Break-Even Analysis Case Study

You and several of your colleague business partners have decided to establish an outpatient fertility clinic in your service area. All of you are very familiar with this patient population base, have completed an extensive market analysis that demonstrated a great need for the service, and are comfortable with setting up a business and the costs associated with this special group of patients.

As part of the business plan, you and your partners will need to convince stakeholders that this new service endeavor will be viable. They will want to know how many patients visits annually will need to occur and how long it will take for the service to be at least cost neutral or profitable. To provide them with this information you will perform a break-even analysis. Use the following data, conduct the analysis accounting for the contribution margin of each patient acuity category.

· Fixed Costs: $9,788,000 (start-costs, specialty physicians, anesthesiologists, APNs, staff

nurses and other staff salaries, specialty equipment, other miscellaneous)

· Variable costs: $500/patient visit (specialty equipment, oxygen supplies, other


· Clinic days: Monday-Saturday- 305 days/year

· Projected patient visits per year: 7480

· Patient charges by patient acuity category:

· Simple (20%)————$2000/visit

· Moderate (70%)——–$6500/visit

· Complex (10%)———$10,000/visit

Break-even Analysis Data Table
Acuity Category Percentage % Charge per Visit Visits per Year Charges per Year Visits per Day Charges per Day Contribution Margin
Simple 20% $2000
Moderate 70% $6500
Complex 10% $10,000
Expected Total Daily Charges
Expected Total Daily Revenue
Break Even point in days
Break Even point in visits

1. Describe your approach to this case study. In addition to the numbers given, what do you need to know before you can calculate the break-even analysis?

2. Perform the calculations needed for the break-even analysis. Show your work, formulas used, and reference the formula. When calculating the patient visits per day, round to the nearest whole. After you’ve completed the calculations, record your results in the appropriate place in the table.

3. How many patient visits are expected per day?

4. What is the contribution margin of each category of patient?

5. Based on the data and your calculations, what is the expected daily revenue?

6. How long (in days, months, or years) will it be before the return on investment begins?

7. How many patient visits will be required to reach the break-even point?

8. Discuss your analysis. Is the project viable and profitable service? Does the analysis support moving forward with the business? Cite specific data from you analysis to support your interpretation.

Points % Description
Approach to Break-Even Analysis 5 5% Approach to Break-even analysis is clearly articulated and contains elements needed to address the scenario
Calculate the number of patients/category served per year and day. 15 15% Number of patients served by the fertility clinic is correctly calculated per year and day for each type/category. Formulas are correctly shown, used, and referenced. Calculations are shown
Calculate the contribution margin for each patient category 30 30% For each of the three patient/categories the contribution margin is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown.
Calculate the number of days to break-even. 10 10% Time to break-even in days is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown
Calculate the break-even quantity (number of visits). 15 15% The break-even quantity (number of visits) is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown.
Analysis of break-even analysis 20 20% Break-even analysis is clearly articulated. Includes elements potential for viability and profitability of service, recommendation for continuing the business. Specific data from the analysis is used to support your interpretation.
Writing conventions, format, and

reference citations

5 5% Writing is clear concise without grammatical and spelling errors. All references are correctly cited (if applicable) and written.
 100 100 A quality assignment will meet or exceed all of the above requirements.

Chamberlain College of Nursing NR533 Financial Management of Healthcare Organizations

NR533 Break-even Analysis AGR STUDENT VERSION 2 4

Grading Rubric

Assignment Criteria Outstanding or highest level of performance Very good or high level of performance Competent or satisfactory level of performance Poor or failing level of performance Unsatisfactory level of performance

Possible Points = 100 Points

Approach to Break-Even Analysis 5 Points 0 Points
Calculate the number of patients per category served at the fertility clinic per year and per day. 15 Points 10 5 0 Points
Number of patients served per year and per day is correctly calculated for each patient category served at the fertility clinic. 2/3 categories correctly calculated 1/3 of categories correctly calculated All categories incorrectly calculated
Calculate the contribution margin for each type of patient served at the fertility clinic. 30 Points 20 10 0 Points
Contribution margin for all category types are correctly calculated Contribution margin for 2/3 category types are correctly calculated Contribution margin for 1/3 category types are correctly calculated Contribution margins for all category types are incorrectly calculated
Calculate the break-even quantity (number of visits) 10 Points 0 Points
Number of visits to break even is correct

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