Problem:
A Nursing Home has 100 private pay residents. The administrator is concerned about balancing the ratio its private pay to non-private pay patients. Non-private pay sources reimburse an average of $100 per day whereas private pay residents pay average 100 percent of full daily charges. The administrator estimates that variable cost per resident per day is $25 for supplies, food, and contracted services and annual fixed costs are $4,562,500.
What is the daily contribution margin of each non-private pay resident?
If 25 percent of the residents are non-private pay, what will shady Rest charge the private pay patients in order to break even?
What if non-private pay payors cover 50 percent of the residents?