Chapter 9 Problems and Applications 19. The Hyde Park Surgery Center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next three years to plan for capital growth projects. For the first year, the hospital anticipates serving 1,500 patients, which is expected to grow by 8% per year. Based on current reimbursement formulas, each patient provides an average billing of $150,000, which will grow by 3% each year. However, because of managed care, the center collects only 35% of billings. Variable costs for supplies and drugs are calculated to be 12% of billings (not collections). Fixed costs for salarles, utilities, and so on, will amount to $20,000,000 in the first year and are assumed to increase by 6% per year. A) For each year up to three years, calculate the following: a) The number of patients b) Average billings per patient c) Gross bilings, which is equal to number of patients times average billings per patient d) Total collections, which is equal to gross billings times collection percentage e) Total variable costs 1) Total fixed costs e) Profit, which is equal to total collections minus total variable costs and total fixed costs B) Calculate the NPV of profit over the next three years using the NPVO) formula In Excel. Use a discount rate of 7% in the NPVO) formula, C) Define four reasonable scenarios as stated below and use the Scenario Manager in Excel to compare the NPV from each scenario. Best case Most likely case Worst case Disastercase Collection 33% 30% 27% 25% Patient Growth Rate 5% 4% 3% 1%