Assume that the average cost has jumped from $100 to $105. All other factors in the example will remain the same. What will be the new required price? Assume that all fixed payers will raise their payment levels 5 percent. Medicare will pay $99.75, Medicaid will pay $78.75 and managed care plan #1 will pay $115.50. If the costs have still increased from 5% to $105, what rate/price would now be required? Use tables 5-2 and 5-3.

Table 5-2 Price-Setting Example TotalcostTotalvolumeAveragecostPayervolumesMedicare(paymentrate=$95)Medicaid(paymentrate=$75)ManagedCare#1(paymentrate=$110)ManagedCare#2(pay80%ofcharges)Uninsured(pay10%ofcharges)TotalallpayersDesirednetincome$100,0001,000$1004001003001001001,000$5,000 Table 5-3 Income Statement for Case Example Revenue Medicare Medicaid Managed Care \# 1 Managed Care \# 2 Uninsured Total less Costs Profit