Module 02: Discussion Forum

Fee-for-Service and Capitation (10 points)

Fee-for-service and capitation are both discussed in this module. These methods can be analyzed using cost volume profit analysis. In this discussion, assume the following:

• A new managed care organization (MCO) is preparing to bid on serving the 1,000 employees of ABC Manufacturing who make an average of 3 medical visits each year.
• The MCO can hire 1 physician for 350,000 SAR (annually) or can hire a Registered Nurse for 150,000 SAR (annually) and have a physician in attendance one day a week.
• A physician is able to see 4,500 patients per year.
• The nurse is able to take care of 2,000 of ABCs medical visits (with the capacity to see 1,000 more) but needs the physician for the other 1,000 visits of the ABC members.
• MCO has to decide how much to charge ABC in their bid for the business.

Use this example to discuss either the fee-for-service or capitation method using fixed cost, variable cost, total cost, revenue, loss, profit, and break even for this healthcare organization. Your response should be both quantitative and qualitative in nature.

Be sure to support your statements with logic and argument, citing all sources that you use. Post your initial response early and check back often to continue the discussion.