Question

7. You have been asked to develop a capitation rate for a primary care group based on the following projections: Service Annual Frequency/1,000 Cost per Service Inpatient Visits 100 $7,000.00 Office Visits 3,000 $45.00 Lab/X-ray 500 $25.00 What per-member per-month (PMPM) rate would be required to break even, ignoring any copayments? Use the information from the previous problems in solving problems 8 and 9. Assume that you are the hospital administrator and that the health plan has offered you a capitated contract at the PMPM rate that you computed in problem 7. You believe, however, that you can control utilization better than is reflected in the table above. You believe the actual utilization will be 370 per 1,000 persons. The number of covered lives is 25,000. Your cost per case is $1,100. (For purposes of this problem, ignore marginal costs, contribution margins, etc. 8.What is the hospital’s total revenue from this contract?. 9.Would your hospital realize a profit on this contract?for problems 8 and 9 use 33.33 as the copay pmpm

i have the following answer for 7 as

Per member utilization rate = 400/1000 = 0.40

PMPM (P1) = ( Per member utilization rate * Cost) / 12 = (0.40*1,000)/12 = $33.33

However, patient pays co-pays, which helps cost shift some of the PMPM away from the MCO, thus,

Co-pay PMPM (P2) = (Per member rate*Co-pay amount)/12 = (0.1*150)/12 = $1.25

Net PMPM (P3) = PMPM - Co-pay PMPM = $33.33 - $1.25 = $32.08

I need assistance with question 8 and 9 using a copay pmpm of 33.33

Answer 1

Per member utilization rate=400/1000=0.4

Annual Cost per member=cost*Per member utilization rate

P1, PMPM(Per Member Per Month)=Annual Cost/12=0.4*1000/12=33.33

Annual copay per member=per member copayrate*copay amount

P2, copay PMPM=Annual copyament per member/12=0.1*150/12=1.25

P3, net PMPM=PMPM-copay PMPM=33.33-1.25=32.08

370 per 1000 and cost of 1100, number of members=25000

Hence, annual cost

=370/1000*25000*1100

=10,175,000

annual revenue

=25000*(400/1000)*1000

=10,000,000

hospital would incur losses