Milbridge Memorial Hospital provides comprehensive physical exams.The clinic has $210,000 in fixed costs per year, how many exams must the clinic provide in order to break even?   

To calculate the number of exams the clinic needs to provide to make it profitable, we must first determine its revenue requirements. It can then be divided by its $210,000 fixed costs and the 20 percent insurance discount. This will give you a 56% figure.

This brings us to $375,000, which is our goal for an annual income for the clinic. It must be sufficient to pay all costs and break even.

This will help you understand the number of visits required. It is also important to know what fee structure applies and what percentage of patients pay for this service. That said, assuming a fee structure whereby each exam generates $100 in revenue and 70% of patients receive a discount – then we can conclude that 3,750 visits would need to take place over a one year period in order for the clinic’s total revenues reach $375,000 (i.e., 3,750 x $100 = 375,000). In order to break even, it would be necessary for the clinic to perform 3,750 visits over a 12-month period. Other expenses should also be taken into consideration.