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Question - You are attempting to develop a break even scenario for a capitation contract with a major HMO. Your hospital has agreed to provide all inpatient services for 10,000 covered lives. You will receive $550 per member per month (PMPM) to cover all inpatient services. it is anticipated that 101 admission per 1000 covered lives will be provided with an average length of stay of 5 day or 505 days per 100.
You anticipate that your hospital will incur fixed costs, or readiness to serve costs, of $41,000,000 for these 10,000 lives. Variable costs per pt day are expected to be $4900.
Calculate the break event point in pt days under this contract?
If the costs, revenue, length of stay and anticipated admissions do not change, does this proposal meet your target of breaking even or better and why?
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