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Thread: Extra revenue gain

  1. #1
    Dec 2012

    Extra revenue gain

    A doctor currently makes $175,000 in profit: $425,000 in revenue and $250,000 in cost. The physician's time spent is on 75% patient care, 15% billing, and 10% administrative services. If a doctor outsources his billing, he can spent the 15% of the time he spent billing seeing patients. How much extra revenue does he earn if billing is outsourced?

    The correct answer is:

    ($425,000 x 15%)/(75%)=$85,000.

    I simply don't understand why you would divide the 75%. Can anyone enlighten me? Thanks.
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  2. #2
    MHF Contributor ebaines's Avatar
    Jun 2008

    Re: Extra revenue gain

    Try this: he made $450K in revenue by sending 75% of his time seeing patients; if he raises that time to 90% he can make (90/75) x $425K = $510K in revenue. The increase in revenue is therefore $510K - 425$ = $85K.

    If you didn't divide by 0.75 the increase would be commensurate with increasing his time seeing patients from 75% to 75% x 1.15 = 86.25% of his time.

    If it's still unclear, another method is to assume he works a 40 hour week. Currently he sees patients for 75% x 40 hours = 30 hours/week and spends 15% x 40 = 6 hours on billing. If he increased his patient time to 90% =36 hours, then the incerase in revenue is 6/30 x $425 = $85K.
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