VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from subscribers. The per member, per month rate (PMPM) is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $359 per month, which is the same amount irrespective of the subscriber's age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, National Physicians, entered the North Carolina market early in the current year with a monthly premium of $316. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in the current year. The latest data on the number of enrollees and the associated costs follow: Age 1-4 5-14 15 - 19 20 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65 - 74 75 - 84 85 years and older Enrollment in Current Year 44, 788 81,556 94, 973 65, 346 132, 596 165, 976 84, 596 98, 324 155, 388 66,995 22,599 1,013, 137 Projected Enrollment Next Year 48, 077 83, 763 94, 987 66,982 131, 654 174, 546 89, 989 101, 023 160, 659 71,565 25, 949 1, 049, 194 Average Monthly Cost in Current Year $ 11, 146, 972 10, 058, 732 8, 435, 924 9, 538, 524 26, 431, 308 38,881, 208 22,741, 036 28, 690, 812 49, 517, 244 33, 431, 860 24, 285, 575 $ 263, 159, 195 1. Calculate the target cost required for VIP-MD to maintain its current market share and profit per enrollee in the current year. 2. Costs in the health care Industry applicable to VIP-MD and National Physicians are expected to increase by 6% in the coming year. VIP-MD is planning for the year ahead and is expecting all providers, including VIP-MD and National Physicians, to increase their rates by $25 to $341. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in the current year. (For all requirements, do not round intermediate calculations and round your answers to 2 decimal places.) 1. Required target oost 2. New target cost