Course: Financial Management of healthcare Organization
Before beginning work on this assignment, please review the expanded grading rubric for specific instructions relating to content and formatting.
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
per 1,000 Enrollees
Average Cost
per Day
General
150
$1,500
Surgical
125
$1,800
Psychiatric
70
$700
Alcohol/Drug Abuse
38
$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.
On the basis of your data analysis, respond to the following:
1. What is the PMPM rate that Bay Pines must set to cover medical costs plus administrative expenses? Detailed explanantion
2. 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?Detailed explanantion
3. Consider the initial base case utilization assumption. What rate would be set if the average cost on each service were reduced by 10 percent?Detailed explanantion
4. Assume that both utilization and cost reductions were made. What would the premium be?Detailed explanantion

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