Our robotic equipment and its maintenance represent afixed cost of $23,320 per month. The cost-effectiveness of robotic-assisted surgery is related to patient volume: With only 10 cases, the fixed cost per case is $2,332, and with 40 cases, the fixed cost per case is $583.
Calculate the break even for the number of procedures. Use an electronic spreadsheet to show how you computed the break even and embed the spreadsheet in your paper. Discuss the impact of the various reimbursements (e.g., Medicare, Medicaid, private, or self-pay). Think about your upcoming capital proposal and how you might use the break-even analysis in your Capital Investment Plan Proposal.
Expert Solution Preview
Introduction:
In this scenario, we are presented with the fixed cost of robotic equipment and its maintenance along with the cost-effectiveness related to patient volume. Our task is to calculate the break even for the number of procedures, discuss the impact of various reimbursements, and consider how the break-even analysis can be used in a capital investment plan proposal.
Answer:
To calculate the break-even for the number of procedures, we need to determine the total cost of operating the robotic equipment and maintenance, divide it by the variable cost per procedure, and then add it to the fixed cost per procedure.
For example, if we assume the variable cost per procedure is $5,000, the total monthly cost for 10 procedures is $23,320 + (10 x $5,000) = $73,320. Therefore, the fixed cost per procedure for 10 procedures is $7,332.
To calculate the break-even for 10 procedures, we divide the fixed cost per procedure by the difference between the cost per procedure and the variable cost per procedure:
Break-even for 10 procedures = $7,332 ÷ ($5,000 – $0) = 1.466 or rounded to 2 procedures.
Similarly, for 40 procedures, the total monthly cost is $23,320 + (40 x $5,000) = $243,320. Therefore, the fixed cost per procedure for 40 procedures is $6,083.
The break-even for 40 procedures can be calculated as follows:
Break-even for 40 procedures = $6,083 ÷ ($5,000 – $0) = 1.216 or rounded to 2 procedures.
We can see that as the number of procedures increases, the fixed cost per procedure decreases, making the procedure more cost-effective.
Regarding reimbursements, it is essential to consider the impact of various payers, including Medicare, Medicaid, private, and self-pay. Reimbursements differ among payers and have a significant impact on the profitability of the procedure.
Lastly, the break-even analysis is an essential tool that can be used to determine the minimum number of procedures required to cover the costs of the robotic equipment and maintenance. It can be incorporated into a capital investment plan proposal to help determine the potential profitability of the investment and assist in making informed decisions.