7.4 c For question 7.4 in the book, I divided $5,000,000 by 100,000 covered lives to get a $50 per member rate. The PMPM rate would be $4.17/member/month.

For part c, if the number of admissions for the capitated group (500) is half of that of the commercial group, then a 10% reduction in the admission rate would be 450 admissions. At 450 admissions, the total revenue would be 450 x $5000 = $2, 250,000. The original revenue for the capitated group was $4.17 x 50,000 x 12 = $2, 502,000. So the overall net income would decrease by $252,000.

Chapter 7: Service Line Costing and over full costs? What price must be set to produce a profit of $20,000 on the combined test? ssume that Valley Forge Hospital has only the following three payer 7.4 A groups: Commercial PennCare Medicare Number of Admissions 1,000 4,000 8,000 Average Revenue per Admission $5,000 4,500 7,000 Variable Cost per Admission $3,000 4,000 2,500 The hospital's fixed costs are $38 million. a. What is the hospital's net incomc? b. Assume that half of the 100,000 covered lives in the commercial payer group will be moved into a capitated plan. All utilization and cost data remain the same. What PMPM rate will the hospital have to charge to retain its Part a net income? c. What overall net income would be produced if the admission rate of the capitated group were reduced from the commercial level by 10 percent? d. Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to $2,200 3 Bay Pines Medical Center estimates that a capitated population of 50,000 would have the following base case utilization and total cost characteristics Inpatient Days per Average Cost Category 1,000 Enrolles er Day eneral Surgical Psychiatric Alcohol/drug abuse Ma 150 125 70 38 42 425 $1,500 1,800 700 500 1,500 $1,367 Total o medical costs, Bay Pines allocates 10 percent of the PMPM rate that Bay Pines must set to cover medical otal Drer Whm for administration/reserves. plus administrative expenses