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Modern Healthcare Case Study

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Modern Healthcare, a group practice clinic with 10 physicians, had the following income in 2014:

Revenue $3,350,000
Less operating expenses:
Salaries
Physicians $1,290,000
Nurses 150,000
Nursing aide 67,000
Receptionist 51,000
Accounting services 49,000
Training 121,000
Supplies 250,000
Phone and fax 3,650
Insurance 270,000
Depreciation 236,000
Utilities 21,600
Miscellaneous 61,000
Total operating expenses 2,570,250
Income before taxes 779,750
Less taxes on income 233,925
Net income $545,825

Prepare a budgeted income statement for Modern Healthcare for the year 2015.
The following changes are expected in 2015:

1. The clinic is expecting a 2 percent decline in revenues because of increasing pressure from insurance companies.
2. Physicians are planning to hire a physician assistant at a salary of $54,000 per year.
3. Training costs are expected to increase by $18,000.
4. Supplies are expected to increase to be 10 percent of revenue.
5. Phone, fax, and insurance amounts will stay the same.
6. Depreciation expense will increase by $19,000 per year, since the clinic is planning to purchase equipment for $125,000.
7. Utilities and miscellaneous expenses are expected to increase by 5 percent next year.
8. Taxes on income will be 30 percent.
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Modern Healthcare, a group practice clinic with 10 physicians, had the following income in 2014:

Revenue $3,350,000
Less operating expenses:
Salaries
Physicians $1,290,000
Nurses 150,000
Nursing aide 67,000
Receptionist 51,000
Accounting services 49,000
Training 121,000
Supplies 250,000
Phone and fax 3,650
Insurance 270,000
Depreciation 236,000
Utilities 21,600
Miscellaneous 61,000
Total operating expenses 2,570,250
Income before taxes 779,750
Less taxes on income 233,925
Net income $545,825

Prepare a budgeted income statement for Modern Healthcare for the year 2015.
The following changes are expected in 2015:

1. The clinic is expecting a 2 percent decline in revenues because of increasing pressure from insurance companies.
2. Physicians are planning to hire a physician assistant at a salary of $54,000 per year.
3. Training costs are expected to increase by $18,000.
4. Supplies are expected to increase to be 10 percent of revenue.
5. Phone, fax, and insurance amounts will stay the same.
6. Depreciation expense will increase by $19,000 per year, since the clinic is planning to purchase equipment for $125,000.
7. Utilities and miscellaneous expenses are expected to increase by 5 percent next year.
8. Taxes on income will be 30 percent.

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