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A dental office is considering a contract from the local university to provide dental services for 10,000 students. Service Annual Number of Services Used Check

A dental office is considering a contract from the local university to provide dental services for 10,000 students.

Service

Annual Number of Services Used

Check up and cleaning

7000

Filling/ cavity repair visits

1500

Root canal procedures

100

Crowns

250

Here are what it costs to perform each of the procedures

Service

Cost

Check up and cleaning

$100

Filling/ cavity repair visits

$350

Root canal procedures

$1250

Crowns

$750

The dental office knows they have to upgrade some of their major equipment in the near future so they have a policy of marking up (increasing) their cost of producing each service by 10% to build up a reserve fund for these purchases.

A) What should the dental office charge the university in a Fee for Service basis for each of the services?

B) The university offered the dental office a Capitated payment Contract for $12.25 per student per month (PMPM). Should the dental office accept the contract? Why or why not.

C) After negotiating contracts the cost of a check up and cleaning increased to $110. What PMPM should the dental office to the university based on this updated cost information? Assume all the other criteria (such as building a reserve fund for equipment replacement) remain the same.

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