Purchase Solution

Utilization Estimates

Not what you're looking for?

Ask Custom Question

See the attached file.
The SLD Imaging Center is currently negotiating with an MCO to provide diagnostic imaging services to 225,000 covered lives. SLD has fixed costs of $750,000 and capacity for an additional 75,000 patient encounters per year. They have two types of services MRI and CT Scans. MRI's have a variable cost of $495 and CT Scan's have a variable cost of $375. The MCO is currently offering $100 per covered life.

SLD has come up with the following utilization estimates:

- 4% of covered lives will need MRIs
- 6% of covered lives will need CT Scans
- Of those needing either service, 27% will require 3 encounters, 56% will require 2 encounters and the remaining 17% will require 1 encounter.

a. Based on SLD's estimates, how much will they be making or losing if they accept the MCO's offer of $100 per covered life?

b. How many total encounters from the covered lives can SLD take on before they start losing money?

Purchase this Solution

Solution Summary

This solution looks at potential loses or gains of providing a service with given utilization estimates.

Solution Preview

Please see the attached file.

Part A

The revenue from this contract will be: 225,000 * $100 = $22,500,000

The average number of encounters for those needing either service = 0.27 * 3 + 0.56 * 2 + 0.17 * 1 = 2.1

People needing:
MRIs = 4% ...

Purchase this Solution

Free BrainMass Quizzes
Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.


This tests some key elements of major motivation theories.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.