GET QUOTEThe Importance of Utilization
Posted on July 2, 2009 - Filed Under Finance
Table 5.9 provides information on the impact of utilization changes on profitability. The center column, the base case, is once again our starting point. With an assumed utilization of four visits for each of Peachtree’s 18,750 members, 75,000 visits result in a projected profit of $419,038. However, if Atlanta’s managers are not able to limit utilization to the level forecasted (or less), the clinic’s profit would fall. Assume that realized utilization is actually 4.4 visits per member, rather than the 4.0 forecasted. Read more
A Graphical View in Terms of Membership (2)
Posted on June 29, 2009 - Filed Under Finance
The analysis based on number of members reveals that there are two elements to controlling total variable costs under capitation: the underlying variable cost of the service ($28.18 per visit) and the number of visits per member (four). The two-variable nature of the variable cost rate makes cost control more difficult under capitation. In a fee-for-service environment, cost control entails only minimizing per visit Read more
A Graphical View in Terms of Membership
Posted on June 26, 2009 - Filed Under Finance
Figure 5.5 is like Alice, of Alice in Wonderland, peering through the looking glass and finding that everything is backwards. The key to this problem is that the horizontal axis does not measure the volume to which revenues are related—that is, the horizontal axis in Figure 5.5 has number of visits on the horizontal axis, just as if Atlanta Clinic were selling healthcare services. It is not; it is now selling insurance, so the appropriate horizontal axis value is the number of members (enrollees). Read more
Profit Analysis in a Capitated Environment (2)
Posted on June 23, 2009 - Filed Under Finance
How might Atlanta’s managers evaluate whether or not the $7,500,000 revenue attached to the contract is adequate? To do the analysis, they need two critical pieces of information: cost information and actuarial (utilization) information. The clinic already has the cost accounting information—the full cost per visit is expected to be $94.41 (at a volume of 75,000 visits), with an underlying cost structure of $28.18 per visit in variable costs and $4,967,462 in fixed costs. For its actuarial information, Atlanta’s managers
estimate that the Alliance will have a covered population of 18,750 members with an expected utilization rate of four visits per member per year. Thus, the total number of visits expected is 18,750 × 4 = 75,000. Read more
Profit Analysis in a Capitated Environment
Posted on June 20, 2009 - Filed Under Finance
As a review of profit analysis, consider how the analysis is changed when a provider operates in a capitated environment. In addition to solidifying concepts presented in previous sections, this section provides insights into the basic differences between fee-for-service reimbursement and capitation. Read more
A Graphical View in Terms of Utilization (2)
Posted on June 17, 2009 - Filed Under Finance
A second critical point about Figure 5.5 is the difference between the flat revenue and the flat fixed-cost base. Atlanta has a spread of $7,500,000 ? $4,967,462 = $2,532,538 to work with in the management of the healthcare of this population for the period of the contract. If total variable costs equal $2,532,538, the clinic breaks even; if total variable costs exceed $2,532,538, the clinic loses. Thus, to make a profit, the number of visits must be less than $2,532,538 / $28.18 = 89,870. If everyone in the organization, especially the managers and clinicians, does not understand the inherent utilization risk under capitation, Read more
A Graphical View in Terms of Utilization
Posted on June 14, 2009 - Filed Under Finance
Figure 5.5 contains a graphical CVP analysis for the capitation contract that is constructed similar to the fee-for-service graphs shown in Figures 5.3 and 5.4 in that the horizontal axis shows the number of visits, while the vertical axis shows dollars of revenues and costs. Also shown is the same underlying cost structure of $4,967,462 in fixed costs coupled with a variable cost rate of $28.18. One very significant difference exists, however. Instead of being upward sloping, the total revenues line is horizontal, which shows that total revenue is $7,500,000 regardless of volume as measured by the number of visits. Read more
Marginal Analysis: Short-Term Versus Long-Term Implications (2)
Posted on June 11, 2009 - Filed Under Finance
However, Atlanta’s managers cannot ignore the long-termimplications associated with accepting the proposal. These are not addressed in detail here, but clearly the clinic cannot survive this scenario in the long run because the clinic’s revenues are not covering the full costs of providing services. In the
meantime, bleeding $580,962 of losses in 2005 may be better than bleeding $1,376,462 until the clinic can adjust to market forces in its service area. This adjustment may be as simple as merely absorbing the Read more
Marginal Analysis: Short-Term Versus Long-Term Implications
Posted on June 8, 2009 - Filed Under Finance
The Atlanta/Peachtree illustration points out how the contribution margin can be used in managerial decision making. To help see this, the analysis needs to be viewed from a different perspective. Suppose the clinic is forecasting a volume of 50,000 visits for 2005, and Peachtree HMO offers to provide the
clinic 25,000 additional visits at $60 revenue per visit. These 25,000 visits are called marginal, or incremental, visits, because they add to the exiting base of visits. Should the clinic’s managers accept this offer? Read more
SEO packages for the website submission
Posted on May 25, 2009 - Filed Under Finance
If you want be successful in online business so you should have amazing and wonderful website to support your business. But, if you can’t make it you can ask for a help from the expert. You have to consider that graphic design of your site determining the level of browsers interest. The more interesting the graphic the more browsers will visit your site. Next, you also have good content to attract the browsers. Making all this stuff will be overwhelming for you. Then, you can visit SubmitEdge.Com and asking for a help. Read more
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