Answer questions 4&5 please. The book is Management Accounting in Healthcare Organizations by David Young the 3rd Edition.

Attached is the Case Study

4. How should Dr. Lopez translate her budget into a capitation rate that she can propose to Continental? What other issues should she consider in her proposal to Continental? 5. What issues should Dr. Lopez consider in working with the PHO, the hospital, and the specialists needed to care for pediatric patients so that she can increase the probability of meeting her budget? Home Search Bookshell D D PRACTICE CASE CENTRAL VALLEY PRIMARY CARE ASSOCIATES I've got a week to finish this proposal. The Information the hospital gave me on Inpatient utilization was incomplete and so detailed that I had to have it sum- marized. Even so, I don't know if rll be able to use it. How am I supposed to work with information like this to come up with a reasonable capitation rate for Continental? The speaker was Maria Lopez, MD, board member of Central Valley Primary Care Associates (CVPCA) and chair of its subcommittee on finance, compensation, and risk CUPCA was an independent practice association comprising 130 primary care pediatri- cians who worked in thirty-nine small group practices, located at fifty-seven sites. It worked closely with the Valley Children's Medical Center (VCMC) physician-hospital orga nization (PHO) Background VEM was alreaching and research institution (with over 200 beds that was considered to be one of the leading children's hospitals in the country Howeved although it had a o 2 P M 2 CHAPTER 1 MANAGEMENT ACCOUNTING AND HEALTH CARE'S IMPENDING FISCAL CRISIS national reputation and was the only children's hospital in the three-state area surround- ing the Central Valley region. It was not the only institution providing pediatric services. Several general hospitals were located nearby, each of which had a small (ten-to thirty- bed) pediatrics department. Moreover, whereas VCMC had both a residency program and an active research agenda, none of the other hospitals was engaged in either teaching or research. Patients in these other hospitals' had relatively uncomplicated diagnoses, requiring fairly standard treatment or procedures. Patients with complicated diagnoses or severe conditions generally were taken directly to VCMC or transported there shortly after admission to one of the other hospitals. Central Valley Primary Care Associates CVPCA had been formed several years ago. Its mission was to develop a comprehensive Integrated primary health care delivery system to ensure quality and cost-effective care Together with VCMC, it aimed to meet the total health care needs of children and ado- lescents in the testate area Dr Lopez's subcommittee was one of six. Its charge was to Kevelop minimally acceptable capitation fees and fee for service compensation pack- ages that directly correspond to the contractually covered services and to outline accept- able risk components that may be included in the physician compensation program, such as withhold skool Shang, and maximum stopies average develop minimally acceptable capitation fees and fee-for-service compensation pack- ages that directly correspond to the contractually covered services, and to outline accept- able risk components that may be induded in the physician compensation program, such as withholds, risk pool sharing, and maximum stop-loss coverage Continental Health Care Request for Proposals CUPCA originally had planned to contract with the PHO to provide community physicians for primary care. Recently, however, it had received a request for proposals from Conti- nental Health Care, a large managed care plan, indicating that Continental intended to do business with primary care providers on a capitation basis rather than using the tra- ditional fee for service approach. All primary care groups in the region had been asked to submit bids specifying the per member per month amount they would charge Con- Unental for a full-risk contract that is a contract that included the cost of all primary care specialty care and inpatient hospitalization care follow-up home health care and specialized services, such as occupational therapy were excluded the full range of inpa. tient services was to be included, however, including such traditionally expensive proce- dures as bone marrow transplants Continental had made it clear that it would not be awarding contracts to all groups in the area. Instead it had said that it would focus is business on the groups that offered the best PMPM rates nasmuch as Continenta currently had contracts the covered some 40 percent of the employees and their familesine egion and was gra Fallute to secure contract would have serious finance implications for Analysis In an effort to develop a budget and ultimately, a PMPM rate. Dr.Lopez had asked her staff assistant Tim Matthews, to gather all the relevant data that she would need to prepare a bid. She had decided to focus her efforts