Total Volumes

Revenue Determination:

Mike Smith who works for a local well star clinic is given the following task: determine the price to charge for patients who are covered by Managed care # 2 plan in order to meet the margin target. Assumptions are listed as the followings:

Reimbursement Rate
Total Cost	$100,000
Total Volume	1000
Patient group
Medicare	40%	$95/visit
Medicaid	10%	$75
Managed Care #1 plan	30%	$110
Managed Care #2 Plan	15%	???
Uninsured	5%	10% of the charge on Managed Care #2 plan

(Dollar amounts are measured in thousands)

Assume that reimbursement rate from Managed care#2 is 90% of the charges charged by the clinic.

Answer the following questions for Mike:

1. What price should the clinic charge for Managed Care #2 plan in order to break even?
2. What price should the clinic charge for Managed Care #2 plan in order to make a profit of 5 million dollars?
3. How sensitive is the price charge to volume change? (Hint: come up with several scenarios of increased/decreased total volumes, different volume composition in terms of different percentages of client groups etc. BE CREATIVE)