Financial Analysis

1. What is break even analysis?
2. When do we use break even analysis? (ie. What is it useful for in healthcare?)
3. What is the formula to calculate break even analysis?

Using the scenario and data provided below, calculate the break-even analysis and respond to the questions. Please show your work.

Imagine you are a strategic planner at a large urban acute care hospital. Due to increasing ER costs, your Board proposes a freestanding Urgent Care Clinic. You are provided with the following estimated costs:

• Fixed Costs (building, equipment, staffing): $800,000 annually
• Variable costs (supplies, materials) per patient visit are estimated at $20.00 per visit
• Average charge per patient visit $70.00

4. How many patients would the Urgent Care need to see annually to break even? (show your work)

5. How many on average would the Urgent Care need to see daily to break even? (show your work, assume the Urgent Care is open 365 days a year)

6. What if we were able to see 18,000 patients annually? How much of a profit would you expect annually?