Bay Pines Medical Center estimates that a capitates population of 50,000 would have the following base case utilization and total cost characteristics:

In addition to medical costs, Bay Pines allocates 10 percent of the total premium for administration/reserves.
a. What is the PMPM rate that Bay Pines must set to cover medical costs plus administrative expenses?
b. What would be the rate if a utilization management program were to reduce utilization within each patient service category by 10 percent? And by 20 percent?
c. Consider the initial base case utilization assumption.
What rate would be set if the average cost on each service were reduced by 10 percent? Assume that both utilization and cost reductions were made. What would the premium be?

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Service Category Average Cost per Day Inpatient Days per 1,000 Enrollees $1,500 General 150 $1,800 Surgical 125 $700 Psychiatric 70 Alcohol/Drug $500 38 Abuse Maternity $1,500 42 $1,367 Total 425