Consider the following:

Payer	Number of Admissions	Average Revenue per Admission	Variable Cost per Admission
Commercial FFS	5,000	$ 7,000	$ 5,500
PennCare	4,500	$ 6,000	$ 5,200
Medicare	6,500	$ 6,500	$ 4,900
Fixed Costs	$ 22,000,000

1. What is the hospitals' net income?
2. Assume 100,000 covered lives. Assume that 75,000 of these individuals will be moved into a capitated plan. What PMPM rate will the hospital have to charge to retain its net income?
3. What overall net income would be produced if the admission rate in the capitated group would be reduced by 20%?
4. Assuming the utilization reduction from #3 above remains, what income would be produced if the variable cost per admission were lowered to $3,000?