4. If XYZ hospital writes off 50% of their gross charges to contractual allowances, what would we expect their total charges to be based off the charge master?
a. $72,000,000
b. $18,000,000
c. $36,000,000
d. $73,500,000
For the question 4 above, use the below income statement
|
XYZ Hospital Systems Inc |
|
|
Operating Revenue |
20XX |
|
Patient Service Revenue |
$ 36,000,000.00 |
|
Uncompensated Care & Bad Debts |
$ (750,000.00) |
|
Incentive Revenue |
$ 1,500,000.00 |
|
Other Revenue |
$ 25,000.00 |
|
Net Revenue |
$ 36,775,000.00 |
|
Expenses |
|
|
Salaries and Wages |
$ 18,000,000.00 |
|
Supplies |
$ 3,000,000.00 |
|
Insurance |
$ 2,500,000.00 |
|
Rents |
$ 700,000.00 |
|
Depreciation |
$ 400,000.00 |
|
Total Expenses |
$ 24,600,000.00 |
|
Operating Income |
$ 12,175,000.00 |
|
Non-operating income |
|
|
Investment Income |
$ 250,000.00 |
|
Net Income |
$ 12,425,000.00 |
XYZ hospital:
4. In this case, XYZ hospital writes off 50% of their gross charges to contractual allowances. Hence the remaining $36,000,000 should be the remaining 50%. Also it is mentioned as “gross” and hence the uncompensated care and bed debts would not be considered in this case.
Hence the calculation:
$36,000,000*(100/50)
=$72,000,000 (option a)
4. If XYZ hospital writes off 50% of their gross charges to contractual allowances, what would we...