A nursing Home contracts with an HMO for skilled nursing care at $3.00 PMPM. If costs are expected to average $120 per day, what is the maximum utilization of days per 1,000 members that the nursing home can experience before it begins to lose money?

A nursing Home contracts with an HMO for skilled nursing care at $3.00 PMPM. If costs are expected to average $120 per day, what is the maximum utilization of days per 1,000 members that the nursing home can experience before it begins to lose money?

Please show all of your work / calculations to receive credit.

Part 2 –

Refer to the table below for problems 1-5. A hospital and a health plan are negotiating a contract for inpatient medical–surgical care.             Calculate the amounts that would  complete the table below. (Please refer to chapter 7 if necessary).

Table: Per Member Per Month (PMPM) Rate

                                       Annual                                                                      

                                    Frequency        Unit                        Frequency        Copay        Copay         Net

Category                        per 1,000      Cost        PMPM       per 1,000       Amount      PMPM       PMPM

Hospital inpatient

Medical surgical                400        $1,000         (Q1)            100               $150         (Q2) (Q3)

Use the information from questions 1 – 3 in solving questions 4 and 5. Assume that you are the hospital administrator and that the  health    plan has offered you a capitated contract at the PMPM rate that you computed in question 1. You believe, however, that you can control utilization better than is reflected in the table above. You believe the actual utilization will be 370 per 1,000 persons. The number of covered lives is 25,000. Your cost per case is $1,100. (For purposes of this problem, ignore marginal costs, contribution margins, etc.)

1. What is the PMPM rate?

2. What is the copay PMPM?

3. What is the NET PMPM?

4. What is the hospital’s total revenue from this contract?

5. Would your hospital realize a profit on this contract?

Please show all of your work / calculations to receive credit.

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