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APA
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Health, Medicine, Nursing
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English (U.S.)
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Pro Forma Income Statement for East Chestnut Regional Health System

Essay Instructions:

In this part of the course, you will prepare a pro forma income statement for a new or revised product or service you recommend for East Chestnut Regional Health System.
Review Case Study: East Chestnut Regional Health System.
Pro Forma Income Statement for East Chestnut Regional Health:
Please complete the following prior to preparing the pro forma income statement and budget. You will need the following information in order to prepare it.
Part I: Market Size Calculation:
Determine the size of the market for the ECRHS product or service you are recommending. Assume East Chestnut Regional Health is located in the market in which you live or work.
Visit the University Library Consumer Demographics page.
From this page, visit the United States Census Bureau sites linked under the Demographic Data heading. A rough estimate of the need for health care products or services can be made based on the population demographics, using age, gender, and in some cases, race. On these sites, you can gain information on the total U.S. market for health care, as well as the number of U.S. consumers who fit your target market segmentation.
Determine the local market for the product or service you recommend for East Chestnut Regional Health.
Next, multiply the percentage of people likely to purchase your recommended ECRHS product or service by the estimate of market share you believe ECRHS can achieve for the product or service. For example, if there are 6,000 women who might be interested in ECRHS obstetrical services, and ECRHS has a potential 40 percent market share, this results in 2,400 patients.
Prepare a 150- to 300-word summary of your market determination process.
Part II: Breakeven Analysis:
A breakeven analysis determines the number of products or amount of service that must be sold to consumers for the organization to break even or cover the costs of production or provision of the product or service.
You will prepare a breakeven analysis for the case study client, East Chestnut Regional Health.
Use the Breakeven Analysis Worksheet to prepare your analysis.
Prepare a 150- to 300-word summary of your breakeven analysis that includes the following:
The fixed and variable costs of product production or service provision
The price and number of units sold at that price
The number of units of product or service sold to cover the fixed and variable costs at the price level
Part III: Pro Forma Income Statement:
A pro forma is an income statement that predicts income for the new or revised product or service you are recommending to East Chestnut Regional Health System (ECRHS) after one year. It shows the sales ECRHS expects to achieve during that period of time, along with the costs associated with that level of sales. The organization must cover the costs of products or services it delivers (cost of goods sold) and the expenses we estimate to achieve those sales (salaries for sales reps, advertising and promotion, office expenses, etc.). This will leave us with a projected profit.
A good pro forma income statement proves out a strategy by showing the expected revenue minus the expected costs and the resulting profit. Conversely, it shows, for example, that you can’t have $100,000 in forecast sales and $3 million in projected advertising, since that would result in a loss.
Use the Pro Forma Income Statement Worksheet to create your pro forma income statement.
Create a pro forma income statement based on the above. Include the following for 1 year:
Projected sales volume in units and revenue
Projected cost of goods/services
Projected marketing expenses
Projected net income
Prepare a 500-word summary statement of your pro forma income statement for East Chestnut Regional Health System for the new or revised existing product or service you have recommended. Include the following:
Summary of market size calculation (150 words)
Summary of breakeven analysis (150 words)
Summary of projected profit (200 words)
Part IV: Marketing Plan Considerations:
Now that you have a better understanding of your market and the finances of the organization, you must consider how economics and finances can affect your marketing strategy.
Write a 350- to 500-word analysis of how specific economic or financial issues will affect the marketing strategies for ECRHS.

Essay Sample Content Preview:

East Chestnut Regional Health System
Your Name
Subject and Section
Professor’s Name
September 21, 2023
Part 1: Pro-forma Income Statement
Description

Amount (USD)

Projected Revenue


Patients (61,448) x Avg Charge per service ($2,500)

$153,620,000

Projected Costs


Direct Medical Costs (70% of revenue)

($107,534,000)

Administrative and Overhead (15% of revenue)

($23,043,000)

Marketing and Promotion (5% of revenue)

($7,681,000)

Net Profit

$15,362,000

Discussion
To begin with, let's envision ECRH situated in a medium-sized U.S. city with a population totaling 1,000,000. Utilizing data from the U.S. Census Bureau, women represent approximately 50.8% of the U.S. populace (Warner, 2014). Consequently, in our assumed city setting, we can estimate a female population of roughly 508,000. Further breaking down this demographic, around 42% of these women fall within the childbearing age group of 15-44, leading to a subset of 213,360 women. Given the pivotal nature of obstetrical services to this age group, it becomes crucial to gauge the potential interest level among these women for ECRH's offerings.
Drawing from the case study insights, a significant 72% of women in Chestnut County exhibited a preference for availing of women's services at East Chestnut Regional Medical Center. Applying this percentage to our population subset provides a figure of 153,619 women who could potentially express interest in ECRH's obstetrical services. However, capturing the entirety of this interest group isn't feasible. If ECRH can achieve a market share of 40%, it would effectively cater to 61,448 women from the city.
Having delineated the market size, the next pivotal step involves crafting a pro forma income statement to anticipate potential financial outcomes from the obstetrical services. If each service is priced at an average charge of $2,500, ECRH's projected revenue would amount to $153,620,000. Offsetting this revenue are inevitable costs, including direct medical expenses (estimated at 70% of the revenue), administrative and overhead charges (approximated at 15% of the revenue), and costs related to marketing and promotion (projected at 5% of the revenue). When these costs are subtracted, ECRH stands to achieve a net profit of $15,362,000 from the obstetrical services.
Part 2: Breakeven Analysis
Breakeven Analysis: Women's Health Services


Projected Revenue

$153,620,000

Patients (61,448) x Avg Charge per service ($2,500)




Projected Costs




Direct Medical Costs

($107,534,000)

70% of projected revenue




Administrative and Overhead

($23,043,000)

15% of projected revenue




Marketing and Promotion

($7,681,000)

5% of projected revenue




Total Costs

($138,258,000)



Net Profit

$15,362,000



Breakeven Point (in revenue)


(Total Costs)

$138,258,000



Breakeven Point (in patients)


(Breakeven Point in revenue / Avg Charge per service)
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