Assume that Valley Forge Hospital has only the following three payer groups: Number of Average Revenue Variable Cost Admissions per Admission per Admission Commercial 1,000 $5,000 $3,000 PennCare 4,000 4,500 4,000 Medicare 8,000 7,000 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 $2,200?
Assume that Valley Forge Hospital has only the following three payer groups: Number of Average Revenue Variable Cost Admissions per Admission per Admission Commercial 1,000 $5,000 $3,000 PennCare 4,000 4,500 4,000 Medicare 8,000 7,000 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 $2,200?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume that Valley Forge Hospital has only the following three payer
groups:
Number of
Average Revenue
Variable Cost
Admissions
per Admission
per Admission
Commercial
1,000
$5,000
$3,000
PennCare
4,000
4,500
4,000
Medicare
8,000
7,000
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 $2,200?
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