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HS440 – INDIVIDUAL PROJECT
OUTLINE:
During this course, each student will work independently on a comprehensive project based upon
the financial implications of adding an in-office nuclear cardiac stress lab to an existing 8-physician
cardiology practice.
The project will encompass the entire course, addressing all aspects of healthcare finance including
calculating revenue for procedures, estimating payor mix, actual reimbursement, and bad debts,
determining capital and operating expenditures, as well as start-up costs for a new venture. The
student will calculate estimated volumes, contribution margin per procedure and a break-even
volume for the venture. The student will become acquainted with compliance issues such as
coverage requirements and the Stark physician self-referral laws. The project will culminate with a
written recommendation to accept or reject the project based upon the assumptions and variables
introduced throughout the course.
The project spreadsheet is “read-only”, so you will need to immediately save it to your computer
using the following naming format:
HS440PROJECT.YEAR.FIRSTNAME.LASTNAME.xls
UNIT 1
Most group physician practices are for-profit, and therefore subject to income tax. In the
INCOME TAX tab of the project spreadsheet, enter a 33% federal income tax rate, a 5% state
income tax rate, and a 2% local income tax rate.
UNIT 2
In the REVENUE tab of the project spreadsheet, incorporate the following payor mix, payment
terms, and bad debt estimates to be used later to calculate gross revenues.
PAYOR % OF PATIENTS % OF MEDICARE FEE SCHEDULE
BAD DEBT
ESTIMATE %
Medicare 51 100% 5%
Medicaid 12 40% 3%
Blue Cross/Blue Shield 16 85% 4%
Aetna 6 80% 6%
Cigna 4 82% 4%
United Healthcare 5 70% 8%
Other commercial 2 75% 3%
Workers’ Comp 1 60% 7%
Self pay 2 Gross charge 40%
Charity care 1 Gross charge 100%
UNIT 3
In the EXPENSES tab of the project spreadsheet, calculate the needed staffing pattern and costs
based upon the following assumptions. FTE counts will be calculated later when volume are
estimated.
STAFF TYPE AVG HOURLY RATE HOURS/TEST STAFF COUNT
Physician $160.00 .5 8
Registered Nurse $28.00 1.0 10
Respiratory Technician $24.50 .5 6
Nuclear med technician $32.00 1.0 2
Receptionist $9.50 .2 6
Insurance verifier $13.50 .3 4
Biller $11.00 .1 4
Collector $12.00 .2 4
Benefits as % of salary costs 24%
In the EXPENSES tab of the project spreadsheet, input the additional operating costs based upon
the following cost estimates:
DESCRIPTION COST/UNIT
Routine medical supplies $15 per test
Radiopharmaceuticals $190 per test
Nuclear license $425 per year
Radiation safety consultant $3,500 per year
Radiation exposure monitors $300 per employee per year
First-year marketing expense $20,000 per year
Clinician education (one-time) $40,000 per year
Equipment insurance coverage $800 per year
Liability insurance coverage $3,000 per year per physician
Patient education materials $200 for 600 pieces
UNIT 4
No additional work is required on the project this unit.
UNIT 5
In the REVENUE tab of the project spreadsheet, look up the Medicare physician fee schedule for
each of the codes listed (http://www.cms.hhs.gov/pfslookup/) and enter the fees where indicated.
Use the Baltimore, MD (location of CMS headquarters) geographic area. After reviewing the
Medicare fee schedule, you decide to use $1,250 per exam as the gross charge for each stress test.
Enter this charge amount as indicated.
http://www.cms.hhs.gov/pfslookup/�
UNIT 6
In the EXPENSES tab of the project spreadsheet, identify and enter the following capital
expenditures. Assume that $1,250,000 is financed at 8% for a term of 20 years, entering this
information where needed.
DESCRIPTION COST USEFUL LIFE
Dual-headed nuclear camera $560,000 8 years
“Hot lab” renovations $ 220,000 12 years
Additional plumbing $ 40,000 15 years
Electrical & data cabling $ 30,000 15 years
Treadmill, exam table, etc. $50.000 5 years
Computer equipment $ 20,000 5 years
Structural renovations $ 600,000 30 years
In the EXPENSES tab of the project spreadsheet, identify operating expenses as fixed, variable or
semi-variable by indicating the appropriate type in the expense grid.
UNIT 7
In the REVENUE tab of the project spreadsheet, include the following volume estimates in each
of three scenarios:
PHYSICIAN CASELOAD
% NEEDING STRESS TEST
LOW MEDIUM HIGH
2,000 5 10 20
2,500 5 10 20
3,000 5 10 20
3,500 5 10 20
In the REVENUE tab of the project spreadsheet, input a present population of 8 cardiologists, a
per-physician caseload of 3,000 patients, and a medium volume of patients needing stress testing to
calculate the remaining projections.
Based upon these assumptions, review and verify the results in the PRO FORMA INCOME
STATEMENT and CONTRIBUTION MARGIN and BREAK-EVEN tabs.
UNIT 8
Use the internet to research (http://www.cms.hhs.gov/center/coverage.asp) CMS coverage issues
on nuclear cardiac stress testing, such as a National Coverage Decision (NCD).
Search the Medicare Administrative Contractor (MAC) website for Maryland (home of CMS
headquarters) (http://www.highmarkmedicareservices.com/policy/index.html), Highmark
http://www.cms.hhs.gov/center/coverage.asp�
http://www.highmarkmedicareservices.com/policy/index.html�
Medicare, for coverage issues on nuclear cardiac stress testing, such as a Local Coverage Decision
(LCD).
