Reference no: EM131764545

As Holy Family Hospital prepares its budget for the upcoming year, it is trying to determine where to set its average inpatient charge per case. Consider the following data on volume, payer mix, and finances.

Volume

Medicare and Medicaid cases                                         1,000

Charity care and bad-debt cases                                        200

Commercial-paying cases                                               1,900

Full-charge-paying cases                                                   100

Financial Data

Budgeted operating expenses                                 $10,000,000

Debt principal payment                                                400,000

Increases in current assets                                          500,000

Increases in current liabilities                                       300,000

Capital expenditures                                                    500,000

Assume that the average payment per case for the Medicare and Medicaid patients is $3,500. Assume that Holy Family realizes no payment on its charity care and bad debt cases. Holy Family’s contracts with commercial payers are negotiated based on a percentage discount off of full charges. For the coming year, the average negotiated discount with commercial payers is 15%.

If the hospital’s total financial requirements for the coming year are $11,100,000

($10,000,000 + $400,000 + ($500,000–300,000) + $500,000 = $11,100,000)

What should be Holy Family’s average charge per case in order to meet the total financial requirements?