on a small subset of the total analysis. work out the methodology, and then instruct Mr. Matthews to use that methodology for the rest of the analysis She commented on the rationale for her approach: Thave to keep the job manageable Any time I spend on this is time away from seeing patients. Also, I'm not an accountant, and have no desire to be one. However. Tim doesn't have the clinical knowledge he needs to figure out a methodology. So I decided to focus on chikken in the five to eleven year age group and to analyze the cost of their care for the three most frequent outpa- tient diagnoses and the three most frequent inpatient diagnoses. I figure that i i can develop a methodology for this set of children and activities. It'll be a relatively simple matter for Tim to extend the analysis to the whole practice Because physicians in the group frequently used is facilities and specialists for outpatient care. De Lopez and Mr. Matthews had assumed that the hospital would be able to supply them with both outpatient and inpatient information Indeed, Matt Barbert. the manager of marketing services for the hospital had been extremely cooperative. He bad supplied them with information on outpatient and inpatient diagnoses by age group a fee schedule for the division of general pediates and nursing waves and hospital charges and cons contained in exhibits though all of the Laboratory tests radiology procedures and pharmay prescriptions that were associated withich npatient diagnoses relatively simple matter for Tim to extend the analysis to the whole practice. Because physicians in the group frequently used VCMC's facilities and specialists for outpatient care Dr Lopez and Mr. Matthews had assumed that the hospital would be able to supplythern with both outpatient and inpatient Information. Indeed, Matt Barberi, the manager of marketing services for the hospital, had been extremely cooperative. He had supplied them with information on outpatient and inpatient diagnoses by age group: a fee schedule for the division of general pediatrics; and nursing wages and hospital charges and costs contained in exhibits 1.1 through 1.4). He also gave them a list of the laboratory tests radiology procedures, and pharmacy prescriptions that were associated with each inpatient diagnosis. There were two complications with the data Mr Barberi had submitted. First, the list of tests, procedures, and prescriptions totaled ten to fifteen pages per diagnosis Dr Lopez realized that working with such a long list for more than a few diagnoses would be extremely cumbersome Under her guidance. Mr Matthews had summarized the informa- son according to the categories shown in exhibit 13. The second complication was that Mr. Barberi had sent a letter along with the data that had not been especially encouraging. It read. in part As you notice there are some limitations to the data we have readily available. For example on the outpatient side, we currently cannot be dannosis codes with resource utilization. Also we cannot te diagnosis with the kind and beraf snecialist referrals or on was his letter to be on the da es her to conclude that whateral anal wond be based on Wonies in the bush head Home Search E D A ASSIGNMENT 231 EXHIBIT 1.1 Top 3 Outpatient Diagnoses for Ages 5 to 11 for the First 6 Months of the Current Fiscal Year Percentage of Total Diagnosis ROUTINE CHLD HEALTH EXAM CHRONIS MEDIA NOS/NEC ABN CLINICAL FINDING NEC TOTAL Cases 1.435 160 1 3600 19 46 Dovydatingsite de 4 DIQQ EXHIBIT 1.2 Top 10 Primary Inpatient Diagnoses for Ages 5 to 11 for the Last Fiscal Year 97 Diagnosis Cases Days Charges 498 91 ASTHMA W STATUS ASTHMATIC 384 942 $1,509/616 486.00 PNEUMONIA ORGANISM NOS 124 364 517.973 78030 CONVULSIONS 239 393.685 54000 ACUTE APPENOKTIS NOS 78 137 324,798 5810 MAINTENANCE CHEMOTHERARY 74 140 670.878 IS19 TRACHEA BRONCHUS DIS NE 3: 243 SOS BABBT OPPOSITIONAL DISORDER 31930 140.00 AC APPEND W PERITATIS 4224 181.75 Ara STENOSIS OF LARYNX 20 209 Hot 100 CYSTIC FIBROS WHOLES 31 29 LAL 2016 ALLOTAALAGASES 28 Sot AL REACHT 3:28 350 meaning of the likeft A @ 4 OE CHAPTER 1 MANAGEMENT ACCOUNTING AND HEALTH CARE'S IMPENDING FISCAL CRISIS EXHIBIT 1.3 Fee Schedule for the Division of General Pediatries for the Current Fiscal Year (All Amounts in Dollars) Facility Fee Professional Fee Total 46.00 36.00 000 0.00 CO 000 80.00 50.00 130.00 45.00 20.00 75.00 126.00 36.00 30.00 45.00 60.00 75.00 Well Child Care New Visit Subsequent visit Anticipatory guidance (15 minutes) Anticipatory guidance (30 minutes Anticipatory guidance 145 minutes) Anticipatory guidance 160 minutes Sick Child Care New Visit Problem focused to minutos Expanded problem focused 20 minutes Detailed 30 minutes) comprehensive (45 minutes) niided herunt Subsequent Visits 17:01 26.00 Beca H THREE 45.00 GULOS 2 sas TO 46200 86.00 TIDO 133.00 115.00 France ods 12300 1950 50.00 105.00 155.00 EXHIBIT 1.4 Wages and Prices for the Current Fiscal Year Nursing Wages LPN $15 per hour Charges $1.900-$2,000 RN $25 per hour Cost $1,000-$1,800 Day of Stay in Hospital 4. How should Dr. Lopez translate her budget into a capitation rate that she can propose to Continental? What other issues should she consider in her proposal to Continental? 