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.

Tasks:

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

  • What is the PMPM rate that Bay Pines must set to cover medical costs plus administrative expenses?
  • 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?
  • Consider the initial base case utilization assumption. What rate would be set if the average cost on each service were reduced by 10 percent?
  • Assume that both utilization and cost reductions were made. What would the premium be?

Submission Details:

  • Present your analysis as a 3-page report in a Microsoft Word document formatted in APA style.

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