Assume that Valley Forge Hospital has only the following 3 Payer groups:

	# of admissions	average revenue per admission	variable cost per admission
Commercial	1,000	$5,000	$3,000
PennCare	4,000	4,500	4,000
Medicare	8,000	7,000	2,500

The hospitals fixed costs are $38 million.

a. what is the hospital's net income?

b. Asume that half of the 100,000 covered lived in the commecial 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 tretain its part a net income?

c. What overall net income would be produced if the admission rate of the capitated group were reduced form the commercial level by 10%?

d. Assuming 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?

* This is all of the information that was provided to solve the problem.