What would rate if a utilization management program reduce

Reference no: EM133502327

Problem

Consider the following data and make your best analysis of per member per month (PMPM) rates, considering reductions in utilization or pricing. Bay Pines Medical Center estimates that a capitated population of 50,000 would have the following base case utilization and total cost characteristics:

Service Category    Inpatient Days per 1,000 Enrollees       Average Cost per Day
General                                       150                                          $1,500
Surgical                                       125                                          $1,800
Psychiatric                                   70                                            $700
Alcohol/Drug Abuse                      38                                            $500
Maternity                                     42                                            $1,500
Total                                           425                                          $1,367

In addition to medical costs, Bay Pines allocates 10 percent of the total premium for administration/reserves.

On the basis of your data analysis, respond to the following:

Question 1. What is the PMPM rate that Bay Pines must set to cover medical costs plus administrative expenses?

Question 2. What would be the rate if a utilization management program were to reduce utilization within each patient service category by 10 percent? And by 20 percent?

Question 3. Consider the initial base case utilization assumption. What rate would be set if the average cost on each service were reduced by 10 percent?

Question 4. Assume that both utilization and cost reductions were made. What would the premium be?

Reference no: EM133502327

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