HACM9102 Financial Management and Economics in Health Care Minor Assignment 2

Part 1: Break-even Analysis

The Foxowl Private Hospital (FPH) charges an average patient fee of $1,980. The hospital currently provides services to 910 patients per year. The average costs per patient are:
Item Average Cost per Patient
Direct staffing / labour $625
Drugs and other consumables $555
Other direct costs $400
Total $1,580
The hospital’s overheads are:
Item Hospital Overhead (annual)
Administration $155,000
Depreciation $31,000
Insurance $34,000
Rent $40,000
Total $260,000
FPH is tendering for a government contract to provide health care services to an additional 400 patients (the government will pay FPH a fixed fee to provide services for the 400 patients). The current occupancy rate is such that FPH’s overheads will stay the same regardless of whether FPH is successful with its tender. It is expected that the additional patients will cost the same to treat as the current patients.