me that Valley Forge Hospital has only the following three payer groups: 7.4 Ass
ID: 2551904 • Letter: M
Question
me that Valley Forge Hospital has only the following three payer groups: 7.4 Assu Number of Admissions 1,000 4,000 8,000 Average Revenue Variable Cost per Admission per Admission Commercial PennCare Medicare $5,000 4,500 7,000 $3,000 4,000 2,500 The hospital's fixed costs are $38 million. a. What is the hospital's net income? b. Assume that half of the 100,000 covered lives in the commercial payer group will be moved into a capitated plan. All utilization and cost data remain the same. What PMPM rate will the hospital have to charge to retain its Part a net income? c. What overall net income would be produced if the admission rate of the capitated group were reduced from the commercial level by 10 percent? d. Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to $2,200Explanation / Answer
a.
b. Income will reduce by 500 * 5000 = 2,500,000
50,000 *PMPM *12 = 2,500,000
PMPM = 4.167
c .
4 .
Revenue Commercial[1000*5000] 5000000 Penn Care
[4000*4500] 18000000 Medicare
[8000*7000] 56000000 Total Revenue 79000000 Less:Variable Cost Commercial
[1000*3000] 3000000 PennCare
[4000*4000] 16000000 Medicare
[8000*2500] 20000000 Total variable Costs 39000000 Less: Fixed Costs 38000000 Net Income
[Revenue - Variable Costs- Fixed Costs] 2000000
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