The use of a break-even analysis: financial analysis of a fast-track program.
OBJECTIVE
To calculate the financial break-even point and illustrate how changes in third-party reimbursement and eligibility could affect a program's fiscal standing.


METHODS
Demographic, clinical, and financial data were collected retrospectively for 446 patients treated in a fast-track program during June 1993. The fast-track program is located within the confines of the emergency medicine and trauma center at a 1,050-bed tertiary care Midwestern teaching hospital and provides urgent treatment to minimally ill patients. A financial break-even analysis was performed to determine the point where the program generated enough revenue to cover its total variable and fixed costs, both direct and indirect.


RESULTS
Given the relatively low average collection rate (62%) and high percentage of uninsured patients (31%), the analysis showed that the program's revenues covered its direct costs but not all of the indirect costs.


CONCLUSIONS
Examining collection rates or payer class mix without examining both costs and revenues may lead to an erroneous conclusion about a program's fiscal viability. Sensitivity analysis also shows that relatively small changes in third-party coverage or eligibility (income) requirements can have a large impact on the program's financial solvency and break-even volumes.
Saywell
R M
RM
School of Public and Environmental Affairs, Bowen Research Center, Indiana University, Indianapolis, USA.
Cordell
W H
WH
Nyhuis
A W
AW
Giles
B K
BK
Culler
S D
SD
Woods
J R
JR
Chu
D K
DK
McKinzie
J P
JP
Rodman
G H
GH
D003362:Cost-Benefit Analysis; D004180:Direct Service Costs; D004636:Emergency Service, Hospital / Q000191:economics*; D005377:Financial Management, Hospital / Q000379:methods*; D018166:Health Care Reform / Q000191:economics; D006784:Hospitals, Teaching / Q000191:economics; D006801:Humans; D007349:Insurance, Health, Reimbursement / Q000191:economics; D008484:Medicaid / Q000191:economics; D015146:Midwestern United States; D009310:National Health Insurance, United States / Q000191:economics; D012189:Retrospective Studies; D012680:Sensitivity and Specificity; D014218:Triage / Q000191:economics*; D014481:United States