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Health Care Services Reimbursement Case Assignment Pearland Medical Center owns a small satellite clinic, specializing in General Practice, located at nearby Pearland airport. General Practice...

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Health Care Services Reimbursement

Case Assignment

Pearland Medical Center owns a small satellite clinic, specializing in General Practice, located at nearby Pearland airport. General Practice Clinic’s sole payor is Air Health, a health care plan that covers the airport employee population. Air Health has been paying on a fee-for-service basis; however, recently, its covered population increased and it proposed a capitation contract for the next year with an annual capitation payment of $150 for each of its 20,000 covered members.

Previous experience indicates that the covered population will average 2 visits per year to General Practice Clinic. General Practice Clinic generates annually $1,150,000 fixed cost, which includes $550,000 in direct cost and $600,000 in allocated overhead. Each visit to General Practice Clinic generates $45 in variable costs.

  1. Construct the base pro forma profit and loss statement on the capitation contract based on the number of visits for the clinic.
  2. What is the clinic’s contribution margin on the contract? What is the clinic’s breakeven point under this capitation contract in the number of visits?
  3. Construct the base pro forma profit and loss statement on the capitation contract based on the number of members for the clinic.
  4. What is the clinic’s breakeven point under this capitation contract in the number of members?
  5. Should the clinic accept the contract terms?
  6. What elements of CVP analysis change when a clinic moves from a fee-for-service to a capitated environment?
  7. How do provider incentives change when it moves from a fee-for-service to a capitated contract?

Length: 3–4 pages, excluding title page and references.

I need 4 pages, APA, 4-5 in-text citations, and 4-5 references

Answered Same Day Jun 28, 2020

Solution

Kuldeep answered on Jun 29 2020
138 Votes
Running head: Health Care Services Reimbursement
Health Care Services Reimbursement
Health Care Services Reimbursement
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Contents
Introduction    3
1. Construct the base pro forma profit and loss statement on the capitation contract based on the number of visits for the clinic.    3
2. What is the clinic's contribution margin on the contract? What is the clinic's
eakeven point under this capitation contract in the number of visits?    4
3. Construct the base pro forma profit and loss statement on the capitation contract based on the number of members for the clinic.    4
4. What is clinic's
eakeven point under this capitation contract in the number of members?    4
5. Should the clinic accept the contract terms?    5
6. What elements of CVP analysis change when a clinic moves from a fee-for-service to a capitated environment?    5
7. How do provider incentives change when it moves from a fee-for-service to a capitated contract?    5
References    8
Introduction
The Medical center Pearland has a small health clinic specialized in prevailing practice at the close by Pearland Airport. The only payor of the General Practice Clinic is the Air Health, a healthcare program which covers the number of employees at the airport. Air Health services for which are been paying on a pay-per-service basis; on the other hand, it has recently increased its coverage and proposed a headcount fee contract for coming year, with a headcount fee of $150 per 20,000 members per year.
1. Construct the base pro forma profit and loss statement on the capitation contract based on the number of visits for the clinic.
Total revenues: ($150 per person * 20,000 members) = $3,000,000 Total Revenues
Total VC = ($90. Costs per member * 20,000 members) = $1,800,000 Total Variable Costs
FC= $1,150,000 = AC =$600,000 + $550,000 DC = FC= $1,150,000
VC = $1,800,000
TC = 2,950,000
Profit (net income) $50,000
TR= $3,000,000 divided into $1,500,000 = 0.50 = 50% of every dollar is available to pay for FC
The head contract is basically a contract that outlines the insurance company's willingness to pay for each of its protected customers to the general practice clinic. So if the company is willing to pay $150 per person and they have 20,000 insured customers, that means they will pay $3 million for all customers to go to the clinic once. The specific situation now means that the “insured population” or the insured will visit the clinic twice a year; so now they do not pay 3 million, but pay 6 million (Black, Black, Christensen & Heninger, 2012). All such information should be properly balanced in this income statement. Once we have placed all the information on our balance sheet, you will be able to calculate the marginal rate of return and the
eak-even point (Vilcu, Verzea & Chaib, 2016).
2. What is the clinic's contribution margin on the contract? What is the clinic's
eakeven point under this...
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