Mercy hospital is a privat hospital that serves an aging population the hospital administrator believes that insurance companies and medicare will move to fixed paymets for spicific procedure which will put increasing pressure on hospital to control cost, acoomon procedure performed at hospital is hipreplacement surgery the hospital administrator has asked the hospital CFO to repare information on the current cost of hip replacement at hospiatl so they can explore the finanicial viablity of thisand other procedure the following information gathered by CFO
- expected change reimbursment sales price $ 25,000
- required return oncharges return on sales 30%
- current average cost per hip replacement $ 22,000
A are hip replacement surgery finanicial viable
B gross function team analyse the hospital hip replacement and estimated through better schedualing the hospital could reduce hospital stay from average of nine day to five days with no loss of quality of care, in fact because elderly patients would be hospitalized for shorter period they would be less likly to cotract respiratory infection, improvement in this procedure can result in reduction of the average cost of a hip replacement by $ 8,000 if this a ccomplished what is the expected return on charges for hip replacemet.