Reference no: EM132274288

Administrators want to evaluate its financial feasibility, but, as the newest member of the team, they first want to hear your input. Estimated fixed costs are $1 million, and the estimated net reimbursement level is $1,500 per procedure. Physicians and other provider salaries on a direct basis are $340 per procedure, and total operating expenses will add another $160 per procedure. Calculate the breakeven point for this potential new service line.

1. If Simi Regional discovered a way to reduce the total initial investment to $600,000, causing the average pricing level to fall to $1,200 and the other assumptions to stay the same, how many procedures would be required to break even?
2. Assuming that the hospital conservatively estimates that it can deliver 1,000 procedures in the first year, which option should be chosen? Is it financially feasible to purchase, install, and employ the new radiology line? Or should the new radiology service be cancelled?