question archive Hospital estimates that a capitated population of 50,000 would have the following base case utilization and total cost characteristics: in addition to medical costs, the hospital allocated 10% of the total premium for administration/reserves Inpatient days per 1,000 enrollees Average cost per day 150 $1,500 125 1,800 70 700 38 500 42 1,500 Total: 425 Total: 1,367 A) what is the PMPM rate that the hospital must set to cover medical costs plus administrative expenses? B) what would be the rate if utilization management program would reduce utilization within each patient service category by 10%? 20%? C) return to the initial base case utilization assumption
Hospital estimates that a capitated population of 50,000 would have the following base case utilization and total cost characteristics: in addition to medical costs, the hospital allocated 10% of the total premium for administration/reserves Inpatient days per 1,000 enrollees Average cost per day 150 $1,500 125 1,800 70 700 38 500 42 1,500 Total: 425 Total: 1,367 A) what is the PMPM rate that the hospital must set to cover medical costs plus administrative expenses? B) what would be the rate if utilization management program would reduce utilization within each patient service category by 10%? 20%? C) return to the initial base case utilization assumption
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Hospital estimates that a capitated population of 50,000 would have the following base case utilization and total cost characteristics: in addition to medical costs, the hospital allocated 10% of the total premium for administration/reserves
|
Inpatient days per 1,000 enrollees |
Average cost per day |
|
150 |
$1,500 |
|
125 |
1,800 |
|
70 |
700 |
|
38 |
500 |
|
42 |
1,500 |
|
Total: 425 |
Total: 1,367 |
A) what is the PMPM rate that the hospital must set to cover medical costs plus administrative expenses?
B) what would be the rate if utilization management program would reduce utilization within each patient service category by 10%? 20%?
C) return to the initial base case utilization assumption. what rate would be set if the average cost on each service were reduced by 10%
D) assume that both utilization and cost reductions were made. what would the premium be?
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Answer:
a)
| Inpatient days per 1,000 enrollees | Annual Usage per member (Inpatient days/1000) -A | Average Cost Per day | Admin Expenses (Average Cost per day/90%)- Average Cost per day |
Total Cost = Average Cost per day +Admin Expenses | PMPM Total Cost *(A/12) |
| 150 | 0.15 | 1500 | 166.67 | 1666.67 | 20.83 |
| 125 | 0.125 | 1800 | 200 | 2000.00 | 20.83 |
| 70 | 0.07 | 700 | 77.78 | 777.78 | 4.54 |
| 38 | 0.038 | 500 | 55.56 | 555.56 | 1.76 |
| 42 | 0.042 | 1500 | 166.67 | 1666.67 | 5.83 |
| PMPM Rate | 53.80 |
b)
| Inpatient days per 1,000 enrollees [reduced by 10%] |
Annual Usage per member (Inpatient days/1000) -A | Average Cost Per day | Admin Expenses (Average Cost per day/90%)- Average Cost per day |
Total Cost = Average Cost per day +Admin Expenses | PMPM Total Cost *(A/12) |
| 135 | 0.135 | 1500 | 166.67 | 1666.67 | 18.75 |
| 112.5 | 0.1125 | 1800 | 200 | 2000.00 | 18.75 |
| 63 | 0.063 | 700 | 77.78 | 777.78 | 4.08 |
| 34.2 | 0.0342 | 500 | 55.56 | 555.56 | 1.58 |
| 37.8 | 0.0378 | 1500 | 166.67 | 1666.67 | 5.25 |
| PMPM Rate | 48.42 |
If reduction is made by 20%:
| Inpatient days per 1,000 enrollees [Reduced by 20%] |
Annual Usage per member (Inpatient days/1000) -A | Average Cost Per day | Admin Expenses (Average Cost per day/90%)- Average Cost per day |
Total Cost = Average Cost per day +Admin Expenses | PMPM Total Cost *(A/12) |
| 120 | 0.12 | 1500 | 166.67 | 1666.67 | 16.67 |
| 100 | 0.1 | 1800 | 200 | 2000.00 | 16.67 |
| 56 | 0.056 | 700 | 77.78 | 777.78 | 3.63 |
| 30.4 | 0.0304 | 500 | 55.56 | 555.56 | 1.41 |
| 33.6 | 0.0336 | 1500 | 166.67 | 1666.67 | 4.67 |
| PMPM Rate | 43.04 |
c)
| Inpatient days per 1,000 enrollees | Annual Usage per member (Inpatient days/1000) -A | Average Cost Per day [Reduced by 10%] |
Admin Expenses (Average Cost per day/90%)- Average Cost per day |
Total Cost = Average Cost per day +Admin Expenses | PMPM Total Cost *(A/12) |
| 150 | 0.15 | 1350 | 150.00 | 1500.00 | 18.75 |
| 125 | 0.125 | 1620 | 180 | 1800.00 | 18.75 |
| 70 | 0.07 | 630 | 70.00 | 700.00 | 4.08 |
| 38 | 0.038 | 450 | 50.00 | 500.00 | 1.58 |
| 42 | 0.042 | 1350 | 150.00 | 1500.00 | 5.25 |
| PMPM Rate | 48.42 |
d)
| Inpatient days per 1,000 enrollees [Reduced by 10%] |
Annual Usage per member (Inpatient days/1000) -A | Average Cost Per day [Reduced by 10%] |
Admin Expenses (Average Cost per day/90%)- Average Cost per day |
Total Cost = Average Cost per day +Admin Expenses | PMPM Total Cost *(A/12) |
| 135 | 0.135 | 1350 | 150.00 | 1500.00 | 16.88 |
| 112.5 | 0.1125 | 1620 | 180 | 1800.00 | 16.88 |
| 63 | 0.063 | 630 | 70.00 | 700.00 | 3.68 |
| 34.2 | 0.0342 | 450 | 50.00 | 500.00 | 1.43 |
| 37.8 | 0.0378 | 1350 | 150.00 | 1500.00 | 4.73 |
| PMPM Rate | 43.58 |
