Show All Work To Determine The Net Operating Income

Show All Workdetermine The Amount Of Net Operating Income That Would R

Show All Workdetermine The Amount Of Net Operating Income That Would R

SHOW ALL WORK Determine the amount of net operating income that would result for a hospital whose payer mix and expected volume (100 cases) is as follows: 1) 30 Medicare cases pay $2,000 per case 30 Blue Cross Blue Shield cases pay $2,200 per case 20 commercial cases pay 100 percent of charges 10 Medicaid cases pay average cost 8 self-pay cases pay 100 percent of charges 2 charity cases pay nothing Average cost per case is expected to be $2,200, and the average charge per case is $2,) Calculate Gross patient revenue and deductions from gross patient revenue. Define revenue Define fee for service, discounted fee for service, charity services, and payment before service is delivered. ( all written assignments must be in APA format) 3) Time Value of Money (TVM) Calculate the Future Value of $1 in each of these 3 projects TVM Exercise Project Number of periods Interest rate Pop 5 11% Whistle 4 7% Loop 3 8% 4) Calculate the Present Value of each of the Projects below: Project End of period Discount rate Single cash Flow Pop 5 11% $10,000 Whistle 15 7% 7,500 Loop 25 8% 5,000 5) Income Statement Preparation: Prepare an Income Statement, in proper format, for 2015 for Johnson Medical Supplies (JMS) from the following information: Salaries $70,000 Insurance $700 Utilities $3,500 Gas/Auto $5,750 Office Supplies $7,250 Revenue $175,000 Rent $12,000 Maintenance $50,000 6) Calculate, define, and discuss the operating expenses, operating profit, and profit percentage.

Did JMS have a good year? Why/Why not?

Paper For Above instruction

The assignment entails several interconnected financial analyses, including calculating the net operating income for a hospital based on its payer mix, understanding revenue components, applying time value of money concepts, preparing an income statement, and evaluating financial performance through operating metrics. Each section requires detailed calculations and clear explanations grounded in finance and healthcare management principles, with proper APA formatting.

Calculating Hospital Net Operating Income and Revenue Components

The first task is to determine the net operating income (NOI) for a hospital with a specified payer mix and volume of 100 cases. The payer mix includes Medicare, Blue Cross Blue Shield, commercial, Medicaid, self-pay, and charity cases. The revenue per case varies depending on payer type, with some paying a percentage of charges and others paying average cost or nothing. The average charge per case is $2,000, and the average cost is $2,200.

First, calculate gross patient revenue by summing all revenue from payer categories:

• Medicare (30 cases at $2,000): $60,000
• Blue Cross Blue Shield (30 cases at $2,200): $66,000
• Commercial (20 cases at 100% of charges): 20 cases at $2,000 = $40,000
• Medicaid (10 cases at average cost): 10 cases at $2,200 = $22,000
• Self-pay (8 cases at 100% of charges): 8 cases at $2,000 = $16,000
• Charity (2 cases pay nothing): $0

Total gross patient revenue: $60,000 + $66,000 + $40,000 + $22,000 + $16,000 = $204,000.

Next, determine deductions, such as contractual adjustments, charity write-offs, and discounts, to arrive at net patient revenue (NPR). For simplicity, deductions include charity ($0) and charity write-offs for charity cases. Commercial, Medicare, and Medicaid payers pay specified rates; their deductions are the difference between charges and paid amounts, which in this scenario are already reflected in revenue calculations.

Net Operating Income (NOI) can be calculated as:

NOI = Total Revenue - Operating Expenses

Assuming operating expenses include salaries, insurance, utilities, gas/autos, office supplies, rent, and maintenance, and calculating accordingly.

Definitions and Explanation of Revenue Components

Revenue refers to the income earned from providing services before any deductions. It encompasses all billed charges regardless of eventual collection amounts.

Fee for Service is the charging model where services are billed individually based on a set rate.

Discounted Fee for Service involves reducing charges for certain payers like Medicare or Medicaid based on negotiated rates.

Charity Services are provided free of charge, resulting in no revenue recognition and potentially offset by charity care expenses.

Payment Before Service implies payments received prior to service provision, establishing deferred revenue until services are rendered.

Time Value of Money (TVM): Future Value Calculations

Using the provided data on three projects—Pop, Whistle, and Loop—the future value (FV) of an initial $1 investment is calculated using the formula:

FV = PV (1 + r)^n

For each project:

• Pop: FV = $1 (1 + 0.11)^5 ≈ $1 1.6851 ≈ $1.6851
• Whistle: FV = $1 (1 + 0.07)^4 ≈ $1 1.3108 ≈ $1.3108
• Loop: FV = $1 (1 + 0.08)^3 ≈ $1 1.2597 ≈ $1.2597

Present Value Calculations for Future Cash Flows

Applying the formula:

PV = Future Value / (1 + r)^n

• Pop: PV = $10,000 / (1 + 0.11)^5 ≈ $10,000 / 1.6851 ≈ $5,935
• Whistle: PV = $7,500 / (1 + 0.07)^15 ≈ $7,500 / 2.759 ≈ $2,720
• Loop: PV = $5,000 / (1 + 0.08)^25 ≈ $5,000 / 6.848 ≈ $730

Preparing an Income Statement for Johnson Medical Supplies

Based on the provided data, the income statement for 2015 is formatted as follows:

Analysis of Operating Expenses, Operating Profit, and Profit Percentage

Operating expenses encompass costs directly associated with generating revenue, including salaries, rent, utilities, insurance, auto expenses, supplies, and maintenance, totaling $149,950. Operating profit is calculated as total revenue minus operating expenses, amounting to $25,050. The profit percentage is derived as (Operating profit / Revenue) * 100, which equals approximately 14.3%.

JMS's profit percentage suggests a healthy operating efficiency, but a comprehensive analysis must consider industry benchmarks and broader financial context. A 14.3% profit margin indicates a satisfactory performance year, though continuous improvement can enhance competitiveness.

In conclusion, JMS experienced a profitable year with effective expense management relative to revenue. To determine whether it had a "good" year, one should compare these metrics with industry averages and historical data. If margins are higher than industry standards, JMS's performance is commendable; if lower, strategic adjustments may be necessary.

References

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