Nursing Home Charges

Answer the two questions using Word or Excel and show all work.

1. Assume that a certain nursing home has two categories of payers. Medicaid pays

$60.00 per day and private pay patients pay the established per diem, but

approximately 10 percent of private pay charges are not collected. If 50 percent of

the patients are Medicaid and 50 percent are private pay, what rate must be set to

generate $150,000 in profit? Variable costs are $45.00 per day and fixed costs are

expected to be $1,000,000. Expected volume is 50,000 patient days.

2. Using this data and assuming that the nursing home charges $100 per day, what

would be the nursing home’s required volume (in patient days) in order to make

$150,000 profit?

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