HADM506, Chapter 2 Exercise problem Centennial Company, a Health Maintenance Organization is in the process of setting a premium for a new group insurance for the year based on a capitation basis. Its premium is based on the anticipated costs from various categories of providers that its members are going to use and the different services that are going to be required. MEDICAL COSTS The anticipated utilization based on 1,000 members is assumed as follows: Service Annual Utilization Rate Fee for Service In-network patient days 400 $1,500 50 $2,000 $1,200 Out-of-area patient days Out-patient surgeries Emergency department visits Skilled nursing home days 150 $200 200 $180 The anticipated use of physician services per member during the year Physician Annual visits Physician annual salary Primary care physician $200,000 Specialists $300,000 Annual physician capacity Primary care physician: 5,000 patient visits Specialist: 2,500 patient visits Staff support per physician: 2 FTE Staff annual salary: $40,000 Total supplies cost per visit: $15 Overhead expense per member per month: $10 HMO COSTS Administration costs per member: $15 Profit contribution per member: $5 Find the total premium per member per month based on the above anticipated costs