Problem:
Hospitals measure their volume in terms of patient-days. We can calculate patient-days by multiplying the number of patients by the number of days that the patients are hospitalized. suppose a large hospital has fixed costs of 54 million per year and variable costs of $ 600 per patient-day. Daily revenues vary among classes of patients. For simplicity, assume that there are two classses: (1) self-pay patients (S) who pay an average of $ 1,000 per day and (2) non-self pay patients (G) who are the responsability of insurance companies and government agencies and who pay an average of $ 800 per day. twenty percent of patients are self pay.
Required:
Question 1: Compute the break-even point in patients-days, assuming that the hospital maintains its planned mix of patients.
Question 2: Suppose that hospital achieves 225,000 patients-days, but that 25% of the patient-days were self-pay. Compute the break-even point.
Note: Provide support for rationale.