Atlantic Imaging Center: Small Imaging Center With Two A ✓ Solved

Atlantic Imaging Center is a small imaging center with two a

Atlantic Imaging Center is a small imaging center with two analogue film or screen units. As the director, determine staffing needs. Current resources: 2 mammography units, 2 technologists, 1 aide. Cost data: Reimbursement per screen $80; Equipment costs per month ($800 per machine) $1,600; Technologist cost per mammography $18; Technologist aide per mammography $5; Variable cost per mammography $9; Equipment maintenance per month per machine ($375 per machine) $750. Given the above information, calculate monthly break-even volumes for the department:

A. Monthly volume to break even.

B. Monthly volume to break even at a desired $5,000 per month profit.

C. Monthly volume to break even with reimbursement $104 per screen and no profit.

D. Monthly volume to break even with an additional technologist.

Paper For Above Instructions

Introduction and approach: This analysis uses standard break-even formulas to determine required monthly mammography volumes for Atlantic Imaging Center given the supplied cost and reimbursement data. Break-even (units) is computed as X = TFC / (P − V), where TFC = total fixed costs, P = reimbursement per unit (price), and V = variable cost per unit. For a targeted profit TF, the units required are X = (TFC + TF) / (P − V) (Zelman et al., 2014; Horngren et al., 2013).

Step 1 — Identify fixed and variable costs

From the scenario, fixed monthly costs that do not vary directly with each mammogram include equipment capital expense and equipment maintenance. Equipment cost is $800 per machine per month × 2 machines = $1,600. Maintenance is $375 per machine × 2 = $750. Total fixed costs (TFC) = $1,600 + $750 = $2,350.

Variable costs per mammogram include technologist labor ($18), aide labor ($5), and other variable costs ($9). Total variable cost per unit V = $18 + $5 + $9 = $32 per mammogram. The current reimbursement price P = $80 per screen. Thus contribution margin per unit (P − V) = $80 − $32 = $48 (Zelman et al., 2014; Horngren et al., 2013).

A. Monthly volume to break even (no profit)

Apply X = TFC / (P − V). Using TFC = $2,350 and contribution margin = $48:

X = 2,350 / 48 = 48.958 → round up to 49 mammograms per month to break even.

Interpretation: At current reimbursement and cost structure, the department must perform at least 49 mammograms monthly to cover fixed and variable costs. Each additional mammogram beyond 49 produces $48 toward profit (Zelman et al., 2014).

B. Monthly volume required for $5,000 monthly profit

Targeted profit TF = $5,000; use X = (TFC + TF) / (P − V):

X = (2,350 + 5,000) / 48 = 7,350 / 48 = 153.125 → round up to 154 mammograms per month.

Interpretation: To achieve a $5,000 monthly departmental contribution after covering fixed costs, the center must perform roughly 154 mammograms monthly. This is 105 more mammograms than the break-even level (154 − 49).

C. Break-even with increased reimbursement ($104 per screen) and no profit

If reimbursement rises to P = $104 and all other costs remain the same (V = $32, TFC = $2,350):

Contribution margin = 104 − 32 = $72

X = 2,350 / 72 = 32.639 → round up to 33 mammograms per month.

Interpretation: A higher reimbursement lowers required volume substantially: only 33 screens per month are required to break even. This demonstrates the sensitivity of break-even volume to reimbursement rates (HFMA, 2018).

D. Break-even with an additional technologist

Assumption and rationale: The scenario gives technologist cost per mammogram ($18) but does not provide a monthly salary for adding headcount. In practice, adding a technologist typically increases fixed labor cost (salary and benefits). I will demonstrate two approaches: (1) if the additional technologist is salaried and creates new fixed monthly cost, and (2) if the technologist's cost continues to be captured as variable only.

