Using breakeven analysis to examine price sensitivity

Increased competition and managed care have brought about a need to reexamine how operating expenses are portrayed. Distinguishing between fixed and variable costs and using breakeven analysis can determine the implications of price concessions that may be requested by insurance companies. This technique also identifies areas of operating that hurt profitability of a specific imaging site or a modality within a single site. Breakeven analysis can also be used to investigate the effect of capitation and to strategize in an environment where commercial insurers sometimes establish fees that are so low, providers would prefer capitated contracts. In that situation the only option may be to manage utilization to enhance profit. This article includes financial models that can be used to simulate the implications of changes in the average income per scan (Table 1) and to examine the profitability of each segment of service within an imaging center (Table 2). Table 2 allows management to trendline each modality and examine cost chracteristics. That enables those responsible for overseeing operations to isolate and understand problem areas.