Medical Necessity Review Service Break-Even: $153K Monthly

Fixed costs $28.8K/mo Base monthly overhead

Contribution margin 81%–89% After variable spend

Break-even revenue $35.6K/mo Cover the base

Break-even timing Month 29 Model break-even point

Break-even calculator

Test monthly revenue, variable expenses, and fixed costs against break-even for a medical necessity review service.

Lean Base Full

Monthly revenue Revenue sets how much margin is available to cover fixed costs. $ Low revenue High revenue Variable expenses Use physician reviewer fees and cloud or API costs that move with volume. $ Low costs High costs

Money available to cover fixed costs $270,654 $318,417 revenue - $47,762 variable expenses

Margin ratio

85%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly cost base break-even must cover. $ Lean base Heavy base

Break-even chart Revenue Total costs

Which expenses are fixed, and which move with sales in a medical necessity review service?

Cost classification

Break-even only works if revenue-linked expenses are pulled out before fixed overhead. Here, physician review fees and cloud fees move with revenue, while rent, licensing, and core compliance spend stay monthly.

Expense	Cost	Break-Even Treatment	Common Mistake
Physician Reviewer Fees	Variable	Model at 12% of first-year revenue, falling to 8% by Year 5; subtract before contribution margin.	Treating clinical labor as overhead instead of revenue-linked delivery spend.
Cloud Infrastructure and API Fees	Variable	Model at 7% of first-year revenue, falling to 3% by Year 5 as scale improves.	Flat-lining cloud spend as general IT overhead.
Office Rent	Fixed	Include $12,000 per month in fixed operating burn throughout the planning range.	Scaling rent with review volume without a capacity trigger.
Professional Liability Insurance	Fixed	Include $3,500 per month as baseline operating overhead.	Leaving it out until claims activity appears.
Legal and Compliance Retainer	Fixed	Include $5,000 per month before measuring break-even revenue.	Treating recurring compliance support as deal-by-deal spend.
Clinical Guideline Licensing	Fixed	Include $4,000 per month as required operating infrastructure.	Burying licensing inside variable clinical delivery expenses.
CRM and ERP Subscriptions	Fixed	Include $1,800 per month as stable administrative software spend.	Linking it to each new customer without support in the model.
Salaried Leadership and Staff	Semi-fixed	Hold salaries flat within each staffing plan, then step them up by year as headcount grows.	Modeling payroll as a smooth percentage of revenue.

How does break-even change across lean, base, and full operating plans for a medical necessity review service?

Scenario table

Break-even improves as revenue ramps faster than variable costs, but the model only turns profitable at full scale. That makes signed payer or provider contracts the real gate, not speculative hiring.

These are planning assumptions from the model, so they show direction and pressure points, not a guaranteed result.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean launch case	$67,800	$12,900	$124,000	81%	($986,000)	Still far below break-even, with overhead doing the damage.
Base contract case	$170,300	$28,900	$161,700	83%	($500,000)	Losses shrink, but the business is still not at break-even.
Full scale case	$318,400	$47,800	$198,800	85%	$493,000	Profit starts here, and the model reaches break-even in Month 29.

What breaks the break-even plan for a medical necessity review service?

Stress test

Break-even is fragile here: Year 1 revenue sits about $85,000 a month below the $153,000 target, and cost creep moves the bar fast. Higher reviewer fees or overhead can push cash burn deeper before Month 29.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change; the base model stays on the Month 29 path.	$153,000	$0 cushion	Base case only clears break-even at Month 29.
Revenue shortfall	Year 1 average revenue is about $67,800 a month.	$153,000	$85,000 gap	Sales ramp leaves a wide gap from day one.
Fixed-cost increase	Fixed monthly overhead rises 10% from $124,000.	$169,000	$101,000 gap	Overhead creep raises the revenue bar fast.
Margin pressure	Variable expenses rise from 19% to 24%, so contribution margin falls to 76%.	$163,000	$95,000 gap	Reviewer and cloud costs take more of each dollar.
Combined pressure	Variable expenses hit 24% and fixed overhead rises 10%.	$180,000	$112,000 gap	Cash risk moves toward the modeled -$1.273m low in Month 28.

What should you verify before locking in the first big fixed-cost commitment for this medical necessity review service?

Founder checklist

Before you commit, test whether signed demand, reviewer coverage, and workflow speed can carry the service to Month 29 breakeven. If any piece is thin, delay fixed costs and keep the model light.

1Pipeline12 customers

Verify signed clients can justify the $150,000 first-year marketing budget, because a $12,500 customer acquisition cost (CAC) only buys about 12 customers and weak pipeline math breaks the plan early.

2Fixed burn$111.7K/mo

Check the monthly fixed load from $995,000 of first-year payroll plus $28,800 of rent and overhead, and delay the office lease if a remote setup can avoid the $12,000 monthly rent.

3Unit margin81% CM

Confirm the first-year contribution margin (CM) holds near 81% after 12% physician reviewer fees and 7% cloud and API fees, because each point of cost creep pushes breakeven farther out.

4Hiring ramp$995K payroll

Lock in contracted physician reviewers and phase hires, because first-year payroll is already about $995,000 and adding engineers, sales, and customer success too early widens the loss.

5Cash trough-$1.273M

Stage enough reserve for the Month 28 cash low, because the model stays negative until Month 29 breakeven and only reaches payback in Month 52.

6Workflow testPHI-ready

Test payer intake, review routing, and decision turnaround before launch, and map the Health Insurance Portability and Accountability Act (HIPAA) workflow first so protected health information never slows the first cases.