Using breakeven analysis to examine price sensitivity

Area of Science:

• Healthcare Management
• Financial Analysis
• Operations Research

Background:

• Managed care and increased competition necessitate re-evaluating operating expense portrayal in healthcare.
• Distinguishing fixed and variable costs is crucial for financial strategy in imaging services.

Purpose of the Study:

• To demonstrate the utility of breakeven analysis in assessing financial implications of price concessions and managed care contracts.
• To identify operational areas impacting profitability within imaging centers and specific modalities.

Main Methods:

• Utilizing breakeven analysis to evaluate cost structures and profitability.
• Employing financial models to simulate changes in average income per scan and service segment profitability.
• Trendlining modality performance and analyzing cost characteristics.

Main Results:

• Breakeven analysis effectively identifies the impact of price concessions and capitation on imaging site profitability.
• Financial models allow for simulation of various financial scenarios, aiding strategic decision-making.
• Analysis of individual modalities and service segments enables isolation of problem areas.

Conclusions:

• Breakeven analysis is a vital tool for imaging centers to manage profitability under competitive and managed care environments.
• Understanding and managing operating expenses, particularly fixed and variable costs, is key to financial success.
• Strategic utilization management may be necessary to enhance profits when insurer fees are low.