5. What issues should Dr. Lopez consider in working with the PHO, the hospital, and the specialists needed to care for pediatric patients so that she can increase the probability of meeting her budget? Home Search Bookshell D D PRACTICE CASE CENTRAL VALLEY PRIMARY CARE ASSOCIATES I've got a week to finish this proposal. The Information the hospital gave me on Inpatient utilization was incomplete and so detailed that I had to have it sum- marized. Even so, I don't know if rll be able to use it. How am I supposed to work with information like this to come up with a reasonable capitation rate for Continental? The speaker was Maria Lopez, MD, board member of Central Valley Primary Care Associates (CVPCA) and chair of its subcommittee on finance, compensation, and risk CUPCA was an independent practice association comprising 130 primary care pediatri- cians who worked in thirty-nine small group practices, located at fifty-seven sites. It worked closely with the Valley Children's Medical Center (VCMC) physician-hospital orga nization (PHO) Background VEM was alreaching and research institution (with over 200 beds that was considered to be one of the leading children's hospitals in the country Howeved although it had a o 2 P M 2 CHAPTER 1 MANAGEMENT ACCOUNTING AND HEALTH CARE'S IMPENDING FISCAL CRISIS national reputation and was the only children's hospital in the three-state area surround- ing the Central Valley region. It was not the only institution providing pediatric services. Several general hospitals were located nearby, each of which had a small (ten-to thirty- bed) pediatrics department. Moreover, whereas VCMC had both a residency program and an active research agenda, none of the other hospitals was engaged in either teaching or research. Patients in these other hospitals' had relatively uncomplicated diagnoses, requiring fairly standard treatment or procedures. Patients with complicated diagnoses or severe conditions generally were taken directly to VCMC or transported there shortly after admission to one of the other hospitals. Central Valley Primary Care Associates CVPCA had been formed several years ago. Its mission was to develop a comprehensive Integrated primary health care delivery system to ensure quality and cost-effective care Together with VCMC, it aimed to meet the total health care needs of children and ado- lescents in the testate area Dr Lopez's subcommittee was one of six. Its charge was to Kevelop minimally acceptable capitation fees and fee for service compensation pack- ages that directly correspond to the contractually covered services and to outline accept- able risk components that may be included in the physician compensation program, such as withhold skool Shang, and maximum stopies average develop minimally acceptable capitation fees and fee-for-service compensation pack- ages that directly correspond to the contractually covered services, and to outline accept- able risk components that may be induded in the physician compensation program, such as withholds, risk pool sharing, and maximum stop-loss coverage Continental Health Care Request for Proposals CUPCA originally had planned to contract with the PHO to provide community physicians for primary care. Recently, however, it had received a request for proposals from Conti- nental Health Care, a large managed care plan, indicating that Continental intended to do business with primary care providers on a capitation basis rather than using the tra- ditional fee for service approach. All primary care groups in the region had been asked to submit bids specifying the per member per month amount they would charge Con- Unental for a full-risk contract that is a contract that included the cost of all primary care specialty care and inpatient hospitalization care follow-up home health care and specialized services, such as occupational therapy were excluded the full range of inpa. tient services was to be included, however, including such traditionally expensive proce- dures as bone marrow transplants Continental had made it clear that it would not be awarding contracts to all groups in the area. Instead it had said that it would focus is business on the groups that offered the best PMPM rates nasmuch as Continenta currently had contracts the covered some 40 percent of the employees and their familesine egion and was gra Fallute to secure contract would have serious finance implications for Analysis In an effort to develop a budget and ultimately, a PMPM rate. Dr.Lopez had asked her staff assistant Tim Matthews, to gather all the relevant data that she would need to prepare a bid. She had decided to focus her efforts on a small subset of the total analysis. work out the methodology, and