Break-Even Analysis of a Fertility Clinic

Paper Info
Page count 3
Word count 857
Read time 4 min
Topic Health
Type Essay
Language 🇺🇸 US

Summary

It is significant to make an accurate analysis of the possible future expenditures and profits to assess the effectiveness of the fertility clinic service before establishing it. A break-even analysis is the original investment examination that brings about neither a benefit nor a loss. Furthermore, it helps to understand the project’s worth in the initial stage. It counts the number of deals expected to cover all factors and fixed expenses. It figures the base number of units to sell, and the business volume expected to pay all costs prior to making a benefit (Hatch, 2017).

For this reason, a break-even analysis can help assume the viability of the proposed service. My approach is to start by finding the number of visits, charges per year, as well as per single day for each acuity category. In order to calculate break-even analysis, it is necessary to know fixed costs, average price, and variable costs. Therefore, before estimating it, I need to find the average price for the calculation. Contribution margin is another variable that is necessary for the business plan construction.

Table 1. Break-even Analysis Data Table

Break-even Analysis Data Table
Acuity Category Percentage % Charge per Visit $ Visits per Year Charges per Year $ Visits per Day Charges per Day $ Contribution Margin
Simple 20% 2000 1496 2992000 5 10000 7500
Moderate 70% 6500 5236 34034000 17 110500 102000
Complex 10% 10000 748 7480000 2 20000 19000
Expected Total Daily Charges 140500
ExpectedTotal Daily Revenue 128500
Break Even point in days 70
Break Even point in visits 1796

The following table (Table 1) illustrates all the calculations needed for the break-even analysis.

The number of visits was calculated by multiplying the total visits per year (7480 visits) by each percentage of one of the three categories.

Visits per year= Total visits*Percentage

Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial management for nurse managers and executives (5th ed.). Saunders.

By finding the number of visits by each acuity category, Charges Per Year was determined by multiplying the visits by assigned costs. The predictions for annual visit numbers were computed by dividing Charges by 305 which is the number of working days in a year.

Visits Per Day=Total Visits/Total Days

Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial management for nurse managers and executives (5th ed.). Saunders.

The Contribution Margin is the variable that addresses the total profits available to cover the Fixed Costs (Nowicki, 2017). Thus, it is equal to the subtraction of Variable Cost from the Charging Price.

Contribution margin = Charging price – Variable costs

Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.

Expected Total Daily Charges were estimated by adding all the Contribution Margin Values in a day since it is assumed as regular profits. The profits are the amount of total gains after subtracting costs. Revenue is the total income without taking expenses into consideration (Nowicki, 2017).

Revenue=Price*Quantity

Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.

The main formula of the analysis is the Break-Even Point which formula was found to be the following:

Break-Even Point = Fixed Costs/ (Average Price — Variable Costs)

Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.

It was used to find the number of required visits to cover the expenses. The average Price was indicated by summing the charges per year and dividing it by the number of visits per year of each category.

Average Price = Sum of the Values/ Number of Prices

Hatch, M. D., Daniels, S. D., Glerum, K. M., & Higgins, L. D. (2017). The cost-effectiveness of vancomycin for preventing infections after shoulder arthroplasty: a break-even analysis. Journal of Shoulder and Elbow Surgery, 26(3), 472–477. Web.

Average Price was replaced with Expected Total Daily Charges to find the number of days which has to be spent to reach the break-even point.

It is estimated that there will be about 25 patient visits per day for this particular service. It was found by summing all the visits of each category in a day.

The contribution margin of each category is 7500$ for simple, 102000$ for moderate, and 19000$ for complex acuity categories for each working day.

The expected daily revenue from the patient visits is 128500.

After all the calculations, it was determined that it will take about 70 days to return the investments and start gaining profits from providing the new service.

It is calculated that 1796 patient visits are needed to reach the break-even point.

Moving from the calculated estimations of the break-even point, the project proves to be viable. This is because it returns the costs in less than 3 months and brings impressive profits after this period. The predictions are overall positive and the number of charges for the service and the number of visits outweighs the costs which are needed for the establishment. That is why an outpatient fertility clinic is a productive service that has promising outcomes for the business development in the clinic.

References

Hatch, M. D., Daniels, S. D., Glerum, K. M., & Higgins, L. D. (2017). The cost-effectiveness of vancomycin for preventing infections after shoulder arthroplasty: a break-even analysis. Journal of Shoulder and Elbow Surgery, 26(3), 472–477. Web.

Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial management for nurse managers and executives (5th ed.). Saunders.

Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.

Cite this paper

Reference

EssaysInCollege. (2022, July 26). Break-Even Analysis of a Fertility Clinic. Retrieved from https://essaysincollege.com/break-even-analysis-of-a-fertility-clinic/

Reference

EssaysInCollege. (2022, July 26). Break-Even Analysis of a Fertility Clinic. https://essaysincollege.com/break-even-analysis-of-a-fertility-clinic/

Work Cited

"Break-Even Analysis of a Fertility Clinic." EssaysInCollege, 26 July 2022, essaysincollege.com/break-even-analysis-of-a-fertility-clinic/.

References

EssaysInCollege. (2022) 'Break-Even Analysis of a Fertility Clinic'. 26 July.

References

EssaysInCollege. 2022. "Break-Even Analysis of a Fertility Clinic." July 26, 2022. https://essaysincollege.com/break-even-analysis-of-a-fertility-clinic/.

1. EssaysInCollege. "Break-Even Analysis of a Fertility Clinic." July 26, 2022. https://essaysincollege.com/break-even-analysis-of-a-fertility-clinic/.


Bibliography


EssaysInCollege. "Break-Even Analysis of a Fertility Clinic." July 26, 2022. https://essaysincollege.com/break-even-analysis-of-a-fertility-clinic/.