Milbridge memorial hospital provides comprehensive physical exams.
To calculate the number of exams that must be performed by the clinic to achieve break-even, we need to first determine how much revenue it needs. To calculate the break-even point, divide the total $210,000 fixed cost by the discount received from the insurer (80% x 70% = 56%).
We arrive at $375,000 as our annual target income for the clinic to reach break even and cover its expenses.
It is important to know the fee structure for each exam and how many patients are covered by this arrangement versus paying full price. That said, assuming a fee structure whereby each exam generates $100 in revenue and 70% of patients receive a discount – then we can conclude that 3,750 visits would need to take place over a one year period in order for the clinic’s total revenues reach $375,000 (i.e., 3,750 x $100 = 375,000). To break-even, you would have to perform 3,750 tests over the course of a year.