You have just started as the administrator at a SNF (skilled nursing facility). In the past the facility has marketed and served exclusively "private pay" patients who pay for their care themselves and to patients with long-term care insurance policies. For the past two years the facility has been losing money and as a result the facility's owners decided to let the previous administrator go.

Current census (number of residents)- 60

Empty beds- 40

Building rent- $30,000/month

Food- $12 per resident per day

Staffing- $75 per resident per day (this can be adjusted up and down with the SNF's census)

Price paid by a commercially insured or private pay resident- $102 per day

Medicaid rate for a day of patient care- $95

1. What is the average cost of caring for one patient for one day given the current census of 60 residents? (Hint: To do this you’ll need to divide building rent by the number of days in a month… assume 30… and the number of residents cared for each day. The food and staffing costs are already provided as per patient day amounts).
2. Is the accountant correct that Medicaid doesn’t pay enough to cover your costs?
3. What would happen to your per-patient-day cost for rent if you had more residents?
4. What is the contribution margin for a commercially insured/self-pay resident?
5. What is the contribution margin for a Medicaid patient?
6. At this point do you think you should pursue your idea to market to Medicaid patients further? Why or why not?
7. How much are you currently losing each month at your current census level (60 private pay patients)?
8. How much would your total profit (or loss) be each month if you added a total of 10 Medicaid residents in addition to the 60 private pay residents? If it’s a loss, put a negative.
9. How much would your profit (or loss) be each month if you added a total of 20 Medicaid residents in addition to the 60 private pay residents?
10. Which scenario is most profitable? Keeping only self-pay patients. Or Adding Medicaid residents, even though Medicaid doesn't pay their full cost of care.

Answer rating: 100% (QA)

Average Cost of caring for one patient for one day for 60 Residents Food 12 Staffing 75 Rent 1667 3000030 Days60 Average Cost per Day 103667 Is the ac... View the full answer