You represent the Executive team for Mountainside Medical Center and have the fo

Question

You represent the Executive team for Mountainside Medical Center and have the following operating results for the year ended 12/31/2016.

You are asked to make a quick estimate of income for 2017. You believe that the volume of services will remain the same from 2016 to 2017, but expect the following changes:

Net revenues will increase by 2%;

Bad debts will increase by 1% over the rate seen in 2016 (take bad debt as a % of gross for 2016 and increase it by 101%). Charity will remain at the same rate as in 2016.

Salaries will increase by 3%. Benefits will remain at the same percentage of salaries as in 2016;

Supplies will increase by 4% over the rate seen in 2016 (take supplies as a % of net for 2016 and increase it by 104%) ;

The hospital will add one item of capital equipment that will add $262,775 in depreciation in 2017.

All other items are expected to remain the same as in 2016.

Your task is to create an income projection for the Medical Center for 2017 given the changes described above.

Item Actual 2016 Revenues Patient Care Revenues Gross Revenue Inpatient Revenue 359,826,750 Outpatient Revenue 138,190,000 Total Gross Revenue $498,016,750 Deductions & Allowances $287,728,213 Bad Debt 22,410,754 Charity Care 8,715,293 Net Patient Revenue $179,162,491 Other Operating Revenue 147,300 Total Operating Revenue $179,309,791 Expenses Salaries & Wages $57,200,000 Employee Benefits 18,161,000 Supplies 53,748,747 Purchased Services 19,707,874 Depreciation & Amortization 17,122,000 Other Operating Expenses 4,479,062 Total Operating Expenses $170,418,683 Operating Profit $8,891,107 Net Income $8,891,107

Explanation / Answer

101.0076%

Income Statement : Actual 2016 additions Estimate 2017 Revenues Amount$ Amount$ Patient Care revenues Gross Revenue Inpatient Revenue 359826750

101.0076%

362577640 Outpatient Revenue 138190000 101.0076% 139246468 Total Gross Revenue 498016750 501824108 Deductions and Allowances 287728213 287728213 Bad Debt 22410754 101% 22634862 Charity Care 8715293 8715293 Net Patient Revenue 179162491 102% 182745740 Other Operating Revenu 147300 147300 Total Operating Revenue 179309791 182893040 Expenses: Salaries and Wages 57200000 103% 58916000 employee Benefits 18161000 18161000 Supplies 53748747 104% 55898697 Purchased Services 19707874 19707874 Depreciation & Amortization 17122000 262775 17384775 Other Operating Expenses 4479062 4479062 Total Operating Expenses 170418683 174547408 Operating Profit 8891107 8345633 Net Income 8891107 8345633

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