Assume that an HMO's capitation payment to PCPs is $20 PMPM, but 15% of this amount is placed in the PCP risk pool. The budgeted amount for specialty and hospital costs is $40 PMPM. The purpose of the risk pool is to encourage the PCPs to take actions that cause realized specialty and hospital costs to be less than those budgeted. Cost is measured by the amount the HMO spends on each physician's referral. There are three PCPs: Physician A, Physician B, and Physician C. Assume that each physician has 1,000 patients. Suppose Physician A's actual referral costs are $500,000, Physician B's are $540,000, and Physician C's are $620,00. Finally, suppose that no PCP will receive any funds from the risk pool if it is empty at the end of the year, but if there are referral funds left in the risk pool at the end of the year, they will be divided equally among the three physicians.

A)How much is the initial annual capitation payment for each doctor before funds are withheld for the risk pool?

B)What is the total amount of funds in the risk pool (all three physicians aggregated)?

C)What is the amount of referral gain (loss) for Physician A?

D)What is the amount of referral gain (loss) for all three physicians combined?

E)Choose the correct combination of Physicians that will receive funds back from the risk pool at the end of the year:

F)Choose the amount of total compensation for Physician A at the end of the year.