then instruct Mr. Matthews to use that methodology for the rest of the analysis She commented on the rationale for her approach: Thave to keep the job manageable Any time I spend on this is time away from seeing patients. Also, I'm not an accountant, and have no desire to be one. However. Tim doesn't have the clinical knowledge he needs to figure out a methodology. So I decided to focus on chikken in the five to eleven year age group and to analyze the cost of their care for the three most frequent outpa- tient diagnoses and the three most frequent inpatient diagnoses. I figure that i i can develop a methodology for this set of children and activities. It'll be a relatively simple matter for Tim to extend the analysis to the whole practice Because physicians in the group frequently used is facilities and specialists for outpatient care. De Lopez and Mr. Matthews had assumed that the hospital would be able to supply them with both outpatient and inpatient information Indeed, Matt Barbert. the manager of marketing services for the hospital had been extremely cooperative. He bad supplied them with information on outpatient and inpatient diagnoses by age group a fee schedule for the division of general pediates and nursing waves and hospital charges and cons contained in exhibits though all of the Laboratory tests radiology procedures and pharmay prescriptions that were associated withich npatient diagnoses relatively simple matter for Tim to extend the analysis to the whole practice. Because physicians in the group frequently used VCMC's facilities and specialists for outpatient care Dr Lopez and Mr. Matthews had assumed that the hospital would be able to supplythern with both outpatient and inpatient Information. Indeed, Matt Barberi, the manager of marketing services for the hospital, had been extremely cooperative. He had supplied them with information on outpatient and inpatient diagnoses by age group: a fee schedule for the division of general pediatrics; and nursing wages and hospital charges and costs contained in exhibits 1.1 through 1.4). He also gave them a list of the laboratory tests radiology procedures, and pharmacy prescriptions that were associated with each inpatient diagnosis. There were two complications with the data Mr Barberi had submitted. First, the list of tests, procedures, and prescriptions totaled ten to fifteen pages per diagnosis Dr Lopez realized that working with such a long list for more than a few diagnoses would be extremely cumbersome Under her guidance. Mr Matthews had summarized the informa- son according to the categories shown in exhibit 13. The second complication was that Mr. Barberi had sent a letter along with the data that had not been especially encouraging. It read. in part As you notice there are some limitations to the data we have readily available. For example on the outpatient side, we currently cannot be dannosis codes with resource utilization. Also we cannot te diagnosis with the kind and beraf snecialist referrals or on was his letter to be on the da es her to conclude that whateral anal wond be based on Wonies in the bush head Home Search E D A ASSIGNMENT 231 EXHIBIT 1.1 Top 3 Outpatient Diagnoses for Ages 5 to 11 for the First 6 Months of the Current Fiscal Year Percentage of Total Diagnosis ROUTINE CHLD HEALTH EXAM CHRONIS MEDIA NOS/NEC ABN CLINICAL FINDING NEC TOTAL Cases 1.435 160 1 3600 19 46 Dovydatingsite de 4 DIQQ EXHIBIT 1.2 Top 10 Primary Inpatient Diagnoses for Ages 5 to 11 for the Last Fiscal Year 97 Diagnosis Cases Days Charges 498 91 ASTHMA W STATUS ASTHMATIC 384 942 $1,509/616 486.00 PNEUMONIA ORGANISM NOS 124 364 517.973 78030 CONVULSIONS 239 393.685 54000 ACUTE APPENOKTIS NOS 78 137 324,798 5810 MAINTENANCE CHEMOTHERARY 74 140 670.878 IS19 TRACHEA BRONCHUS DIS NE 3: 243 SOS BABBT OPPOSITIONAL DISORDER 31930 140.00 AC APPEND W PERITATIS 4224 181.75 Ara STENOSIS OF LARYNX 20 209 Hot 100 CYSTIC FIBROS WHOLES 31 29 LAL 2016 ALLOTAALAGASES 28 Sot AL REACHT 3:28 350 meaning of the likeft A @ 4 OE CHAPTER 1 MANAGEMENT ACCOUNTING AND HEALTH CARE'S IMPENDING FISCAL CRISIS EXHIBIT 1.3 Fee Schedule for the Division of General Pediatries for the Current Fiscal Year (All Amounts in Dollars) Facility Fee Professional Fee Total 46.00 36.00 000 0.00 CO 000 80.00 50.00 130.00 45.00 20.00 75.00 126.00 36.00 30.00 45.00 60.00 75.00 Well Child Care New Visit Subsequent visit Anticipatory guidance (15 minutes) Anticipatory guidance (30 minutes Anticipatory guidance 145 minutes) Anticipatory guidance 160 minutes Sick Child Care New Visit Problem focused to minutos Expanded problem focused 20 minutes Detailed 30 minutes) comprehensive (45 minutes) niided herunt Subsequent Visits 17:01 26.00 Beca H THREE 45.00 GULOS 2 sas TO 46200 86.00 TIDO 133.00 115.00 France ods 12300 1950 50.00 105.00 155.00 EXHIBIT 1.4 Wages and Prices for the Current Fiscal Year Nursing Wages LPN $15 per hour Charges $1.900-$2,000 RN $25 per hour Cost $1,000-$1,800 Day of Stay in Hospital