2.0 Current asset turnover ratio of 5.0 Inventory turnover ratio of 45.25 Long-term debt to capitalization ratio of 37.2