2. Investment Decision Now you are the Director of Rehab, and the CEO has asked you to advise Administration and the Board on the feasibility and

2. Investment Decision

             Now you are the Director of Rehab, and the CEO has asked you to advise Administration and the Board on the feasibility and advisability of opening an Outpatient Rehab program. The Administrative Support areas – Human Resources, Finance, Marketing, Plant and Facilities, IT – have all agreed that, at least for now, any addition costs that they will incur for the venture will be negligible since the space is currently available and the overall outpatient program is so big. So, the only things you need to consider are,

·      on the cost side, staff, equipment and supplies

·      on the revenue side, patient visits for OT and PT

·      reimbursement rate and payor mix.

Information available to you

·      Equipment and Supply Costs

o  Equipment – $500,000 to open and an additional $50,000 for each additional 5,000 visits a year over 10,000 visits.

o  Supply costs – $5 per visit

·      Staff Costs

o  Administrative staff (annual salary – don’t treat patients)

§ Supervisor – $70,000 per year

§ Clerk – $40,000

§ Benefits for Administrative staff at 30% of salary

o  Therapists (per visit) – $60 per visit

·      Revenue

o  Medicare and Private Pay – $120 per visit

o  Medicaid – $80 per visit

Questions:

1.     How many visits will it take to break even if all visits are Medicare or Private Pay?

2.     How many visits will it take to break even if visits are 50% Medicare/Private Pay and 50% Medicaid?

3.     How many visits will it take to break even if all visits are Medicaid?

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