From the Front Lines

From the Front Lines

Using the example of “From the Front Lines” in Chapter 6 of your text, calculate the break even for the number of procedures. Use an electronic spreadsheet to show how you computed the break even and embed the spreadsheet in your paper.
Discuss the impact of the various reimbursements (e.g., Medicare, Medicaid, private, or self-pay).

From the Front Lines:
We recently purchased an endoscopic ultrasound (EUS), which allows doctors to examine the linings of the esophagus and stomach, as well as the walls of the gastrointestinal tract. It is a necessary, but expensive, piece of equipment, which cost us $20,000 ($11,000 to purchase, plus $9,000 for renovations). Our fixed costs are four full-time equivalent employees at $336,000. Medicare payments are $885 per procedure, and each procedure requires $175 in average variable costs. It has been estimated that we will complete 500 procedures in the first year and 850 procedures in years 2 to 5.

We have calculated that 3% of Medicaid patients account for more than half of our total costs. Because of this, we are proposing the removal of the highest risk patients from the primary care physician´s office and instead providing all services within a high-risk clinic. Residents will have a team assigned to them, helping them learn to manage their chronic conditions. The CFO sees this plan as a major challenge, because it will reduce fee-for-service revenue by $25 million, and add $2 million in costs for items like the office, staffing, claims analytics, predictive modeling and risk stratification tools, and case management information technology platform. However, we currently lose money on these residents, so we should lose less money.