Bayview Surgery Center: Break-Even Analysis

That will also apply to Ex-ante analysis. The center will not be able to implement strategies and ideas for future movements in price or the future impact of a newly implemented policy. For example, if Bayview Surgery Center perform higher number of surgeries on the following year. The revenue generated from overcharging the insurance companies will also increase the profit. As a result, it will be hard to evaluate the implemented strategies since we won’t be able to interpret the revenue increase accurately.
It’s also an ethical issue to use the Break-even analysis. First of all, it’s extremely complicated for Bayview Surgery Center to calculate and examine the margin of safety for based on the overstated revenues collected and associated

costs. In addition, the center cannot use the break-even analysis to determine the most favorable level of sales needed to cover total fixed costs. That will also apply for the demand-side analysis since it won’t provide an accurate insight regarding the selling capabilities for the center.
Bayview Surgery Center estimation of cash inflows and outflows will not be accurate enough to determine whether the yearly budget is sufficient to operate. Companies normally use sales and forecasts in order to generate the cash budget, in addition to an estimation for the necessary spending and accounts receivable, which is not easy to monitor in the current case. The spending is accurate but the accounts receivable is not, the forecast will also be complicated to determine.
Finally, this case overall may be considered as an act of fraud since the upper management are taking advantage of the extra revenue to boost the net profit, instead of making an end to these actions and hold billing department accountable. As a solution to fix this matter the insurance company should implement a new rules and strategies to get their clients more involved in the process. For example, have the hospital to get the patient signing and admitting the charges before sending it for payment, or schedule a meeting with the client to discuss all details before processing the payment.