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Determining charges for private pay residents. Shady Grove Nursing Home has 220 private pay residents.

Determining charges for private pay residents. Shady Grove Nursing Home has 220 private pay residents. The administrator is concerned about balancing the ratio of
its private pay to non-private pay patients. Non-private pay sources reimburse an average of $125 per day whereas private pay residents pay on average 90 percent
of full daily charges. The administrator estimates that variable cost per resident per day is $45 for supplies, food, and contracted services, and annual fixed
costs are $6,000,000. ‘ What is the daily contribution margin of each non-private pay resident? ‘ If 25 percent of the residents are non-private pay, what will
Shady Rest charge the private pay patients to break even? ‘ What if non-private pay payors cover 50 percent of the residents? ‘ The owner of Shady Rest Home
insists that the facility earn $80,000 in annual profits. How much must the administrator raise the per day charge for the private insured residents if 25 percent
of the residents are covered by non-private pay payors?

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