Total cost $100,000 Total volume 1,000 Average cost $100 Payer volumes Medicare

Question

Total cost $100,000
Total volume 1,000
Average cost $100

Payer volumes
Medicare (payment rate = $95) 400
Medicaid (payment rate = $75) 100
Managed Care # 1 (payment rate = $110) 300
Managed Care # 2 (pay 80% of charges) 100
Uninsured (pay 10% of charges) 100
Total all payers 1,000

Desired net income $5,000


Medicare and Medicaid presently account for 50% of the volume. The hospital wishes to reduce its dependence on government payers. Assume that Medicare volume is reduced to 380 patients and Medicaid volume is reduced to 90 patients. The volume from managed-care plan #1 rises to 320 patients from 300. The volume from managed-care plan #2 increases to 110 patients. Thus, total volume is unchanged at 1,000 visits. What is the new price necessary assuming all other factors are unchanged?
please show work

Explanation / Answer

AC=$100

Fixed price FP TOATL VOLUME =790

Medicare ($95/case)= 38

Medicaid ($75/case)= 90

MCO #1 ($110/case)= 320

CHARGE PAYERS (CH) TOTAL VOLUME =210

MCO #2 (pay 80% charges)= 110

Uninsured (10% of charges)= 100

AVERGE PRICE PAID BY FP PAYERS BY

Pg = ((.38/79) x 95) + ((.09/79) x 75)+ ((.32/79) x 110)=98.80

Unadjusted price

Pe= 100+ (5000/.21) x1000 + 100-98.80 x (0.79 x1000) / .21x1000 =128.32

Write off proportion =((.11/.21) x .2) + (.10/.21) x .9)=0.53

Price =128.32 / 1- 0.53 =$ 273.02

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