Let us suppose that a hospital wants to set their fees for an overnight stay such that the contribution margin on a hospital room will be 32%. The cost to the hospital of an overnight stay (staff, physical equipment, and supplies) is $450. What fee should they charge to obtain a contribution margin of 32%? [Hint: if the contribution margin is 32%, then the $450 cost is 68% of Operating Revenues.]
What is the target fee for an overnight stay?