With no change in volume (utilization), is the clinic projected to make a profit? Currently the clinic sees about 45 patients per day and they have capacity to handle 85. If they continue how they are operating the clinic is looking at a loss of $3,173. At this rate the clinic will not be able to make a profit in spite of inflation over the next couple years. How many additional daily visits must be generated to break even? There is an average of 1,230 visits a month, bringing in 47,037 a month in net revenue.
Figure one tells us that in order to breakeven without the new marketing program the clinic will need to see 22 more patients per day, which brings it to a grand total of 67 patients that will need to be seen per day. Answer the same question as in question 2, but this time assume the marketing program has been implemented. According to figure 2 in order to breakeven with the new marketing plan they would need to see 28 patients per day which is 6 more than without the marketing plan.
The total of patients needing to be seen per day with this marketing plan is 73. How many incremental daily visits would it take to pay for the marketing program, irrespective of overall clinic profitability? Now according to figure 3 in order for the clinic to pay for the marketing plan it would need to have 22 consecutive days in operation seeing 73 patients per day. Which items in the statement were easiest to project and why? Which were the most difficult and why?
What effect could mis-estimates have had on projections? Which items would cause the most damage if mis-estimated? The items in the statement that were easiest to project were the building lease, and equipment rental because the historical financial data have shown each have been consistently around the same cost.
The equipment rental has been the exact same on the statement in the previous years and the building lease looks to be almost the same as well.
It seems that these two categories are easiest to project because the clinic is most likely in an agreement with the landlord and servicers who are renting them the equipment, so costs should be consistent if they are on a contract. The most difficult items to project were patient visits because they are vital to the entire process since they dictate the electricity, salaries and wages, malpractice insurance, water, and supplies.
It is not an easy task to guess how many patients will need to be seen since we do not know what the geographical location is of the clinic or what the year will bring in outbreaks or illnesses. How sick a patient is or what illnesses are prevalent during that time period is not something that the clinic can control. Also the clinic has been very understaffed the past couple years so with the hopefully influx in patients there would need to be an increase in administrative and medical staff.
The items that would cause the most risk if mis-estimated would be malpractice insurance, salaries and wages, and number of visits. If they miscalculate the number of visits then this could hinder the other categories which would result in a possible shut down of clinic if not enough malpractice insurance is counted for and staff and personnel would leave if they were not being paid appropriately due to the miscalculation of patient visits. #6 What could Brent do to minimize the uncertainties/risk inherent in the estimates?
Brent is going to need to be as thorough as possible in analyzing the historical data in order to project the possible numbers. It would be helpful to also start collecting detailed reports on the patients and what is used more frequently in order to help the organization and minimize the risks. By doing this he can be more accurate on staffing and volume. He is also going to need to do an assessment of the geographical area to see what the patients are in need of and how he can better assist them, therefore this will cut back on unnecessary supplies and equipment.
The better he knows the population and their needs the more efficient the organization and staff will become. #7 Please offer your final recommendation to the CEO regarding the fate of the clinic, including your response for doing so. In conclusion, I think the clinic should implement the marketing plan because they will have a better chance of reaching the breakeven point with the marketing program than without the advertising efforts. Also being that they only 1 of the 3 walk in clinics and 2 clinics have recently shut down the have a good chance of increasing their patient census.
They are also only a few minutes from the hospital and are part of a large profit making organization, so if they are able to get the word out about their strengths I think they will become more successful. Also by lowering the variable costs and semi-fixed costs, they can raise gross margin. If they are diligent about purchasing supplies, controlling inventory, and increasing productivity of labor by using cost effective scheduling or adding more efficient technology this would also be helpful in conserving and controlling costs.
I think by trying the marketing plan for at least a year will give them some data to go off (as to whether or not the marketing helped) of and an option to stay open for longer. It is almost like a second shot, a reopening and image boost. It might be hard to cover the initial costs of the marketing program, but the payoff will be positive and essential provide the clinic with a higher patient volume to fill the gap and help them break even and one day make profit.
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