HA 620 Unit 3 break-even analysis example

How Many Visits Before an Eight-Chair Infusion Suite Pays for Itself: A Break-Even Analysis With Every Cost Classified and the Staffing Steps Shown

Student Name

Health Care Administration, Herzing University

HA 620: Healthcare Economics, Finance, and Resource Management

Instructor Name

January 29, 2026

How Many Visits Before an Eight-Chair Infusion Suite Pays for Itself: A Break-Even Analysis With Every Cost Classified and the Staffing Steps Shown

The Service Line

The composite 180-bed hospital proposes an eight-chair outpatient infusion suite in leased space adjacent to its cancer clinic, to serve patients now sent 40 miles away for infusions of cancer drugs, biologics for rheumatologic and gastrointestinal conditions, and intravenous iron. The analysis covers the first full year of operation. Drug revenue and drug cost are excluded: drugs are billed and paid separately, carry their own margin, and would distort an analysis of whether the suite itself covers its costs. All figures are annual unless stated.

Revenue per Visit

Expected net revenue per visit for administration and facility charges, weighted by the payer mix the cancer clinic now sees, is $410. This figure is after contractual adjustments, using each payer's actual payment for the administration codes billed in similar visits at the hospital's existing outpatient infusion chair in the day surgery unit.

Costs, Classified

Each cost is listed with its classification and the reason for it, because whether a cost is fixed or variable depends on the period and the range of volume examined.

The Break-Even Calculation

Variable cost per visit: $38 + $6 + $22 + $9 = $75.

Contribution margin per visit: $410 − $75 = $335. Each visit contributes $335 toward fixed costs.

Fixed costs excluding nurses: $96,000 + $42,000 + $62,000 + $48,000 + $18,000 + $24,000 = $290,000.

Fixed costs with two registered nurses, the minimum safe staffing at opening: $290,000 + (2 × $105,000) = $500,000.

Break-even volume: $500,000 ÷ $335 = 1,492.5, rounded up to 1,493 visits a year.

Check: 1,493 × $335 = $500,155, which just covers $500,000. At 1,492 visits, the suite would fall $180 short.

Because 1,493 visits is well within the two-nurse step, which covers up to 4,800 visits, the break-even point does not trigger another staffing step.

Capacity and Projected Volume

Capacity: eight chairs × an average of 2.5 visits per chair per day × 250 operating days = 5,000 visits a year. Projected first-year volume, from referral data in the cancer, rheumatology, and gastroenterology clinics: 3,000 visits. At 3,000 visits, the suite would produce 3,000 × $335 − $500,000 = $505,000 above its costs before drug margin. The projection is about twice the break-even volume, which leaves room for error.

The step matters near capacity. Above 4,800 visits, a third nurse raises fixed costs to $605,000. At the full 5,000 visits, the suite would produce 5,000 × $335 − $605,000 = $1,070,000.

Sensitivity

The figure most likely to be wrong is revenue per visit, because payer mix can shift. If net revenue per visit fell by 15%, to $348.50, the contribution margin would fall to $273.50 and break-even would rise to $500,000 ÷ $273.50 = 1,828 visits, still well below the projection. If volume reached only 1,800 visits in the first year, perhaps because referring physicians were slow to change habits, the suite would be close to break-even at the original revenue figure, with about $103,000 above costs. A combination of lower revenue and lower volume is the scenario that would produce a loss, and it would be the first thing to watch in monthly reports.

One consideration lies outside the arithmetic. Some infusions can be given safely at home, and home infusion has been found to be safe, preferred by many patients, and often less costly for payers (Polinski et al., 2017). If payers steer eligible patients toward home infusion, the suite's volume projection would need to exclude those drugs. Cost-volume-profit analysis of this kind follows the course finance text (Pink & Song, 2020), and the case for measuring costs at the level of the service line rather than the department follows the argument that accurate cost measurement is the starting point for managing health care costs (Kaplan & Porter, 2011). The hospital and figures are composite.

What the Analysis Leaves Out, and the Decision It Supports

Four things are deliberately outside the calculation. Drug margin, as noted, is excluded; including it would make the suite look far more profitable and hide whether the service itself covers its costs. Start-up costs before opening, such as recruiting and training nurses in chemotherapy administration, are one-time costs of about $45,000 and belong in the capital request rather than in the annual break-even. Indirect benefits are excluded: patients who stay local for infusions are more likely to stay local for imaging and follow-up visits, which the finance team estimates at modest additional revenue but cannot yet measure. And the cost of patients traveling 40 miles, which is a real cost to them, is not a cost to the hospital and so does not appear, though it is the strongest reason for the service.

The analysis supports a decision to proceed, with one condition. Because the combination of lower revenue and slower referrals is the only plausible route to a loss, the suite should open with a referral agreement in place with the three clinics, and the monthly report should track visits and revenue per visit against the break-even line from the first month. If volume is below 125 visits a month after the first six months, which corresponds to the annual break-even pace, the service line should be reviewed rather than left to run.

References

Kaplan, R. S., & Porter, M. E. (2011). How to solve the cost crisis in health care. Harvard Business Review, 89(9), 46-52.

Pink, G. H., & Song, P. H. (2020). Gapenski's fundamentals of healthcare finance (3rd ed.). Health Administration Press.

Polinski, J. M., Kowal, M. K., Gagnon, M., Brennan, T. A., & Shrank, W. H. (2017). Home infusion: Safe, clinically effective, patient preferred, and cost saving. Healthcare, 5(1-2), 68-80. https://doi.org/10.1016/j.hjdsi.2016.04.004