Cost Shifting Practice Problem

Assume the following: Insurance Type # of Patients Medicare 20 $950 Medicaid 30 $900 Managed Care #1 25 15% discount Managed Care #2 10 25% discount Private Payer 5 100% of charges Bad Debt 5 $0 Charity Care 5 $0 Costs per patient $1,000 Costs = Charges Step 1: Calculate the projected profit or loss Payer # of Patients Costs Charges Collections Profit/Loss Medicare Medicaid Managed Care #1 Managed Care #2 Private Bad Debt Charity Care Total 0 $- $- $- $-

Step 2: Calculate the necessary charge to recover the costs Profit or Loss here $- $1,000 $1,000 Add the categories of patients who will pay an increased charge here 21.25 7.5 5 Current costs

Step 3: Check the answer by calculating the profit/loss using the new charge *Hint: You should breakeven Payer # of Patients Costs Charges Collections Profit/Loss Medicare Medicaid Managed Care #1 Managed Care #2 Private Bad Debt Charity Care Total 0 $- $- $- $- Cost Cutting Practice Problem (In Class) Calculate the number of costs you will need to cut if charges were limited to $1,050.00

Step 1: Calculate the total costs to be cut using the new charge per patient Payer # of Patients Costs Charges Collections Profit/Loss Medicare Medicaid Managed Care #1 Managed Care #2 Private Bad Debt Charity Care Total $- $-

Step 2: Calculate the new cost per patient Total profit/loss from above Current total costs here $- $- $- 100

Step 3: Check your work, you should break even Payer # of Patients Costs Charges Collections Profit/Loss Medicare Medicaid Managed Care #1 Managed Care #2 Private Bad Debt Charity Care Total $-