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Health Care 2 Pages

# Health Care Finance

##### Question

Module 2 - SLP

Health Care Services Reimbursement

Foundation for this assignment

In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling \$14,550,400. The Gastroenterology Clinic costs data for a 12-month period from January 2013 through December 2013 were reported as follows:

 Month,   2013 Number of Patient Visits Gastroenterology Clinic Costs, \$ January 6,755 945,700 February 6,620 946,660 March 5,834 880,934 April 6,228 927,972 May 7,554 944,250 June 7,620 914,400 July 7,136 949,088 August 7,440 959,760 September 6,453 942,138 October 5,325 825,375 November 5,588 854,964 December 7,020 961,740

Find the fixed and variable portion of costs using the high-low method.

Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.

Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.

In deciding to continue (or to discontinue) a service, which revenues currently do not cover total cost, which is more important in the short run, variable cost or fixed cost? In the long run (with more service volume)? Why?

SLP Assignment Expectations

Assignment Expectations, in order to earn full credit:

Length: 3 - 4 pages, excluding title page and references.

##### Solution

Title: Health Care Finance
Length: 2 pages (550 Words)
Style: APA

Preview

Health Care Finance

High-Low method is a technique used to split mixed cost into its fixed and variable components.

 Variable Cost per Unit = y2 − y1 x2 − x1

Where,
y2 is the total cost at highest number of patients;
y1 is the total cost at lowest number of activities;
x2 are the highest number of patients;
x1 are the lowest number of patients:

Therefore: Variable cost= (914,400-825,325)/ (7620-5325)

= \$ 38.79.

Total cost = 914,400-(7620*38.79)

= \$ 618,820.2

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