Case: Dade General Hospital - Doral Urgent Care Center ✓ Solved

Case: Dade General Hospital - Doral Urgent Care Center. The

Case: Dade General Hospital - Doral Urgent Care Center. The center has been operating with losses for the first two years and the 2018 projections still show losses for the year. Hansel Padrón, the CEO of the hospital, is concerned about the financial status and has approached you, the administrator, to recommend whether it should be closed or remain open. If the latter decision, then what is the plan of action to make the center profitable.

Prepare: 1. Break-even analysis for the following scenarios: a. With no marketing efforts, what is the number of visits the center needs to have in a year to break even? Will it happen within the next three years? b. What is the number of visits needed to break even if the marketing effort is undertaken? Will it happen within the next three years? c. How many additional visits will the center need in order to cover the cost of the marketing efforts, regardless of the center's overall profitability. 2. Recommendations for actions to take to improve the center's financial performance. 3. Prepare a document or PowerPoint presentation which includes: executive summary, summary of the analysis performed and conclude with your recommendation to either close the center or remain open and substantiate your decision. (words plus Exhibits). Case should be presented in a professional manner as a document that you would give to your CEO. Exhibits A, B and C present data.

Paper For Above Instructions

Executive summary: This paper analyzes the Doral Urgent Care Center’s financial performance using standard break-even (cost-volume-profit) analysis and then translates findings into actionable recommendations for management. The key question is whether the center should remain open and, if so, what marketing and operational actions are required to achieve profitability within a three-year horizon. Using the data provided in Exhibits A–C, the center’s current economics indicate a path to profitability if volumes increase sufficiently and fixed costs are managed through targeted marketing and capacity utilization.

Background and data context: The Doral Urgent Care Center has operated at a loss for the initial years, with 2018 projections still showing negative results. The center’s operating metrics include a capacity to handle up to 80 visits per day, a 2017 average of 42 visits per day, and a projected 2018 average of about 46.3 visits per day (Exhibit C). The center’s actual annual volumes and the corresponding net revenues are provided in Exhibits A and B. For the purpose of this analysis, we use: (a) net revenue per visit, (b) variable costs per visit, and (c) fixed operating costs (including advertising and staff costs) as inputs for a CVP framework.

Methodology: The core analytical tool is cost-volume-profit (CVP) analysis. The contribution margin per visit (revenue per visit minus variable cost per visit) determines how many visits are required to cover fixed costs and achieve profitability. The general equations are:

• Revenue per visit (average) = Net Revenues / Number of Visits
• Variable cost per visit = per-visit costs for supplies, administration, etc. (as given in Exhibit C)
• Contribution margin per visit = Revenue per visit – Variable cost per visit
• Break-even visits per year = Total annual fixed costs / Contribution margin per visit

Note: The exhibits show per-visit variable costs and a set of fixed costs. The fixed-cost base shown in Exhibit C includes items such as the marketing assistant salary and advertising, listed monthly, which translates to annual fixed costs for CVP purposes. There is also an explicit line for “Building lease” which represents significant fixed commitments; for sensitivity analysis, we consider scenarios both with only the directly disclosed fixed costs and with the lease included as a fixed annual cost, to illustrate a range of possible break-even points.

Findings – baseline (no marketing): Using the 2018 projection data (visits ≈ 16,909; net revenues ≈ $667,906; per-visit revenue ≈ $39.46; total per-visit variable cost ≈ $5.35), the contribution margin per visit is approximately $34.11. The fixed costs (from the fixed-cost lines in Exhibit C) imply an annual fixed cost base of about $84,000 (assuming the listed monthly fixed costs are representative). Break-even visits = $84,000 / $34.11 ≈ 2,461 visits per year, or roughly 6.7 visits per day (assuming 365 days). This is well below the projected 2018 volume of 16,909 visits, suggesting that, on the basis of these inputs alone, the center would be profitable once fixed costs are covered. However, the Exhibits show ongoing losses in the reported period, which indicates that the actual fixed costs may be higher when all obligations (such as the building lease) are included or that the net revenue per visit is depressed by payer mix, discounts, or other factors. Sensitivity to these factors is acknowledged below.

Sensitivity scenario – marketing costs: If marketing expenditures are added to fixed costs (e.g., incremental marketing costs of $48,000 annually for a campaign), the new break-even requirement becomes (Fixed costs + marketing costs) / CM per visit. With the same $34.11 CM, the break-even visits would rise to approximately (84,000 + 48,000) / 34.11 ≈ 4,360 visits per year, or about 12.0 visits per day. This illustrates how marketing investments alter the required volume to reach profitability and underscores the importance of ensuring that marketing yields the intended increase in patient volume and revenue per visit.

Additional visits required to cover marketing costs: If the annual incremental marketing cost is $48,000 and the contribution margin per visit is $34.11, then additional visits needed to cover the marketing expenditure alone are 48,000 / 34.11 ≈ 1,406 visits per year (about 3.85 visits per day). This calculation isolates the marketing investment as a separate demand on volume, independent of overall profitability. If marketing drives volumes beyond baseline, the incremental contributions from those visits help offset the marketing expense and push the center toward overall profitability.

Discussion of implications and strategic options: Given that the center’s capacity is 80 visits per day, and the 2017–2018 trend shows growth in daily volume toward 46.3 visits per day (projected), there is substantial headroom to reach the higher volumes required by break-even under marketing scenarios. The key questions for decision making are (1) the reliability and ROI of the proposed marketing push, (2) the payer mix and price realization that affect net revenue per visit, and (3) the fixed commitments (notably the lease) that may impair short-term profitability if volumes do not materialize as planned. A disciplined action plan should couple targeted marketing with operational improvements (appointment scheduling efficiency, patient flow optimization, extended hours or weekend access) to raise daily visits toward the higher break-even thresholds without excessive cost growth.

Recommendations: I recommend that the center remain open and pursue a targeted marketing initiative paired with capacity-utilization improvements to achieve the required volume uplift. Specifically, implement a three-phase plan: (1) a focused, data-driven marketing campaign aimed at the center’s referral sources and nearby catchment area, (2) process improvements to reduce bottlenecks and increase daily visit capacity per staff hour (e.g., streamlined triage, optimized nurse/physician scheduling, and better appointment block management), and (3) ongoing monitoring of key metrics (daily visits, revenue per visit, variable costs, and fixed costs) with monthly CVP analysis to ensure that the marketing investment translates into the required incremental volume and margin. If after an appropriate 12–18 month period the required volumes are not realized and the fixed obligations remain unsustainably high, a re-evaluation would be warranted.

Implementation plan: To execute this strategy, the center should (a) establish a marketing ROI target aligned to incremental visits necessary to cover marketing costs and move toward fixed-cost profitability, (b) engage with local PCPs, employers, and community organizations to drive visits, (c) optimize scheduling and throughput to minimize patient wait times and maximize daily patient capacity (up to the 80-patient daily ceiling), and (d) conduct quarterly reviews of CVP metrics and adjust tactics accordingly. The plan should be documented in a brief executive summary and a slide deck for the CEO, as requested in the assignment.

Limitations and caveats: The calculations rely on the data presented in Exhibits A–C, which include some inconsistencies and ambiguities (notably around fixed-cost totals and lease-related obligations). The CVP results provided here illustrate the mechanics and provide directional insights rather than precise, auditable numbers. For final decision making, a revised data pull with cleaned inputs (including all fixed commitments and payer mix effects) is recommended.

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