A nursing home presents the following revenue and expense information – Number of admissions: 8,000 Average Revenue per admission: 10,000 Variable Cost per admission: 2,000 Given that the nursing home's fixed costs are $40 million:
a. What is the nursing home’s net income?
b. Compute the volume of admissions required for the nursing home to achieve accounting breakeven?
c. If the nursing home is targeting profits of $20 million, what volume of admissions will achieve this economic breakeven?
d. Assume that all the admissions to this nursing home come from a single payer with 50,000 members who are to be covered under a capitates plan. What PMPM rate will the nursing home need to charge to retain its net income (from ‘a’ above)?