The president of Gentiva Health Services is considering increasing her number of
ID: 2595276 • Letter: T
Question
The president of Gentiva Health Services is considering increasing her number of Medicare patients served next year. However, to do so she must begin to use RNs for client visits, which Medicare reimburses at $45 per visit. An RN costs $35 per hour versus the current cost of $15 for an LPN or nurse’s aide. The president believes she can increase her patient visits by 15% by accepting Medicare patients. She is also aware that if she increases her Medicare patients, the company’s administrative costs will increase by approximately $10,000 per year because of the claims file complexity.
Use the following websites to gather data:
10K Annual Report
10Q Quarterly Report
Use the following volumes for your calculations:
Volume for the year:
Flexible budget: 6,000 visits
Static budget: 5,945 visits
Actual budget: 5,889 visits
Prepare a two-page report that addresses the following:
How many more visits will the company generate if it accepts Medicare patients?
What would be the estimated profit or loss associated with the Medicare service line?
Would you recommend that Gentiva Health Services increase its number of Medicare patients served? Why or why not?
The second task is: Business Plan
Review the quarterly report and develop a business plan for the organization for its upcoming financial year. Be sure to include the following in your organized business plan:
Organization segment
Marketing segment
Financial segment
Projected cash flow statement
Projected income statement
Projected balance sheet
Feel free to take liberties with information needed that is not available in the report.
You may find the quarterly report at
Gentiva® Health Services Reports Third Quarter 2014 Revenue and Adjusted EBITDA Results
Explanation / Answer
Q1) How many more visits will Gentiva Health Services generate?
Ans. Gentiva Health Services will generate roughly 880-900 extra visits:
=15%*5889
=883
883 extra visits are estimated to be generated (this is a probable figure, actual shall vary from estimation).
Q2) What would be the estimated profit or loss associated with the Medicare service line?
Ans. Estimated Profit/Loss= Estimated Revenue-Estimated Cost
Estimated Revenue:
=883*$45
=$39735
Estimated Cost: (assuming each visit to last an hour)
=883*$35+$10000
=$40905
Estimated Loss= $39735-$40905
=-$1170
Q3) Would you recommend? Why or Why not?
Ans: No, I wouldn't recommend Gentiva to enter into this increase of medicare service line due to it's possibility of generating no extra profits for it's organisation and a sure increase in responsibilities.
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