Use the internet to research the “Stark” law and the “in-office ancillary exception”; a good resource
from the Oklahoma Bar Association is: http://www.okbar.org/obj/articles07/080407rogers.htm
UNIT 9
Research the CMS website (http://www.cms.hhs.gov/mcd/indexes.asp?clickon=index) for
coverage of cardiac CT angiography (CCTA) as a possible competitive diagnostic tool which could
affect volumes of cardiac stress testing. Check for both a National Coverage Decision (NCD) and
National Coverage Analysis (NCA).
Search the Medicare Administrative Contractor (MAC) site for Maryland (home of CMS
headquarters) (http://www.highmarkmedicareservices.com/policy/index.html) for coverage rules
for cardiac CT on a local basis.
UNIT 10
Summarize your recommendation in a written report to the practice administrator, addressing the
following issues.
1. Estimated net revenue and volume projections
2. Payor mix and contract rates, including bad debt assumptions
3. Capital expenditures and start-up costs
4. Staffing patterns and expenses
5. Ongoing operating expenses
6. Contribution margin and break-even point
7. Income tax implications
8. Compliance issues, such as coverage issues (both stress testing and cardiac CTA) and Stark
self-referral laws
Begin your report with a basic practice description and identify all assumptions. Include your
completed project spreadsheet for supporting financial information. Conclude with a
recommendation as to whether your analysis indicates the practice will earn additional after-tax
profits with the additional of an in-office nuclear stress testing laboratory.
http://www.okbar.org/obj/articles07/080407rogers.htm�
http://www.cms.hhs.gov/mcd/indexes.asp?clickon=index�
http://www.highmarkmedicareservices.com/policy/index.html�
PRO FORMA INC STMT
REVENUE
S:
EXPENSES
:
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
expense
$ – 0
$ – 0
$ – 0
$ – 0
INCOME TAX
ES:
$ – 0
$ – 0
$ – 0
$ – 0
$ – 0
CONT MGN and BREAK-EVEN
| CONTRIBUTION MARGIN | ||||
| BREAK-EVEN ANALYSIS | ||||
| VOLUME | ||||
| REVENUES: | PER EXAM | TYPE OF EXP | ||
| Net patient revenue per exam | ||||
| EXPENSES: | ||||
| Total Variable Expenses | Total Variable Expense per exam | |||
| Contribution Margin | Contribution Margin per exam | |||
| FIXED EXPENSES: | ||||
| Total Fixed Expenses | ||||
| BREAK-EVEN POINT | ||||
| INCOME TAXES: |
INCOME TAX
| RATES | AMOUNT |
| Total taxes | 0% |
REVENUE
| PAYOR | % OF PATIENTS | % OF MPFS | BAD DEBT % | |
| Medicare | ||||
| Medicaid | ||||
| Blue Cross/Blue Shield | ||||
| Aetna | ||||
| Cigna | ||||
| United Healthcare | ||||
| Other commercial | ||||
| Workers’ Comp | ||||
| Self pay | ||||
| Charity care | ||||
| DESCRIPTION | CPT CODE | BALTO MD RATE | ||
| Radionuclide | various | $ 265.00 | estimate per patient | |
| Myocardial perfusion imaging; tomographic (SPECT), multiple studies (including attenuation correction when performed), at rest and/or stress (exercise and/or pharmacologic), and redistribution and/or rest injection, with or without quantification | 78465 | Use participating, non-facility price (with no modifiers) | ||
| Myocardial perfusion study with wall motion, qualitative or quantititative study (use in conjunction with 78460, 78461, 78464, 78465) | 78478 | |||
| Myocardial perfusion study with ejection fraction (use in conjunction with 78460, 78461, 78464, 78465) | 78480 | |||
| Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; with physician supervision, with interpretation and report | 93015 | |||
| TOTAL | ||||
| GROSS CHARGE PER TEST | ||||
| % OF PATIENTS NEEDING STRESS TEST | ||||
| PHYSICIAN CASELOAD | LOW | MEDIUM | HIGH | |
| TOTAL ANNUAL TEST VOLUME | ||||
| Physician | ||||
| # of cardiologists | ||||
| % of patients needing stress testing | ||||
| Annual anticipated test volume | ||||
| GROSS REVENUE | NET FEE PER TEST | CONTRACTUAL ALLOWANCE | NET REVENUE | BAD DEBT EXPENSE |
| TOTALS |
EXPENSES
| PROJECTED VOLUME: | |||||||
| STAFFING: | AVG HR RATE | HOURS/TEST | TOTAL STAFF COUNT | COST | FTE | ||
| Registered Nurse | |||||||
| Respiratory Technician | |||||||
| Nuclear Medicine Technician | |||||||
| Receptionist | |||||||
| Insurance verifier | |||||||
| Biller | |||||||
| Collector | |||||||
| Benefits as % of salary cost | |||||||
| OPERATING EXPENSES: | UNITS | ||||||
| Routine medical supplies | |||||||
| Radiation exposure monitors | |||||||
| TOTAL EXPENSES (not including bad debts) | |||||||
| CAPITAL EXPENDITURES: | USEFUL LIFE (YRS) | DEPRECIATION | |||||
| Dual-headed nuclear camera | |||||||
| “Hot lab” renovations | |||||||
| Additional plumbing | |||||||
| Electrical & data cabling | |||||||
| Treadmill, exam table, etc. | |||||||
| Computer equipment | |||||||
| Structural renovations | |||||||
| FINANCING: | |||||||
| Borrow | |||||||
| Interest rate | |||||||
| Term in years |
