PRICE BREAKEVEN TOTAL REVENUE-TOTAL VARIABLE COST-FIXED COST =PROFIT

VARIABLE COST PER VIST $ 5

ANNUAL DIRECT FIXED COST $ 500,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTESANNUAL UTILIZATION $ 10,000

A. ANNUAL PROFIT $100,000

What per visit price must be set for the service to break even?
(10,000X P)-(10,000X5)-500,000-50,000=0
10,000XP=600,000
X=60
What per visit price must be set for the service to break even?
VARIABLE COST PER VIST $ 5
ANNUAL DIRECT FIXED COST $ 500,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
$ 600,000
PRICE $ 60.00
ANNUAL PROFIT $100,000
VARIABLE COST PER VIST $ 5
ANNUAL DIRECT FIXED COST $ 500,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
ANNUAL PROFIT $ 100,000
$ 700,000
PRICE $ 70.00

B.
VARIABLE COST PER VIST $ 10
ANNUAL DIRECT FIXED COST $ 500,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
$ 650,000
PRICE $ 65.00

ANNUAL PROFIT $100,000

VARIABLE COST PER VIST $ 10
ANNUAL DIRECT FIXED COST $ 500,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
ANNUAL PROFIT $ 100,000
$ 750,000
PRICE $ 75.00
C.
VARIABLE COST PER VIST $ 5
ANNUAL DIRECT FIXED COST $ 1,000,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
$ 1,100,000
PRICE $ 110.00

ANNUAL PROFIT $100,000

VARIABLE COST PER VIST $ 5
ANNUAL DIRECT FIXED COST $ 1,000,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
ANNUAL PROFIT $ 100,000
$ 1,200,000
PRICE $ 120.00

D
VARIABLE COST PER VIST $ 10
ANNUAL DIRECT FIXED COST $ 1,000,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
$ 1,150,000
PRICE $ 115.00

ANNUAL PROFIT $100,000

VARIABLE COST PER VIST $ 10
ANNUAL DIRECT FIXED COST $ 1,000,000
ANNUAL OVERHEAD ALLOCATION $ 50,000
EXPECTED ANNUAL UTILIZATION $ 10,000
ANNUAL PROFIT $ 100,000
$ 1,250,000
PRICE $ 125.00
LE COST-FIXED COST =PROFIT
B1

B2
C1

C2
 Inpatient Days Average Cost CAPITATED POPULATION
Service Category per 1,000 Enrollees per Day 50,000
General 150 $1,500 ALLOCATED PERCENT
Surgical 125 $1,800 10%
Psychiatric 70 $700
Alcohol/Drug Abuse 38 $500 ENROLLEES
Maternity 42 $1,500 1,000
Total 425 $1,367

A. The PMPM rate is calculated with the use of following table

Administration Expenses
Annual Usage Per (Average Cost Per Day –
Member (Inpatient Days Average Cost Per Day Average Cost Per Day/
Service Category per 1,000 Enrollees) [A] (B) (90%)) [C]
General 0.15 1,500 166.67
Surgical 0.125 1,800 200.00
Psychiatric 0.07 700 77.78
Alcohol/Drug Abuse 0.038 500 55.56
Maternity 0.042 1,500 166.67
PMPM Rate

If Reduction is by 10% 0.10 1,000.00

Annual Usage Per Administration Expenses

Member (Inpatient Days (Average Cost Per Day –
per 1,000 Enrollees-10%) Average Cost Per Day Average Cost Per Day/
Service Category [A] (B) (90%)) [C]
General 0.135 1,500 166.67
Surgical 0.113 1,800 200.00
Psychiatric 0.063 700 77.78
Alcohol/Drug Abuse 0.034 500 55.56
Maternity 0.038 1,500 166.67
PMPM Rate

If Reduction is by 20% 0.20 1,000.00

Annual Usage Per Administration Expenses

Member (Inpatient Days (Average Cost Per Day –
per 1,000 Enrollees-10%) Average Cost Per Day Average Cost Per Day/
Service Category [A] (B) (90%)) [C]
General 0.120 1,500 166.67
Surgical 0.100 1,800 200.00
Psychiatric 0.056 700 77.78
Alcohol/Drug Abuse 0.030 500 55.56
Maternity 0.034 1,500 166.67
PMPM Rate

f Average Cost is Reduced by 10% 0.10 1,000.00

Administration Expenses
Annual Usage Per (Average Cost Per Day –
Member (Inpatient Days Average Cost Per Day Average Cost Per Day/
Service Category per 1,000 Enrollees) [A] (B) (90%)) [C]
General 0.15 1,350 150.00
Surgical 0.125 1,620 180.00
Psychiatric 0.07 630 70.00
Alcohol/Drug Abuse 0.038 450 50.00
Maternity 0.042 1,350 150.00
PMPM Rate

f Average Cost is Reduced by 10% 0.10 1,000.00

Administration Expenses
Annual Usage Per (Average Cost Per Day –
Member (Inpatient Days Average Cost Per Day Average Cost Per Day/
Service Category per 1,000 Enrollees) [A] (B) (90%)) [C]
General 0.135 1,350 150.00
Surgical 0.113 1,620 180.00
Psychiatric 0.063 630 70.00
Alcohol/Drug Abuse 0.034 450 50.00
Maternity 0.038 1,350 150.00
PMPM Rate
 90%

owing table

PMPM (Total
Total Rate (B+C) Rate*A/12)
1,666.67 20.83
2,000.00 20.83
777.78 4.54
555.56 1.76
1,666.67 5.83
$53.80

PMPM (Total
Total Rate (B+C) Rate*A/12)
1,666.67 18.75
2,000.00 18.75
777.78 4.08
555.56 1.58
1,666.67 5.25
$48.42

PMPM (Total
Total Rate (B+C) Rate*A/12)
1,666.67 16.67
2,000.00 16.67
777.78 3.63
555.56 1.41
1,666.67 4.67
 $43.04

PMPM (Total
Total Rate (B+C) Rate*A/12)
1,500.00 18.75
1,800.00 18.75
700.00 4.08
500.00 1.58
1,500.00 5.25
$48.42

PMPM (Total
Total Rate (B+C) Rate*A/12)
1,500.00 16.88
1,800.00 16.88
700.00 3.68
500.00 1.43
1,500.00 4.73
$43.58
A

B
LEVEL TYPE NO. OF RVU's REQUIERED TOTAL NO. EXAMINATIONS RVU;s REQUIRED
Level I 10 2400 24000
Level II 20 800 16000
Level III 30 400 12000
Total RVU's Required 52000
Laboratory Annual Cost $ 500,000.00
Cost per unit RVU $ 9.62

LEVEL PRICE NO. OF RVU's REQUIERED COST EXAMINATION

Level I 10 $ 96.15
Level II 20 $ 192.31
Level III 30 $ 288.46

LEVEL PRICE COST EXAMINATION PROFIT MARGIN 20% PRICING

Level I $ 96.15 $ 24.04 $ 120.19
Level II $ 192.31 $ 48.08 $ 240.38
Level III $ 288.46 $ 72.12 $ 360.58
$ 96.15
0.8
$ 120.19