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Ut 3333

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Class HEALTHCARE FINANCE

Ut 3333: Evaluating Financial Statements
·         Description:
o    Evaluating Financial Statements
§  Balance Sheet
§  What organization owes, owns and difference
§  For a specific time
§  Income Statement
§  Did organization make a profit?
§  Covers a period of time
§  Statement of Cash Flows
§  Inflows and outflows of cash
§  Covers a period of time
§  Ratios/Ratio analysis
§  Liquidity ratios
§  Solvency ratios
§  Profitability ratios
§  Used to:
o    Identify deficiencies
o    Take corrective action
o    Based on norms and trends
§  Benchmarks
§  Used to compare
§  Compare from one period to another
§  Compare to another organization
§  Distortion of financial statements
§  Delay paying suppliers to increase cash balance
§  Difficult to determine if ratio is good or bad
§  Ratio analysis is only as good as financial statements

·         Type: Individual Project
·         Due Date: 11/21/14
·         Points Possible: 100
·         Deliverable Length:  3 pages
·         Description:
Your facility has the following payer mix:

40% commercial insurances
25% Medicare insurance
15% Medicaid insurance
15% liability insurance
5% all others including self-pay
Assume that for the time in question you have 2000 cases in the proportions above. (What are the proportions of the total cases for each payer?)
The average Medicare rate for each case is \$6200- use this as the baseline. Commercial insurances average 110% of Medicare, Medicaid averages 65% of Medicare, Liability insurers average 200% of Medicare and the others average 100% of Medicare rates. (What are the individual reimbursement rates for all 5 payers?)
1.   What are the expected rates of reimbursement for this time frame for each payer? What is your expected A/R?
2.   What rate should you charge for these services (assuming one charge rate for all payers)?(this gives you your total A/R.) Calculate the total charges for all cases based on this rate.
3.   What is the difference between the two A/R rates above? Can you collect it from the patient? What happens to the difference?
4.   Which of these costs are fixed? Which are variable? Direct or indirect?
§  materials/supplies (gowns, drapes, bedsheets)
§  Wages (nurses, technicians)
§  Utility, building, usage exp (lights, heat, technology)
§  Medications
§  Licensing of facility
§  Per diem staff
5.   Calculate the contribution margin for one case (in \$) with the following costs for this period, per case: a. materials/supplies: \$2270 b. Wages: \$2000 c. Utility, building, usage exp: \$1125 d. Insurances (malpractice, business etc.): \$175
6.   Using the above information, determine which is fixed and which cost is variable. Then calculate the breakeven volume of cases in units for this period.
7.   Suppose you want to make \$150,000 profit between this period and next period to fund an expansion to the NICU, how many cases would you have to see? At what payer mix would this be optimal?

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