Calculated the PMPM rate to cover medical and administrative costs., assignment help

  

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Class: Financial Management of Healthcare Organizations
Text-book: Healthcare Finance: An Introduction to Accounting and Financial Management
This weeks readings:
· Cost Behavior & Profit Analysis
· Cost Allocation
· Pricing & Service Decisions
· Planning & Budgeting
Analyzing Bay Pines Medical Center’s Financial Statement
After gaining an understanding of the components of a financial statement, analyzing and applying what the
components represent, in terms of future planning, are the most important aspects of working in healthcare
finance. Consider the following data and make your best analysis of per member per month (PMPM) rates,
considering reductions in utilization or pricing.
Bay Pines Medical Center estimates that a capitated population of 50,000 would have the following base case
utilization and total cost characteristics:
Service Category
Inpatient Days
Average Cost
per 1,000 Enrolleesper Day
General
150
$1,500
Surgical
125
$1,800
Psychiatric
70
$700
Alcohol/Drug Abuse38
$500
Maternity
42
$1,500
Total
425
$1,367
In addition to medical costs, Bay Pines allocates 10 percent of the total premium for administration/reserves.
Tasks:
On the basis of your data analysis, respond to the following:
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What is the PMPM rate that Bay Pines must set to cover medical costs plus administrative expenses?
What would be the rate if a utilization management program were to reduce utilization within each
patient service category by 10 percent? And by 20 percent?


Consider the initial base case utilization assumption. What rate would be set if the average cost on
each service were reduced by 10 percent?
Assume that both utilization and cost reductions were made. What would the premium be?
Submission Details:




Present your analysis as a 3-page report in a Microsoft Word document formatted in APA style.
On a separate page, cite all sources using APA format.
Name your document SU_MHC6305_W3_A2_LastName_FirstInitial.doc.
By Tuesday, June 9, 2015, submit your assignment to the W3 Assignment 2 Dropbox.
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