You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:
Budgeted Procedures 15,000
Budgeted Cost $600,000
Desired Profit $120,000
It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:
Payer Volume % Discount %
Blue Cross 20 4
Unity PPO 15 10
Kaiser 10 10
Self Pay 5 40
50%
1. What rate must be set to generate the required $120,000 in profit in the preceding example?
2. If the forecasted volume increased to 18,000 procedures and budgeted costs increased to $684,000, while all other variables remained constant, what price should be established?
3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?