Reference no: EM132498789

The partners of Ortho Inc. are planning for the upcoming fiscal year. For every 1,000 patients you can expect the following rates:

1. 350 Medicare patients, in which the government will reimburse $1,200 per procedure;
2. 50 Medicaid patients, in which the state of Virginia will reimburse $750 per visit;
3. 200 Aetna patients, in which you have a negotiated contract at charges less a 15% discount;
4. 100 Blue Cross patients in which your contract states will pay you charges less a 30% discount;
5. 100 patients from United in which the contract pays the lesser of $1,400 or 75% of charges;
6. 100 private pay patients who will pay 100% of charges;
7. 25 Charity patients who you are required to render healthcare to; and
8. 75 Self-Pay patients who will pay (on average) of 15% of our total charges.
9. Charity and Self-Pay patients originated from the Hospital's Emergency department and were a result of Ortho Inc.'s on-call commitments.
10. Next year, Ortho Inc.'s costs will be $1,150 per patient.

Question 1: Calculate the gross charge necessary to recover Ortho Inc.'s total cost of operations. Be sure to consider United's "lesser or" clause in their reimbursement rate. Hint: Profit = Total Revenue - Total Cost/ Profit Margin = Total Profit/Total Revenue.

Question 2: Calculate the gross charge necessary for Ortho Inc.'s to realize a 15% profit margin on its 1,000 patients.

Question 3: United presents a proposal to the group. They have offered to send an additional 100 patients per year to the group at a reduced rate of $1,200 per case. This rate would only pertain to the incremental patients. The marginal cost for the incremental patients is $900 per case. The practice needs to maintain its 15% profit margin; can the practice afford to accept this proposal and maintain its profit margin?