Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that Valley Forge Hospital has only the following three payer groups: Payer Number of Average Revenue Variable Cost Admissions per Admission per Admission Commercial

Assume that Valley Forge Hospital has only the following three payer groups: Payer Number of Average Revenue Variable Cost Admissions per Admission 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. Using the profit/loss format from our textbook and PowerPoints in this module, determine the hospitals net income, therefore showing your work to demonstrate how you got to the net income answer.

b. Assume that half of the 100,000 covered lives in the commercial payer group (above) 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 retain its Part A net income (what you calculated above)?

c. What overall net income would be produced if the admission rate of the capitated group (from part B above) were reduced from the commercial level (originally listed as $2,500 total from above) by 10 percent?

d. For this same capitated group, assuming that utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for this same capitated group were lowered to $2,200 (from the original $2,500 listed above)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ray Garrison, Eric Noreen, Peter Brewer

11th Edition

0072834943, 9780072834949

More Books

Students also viewed these Accounting questions

Question

Contrast compensation and overcompensation in Adlers theory.

Answered: 1 week ago