# What are the expected rates of reimbursement

August 30, 2017

Question
Your facility has the following payer mix:

40% commercial insurances

25% Medicare insurance

15% Medicaid insurance

15% liability insurance

5% all others including self-pay

Assume that for the time in question you have 2000 cases in the proportions above. Commercial insurances average 110% of Medicare, Medicaid averages 65% of Medicare, Liability insurers average 200% of Medicare and the others average 100% of Medicare rates. The average Medicare rate for each case is \$6200.

1) What are the expected rates of reimbursement for this time frame for each payer? What is your expected A/R?

2) What rate should you charge for these services (assuming one charge rate for all payers)?(this gives you your total A/R.) Calculate the total charges for all cases based on this rate.

3) What is the difference between the two A/R rates above? Can you collect it from the patient? What happens to the difference?

4) Which of these costs are fixed? Which are variable? Direct or indirect?

a. materials/supplies (gowns, drapes, bedsheets)

b. Wages (nurses, technicians)

c. Utility, building, usage exp (lights, heat, technology)

d. Medications

e. Licensing of facility

f. Per diem staff

5) Calculate the contribution margin for one case (in \$) with the following costs for this period, per case:

a. materials/supplies: \$2270

b. Wages: \$2000

c. Utility, building, usage exp: \$1125

d. Insurances (malpractice, business etc.): \$175

6) Using the above information, determine which is fixed and which cost is variable. Then calculate the breakeven volume of cases in units for this period.

7) Suppose you want to make \$150,000 profit between this period and next period to fund an expansion to the NICU, how many cases would you have to see, and at what payer mix would this be optimal?

Show all calculations.

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