Premium
The Use of a Break‐even Analysis: Financial Analysis of a Fast‐track Program
Author(s) -
Saywell Robert M.,
Cordell William H.,
Nyhuis Allen W.,
Giles Beverly K.,
Culler Steven D.,
Woods John R.,
Chu David K. W.,
McKinzie Jeffry P.,
Rodman George H.
Publication year - 1995
Publication title -
academic emergency medicine
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.221
H-Index - 124
eISSN - 1553-2712
pISSN - 1069-6563
DOI - 10.1111/j.1553-2712.1995.tb03628.x
Subject(s) - medicine , reimbursement , revenue , solvency , indirect costs , fiscal year , fast track , data collection , financial analysis , finance , actuarial science , emergency medicine , health care , surgery , economics , accounting , statistics , economic growth , mathematics , market liquidity
Objective: To calculate the financial break‐even point and illustrate how changes in third‐party reimbursement and eligibility could affect a program's fiscal standing. Methods: Demographic, clinical, and financial data were collected retrospectively for 446 patients treated in a fast‐track program during June 1993. The fast‐track program is located within the confines of the emergency medicine and trauma center at a 1,050‐bed tertiary care Midwestern teaching hospital and provides urgent treatment to minimally ill patients. A financial break‐even analysis was performed to determine the point where the program generated enough revenue to cover its total variable and fixed costs, both direct and indirect. Results: Given the relatively low average collection rate (62%) and high percentage of uninsured patients (31%), the analysis showed that the program's revenues covered its direct costs but not all of the indirect costs. Conclusions: Examining collection rates or payer class mix without examining both costs and revenues may lead to an erroneous conclusion about a program's fiscal viability. Sensitivity analysis also shows that relatively small changes in third‐party coverage or eligibility (income) requirements can have a large impact on the program's financial solvency and break‐even volumes.