Approach 1 — additional salaried technologist: Assume a conservative estimated monthly cost for an additional mammography technologist (salary + benefits) of $5,000 per month, consistent with radiologic technologist market medians (BLS, 2024; Payscale, 2024). New TFC = existing TFC ($2,350) + $5,000 = $7,350. Contribution margin remains $48 (P − V).

New X = 7,350 / 48 = 153.125 → round up to 154 mammograms per month.

Interpretation: With an added technologist paid as a fixed monthly salary of $5,000, required volume to break even increases to about 154 screens — the same level calculated for achieving a $5,000 profit earlier because the additional fixed cost equals the previously targeted profit. This shows that adding salaried staff materially raises the volume needed to cover new fixed obligations (Zelman et al., 2014).

Approach 2 — additional technologist as variable-cost coverage: If instead the staffing model distributes technologist labor as entirely unit-based (e.g., per-screen labor cost remains $18 and hiring additional staff is used to handle peak times without increasing fixed monthly payroll significantly), then fixed costs may be unchanged and break-even volume remains 49 screens. This emphasizes that the financial impact depends on whether headcount adds fixed payroll obligations or purely variable/contingent labor costs (Horngren et al., 2013).

Practical recommendations

1. Monitor capacity: If average monthly demand is near or below 49 screens, avoid hiring additional salaried technologists; instead use flexible scheduling or per-diem technicians (BLS, 2024; ACR, 2020).

2. Negotiate reimbursement: Increasing reimbursement (to $104 per screen in the scenario) substantially reduces required volumes for fixed-cost recovery — making negotiations with payers and coding optimization an efficient lever (CMS, 2022).

3. Sensitivity analysis: Model break-even under multiple salary assumptions (e.g., $3,500, $5,000, $6,500 monthly) to guide hiring decisions; include benefits and training costs in fixed-cost estimates (HFMA, 2018).

4. Track variable cost reduction: Reducing per-screen variable costs (supplies, workflow efficiency) improves contribution margin and lowers break-even. Lean process improvements and supply-chain management can be high-impact strategies (IHI, 2017).

Conclusion

Using the provided data and standard break-even formulas, Atlantic Imaging Center must perform approximately 49 mammograms monthly to break even at $80 reimbursement and $32 variable cost. To earn $5,000 monthly, they need about 154 screens. A reimbursement increase to $104 reduces break-even to ~33 screens. Adding an additional salaried technologist (estimated $5,000/month) raises break-even to ~154 screens; if the extra technologist is accommodated via variable (per-unit) labor expenses, fixed costs and break-even remain unchanged. Decisions to hire should therefore be based on current and forecasted demand, reimbursement environment, and whether labor will be a fixed or variable commitment (Zelman et al., 2014; Horngren et al., 2013).

References

  • Zelman, W. N., McCue, M. J., & Glick, N. D. (2014). Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts, and Applications. (7th ed.). Jossey-Bass.
  • Horngren, C. T., Datar, S. M., & Rajan, M. V. (2013). Cost Accounting: A Managerial Emphasis. Pearson.
  • Bureau of Labor Statistics. (2024). Occupational Employment and Wages, Radiologic Technologists. U.S. Department of Labor. https://www.bls.gov
  • Healthcare Financial Management Association (HFMA). (2018). Break-even and Contribution Margin: Implications for Health Care Management. HFMA Briefing.
  • Centers for Medicare & Medicaid Services (CMS). (2022). Reimbursement Basics and Coding Guidance. https://www.cms.gov
  • American College of Radiology (ACR). (2020). Practice and Quality Improvement Guidance for Mammography Services. ACR Publications.
  • Institute for Healthcare Improvement (IHI). (2017). Improving Health Care Quality: Process and Cost Improvements. IHI White Paper.
  • Payscale. (2024). Radiologic Technologist Salary Report. https://www.payscale.com
  • Investopedia. (2020). Break-Even Analysis Definition. https://www.investopedia.com/terms/b/breakevenanalysis.asp
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Intermediate Accounting (15th ed.). Wiley. (for general cost-accounting and contribution-margin formulas)

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