Explain how the CVP graphs would change in a capitated environment

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  • Week 3 Discussion

    Discussion Topic

     

    Task: Reply to this topic
     Due March 4 at 11:59 PM

    Before beginning work on this discussion forum, please review the link “Doing Discussion Questions Right,” the expanded grading rubric for the forum, and any specific instructions for this topic.

    Before the end of the Week, begin commenting on at least two of your classmates’ responses. You can ask technical questions or respond generally to the overall experience. Be objective, clear, and concise. Always use constructive language, even in criticism, to work toward the goal of positive progress. Submit your responses in the Discussion Area.

    Review the CVP-graph PDF for more information on CVP graphs and how to read them. Assuming the graphs are drawn to the same scale, consider the break-even charts—cost-volume-profit (CVP) graphs—below for two competing providers operating in a fee-for-service environment. On the basis of your understanding of variable cost rate, per-unit revenue, contribution margin, fixed costs, and the CVP graphs above, answer the following questions:

    • Explain how the CVP graphs would change if the providers were operating in a discounted fee-for-service environment.
    • Explain how the CVP graphs would change in a capitated environment. Evaluate which provider is in the best position to grow its business.
    • Provide reasons for and evidence in support of your responses.

    To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.

    Your initial posting should be addressed at 300-500 words. Submit your document to this Discussion Area by the due date assigned. Be sure to cite your sources using APA format.

    Respond to your peers throughout the unit. Justify your answers with examples, research, and reasoning. Follow up posts need to be submitted by the end of the week.

    Use the following rubric as a guide to complete your discussion responses.

  • Week 3 Project

    Assignment

     

    Task: Submit to complete this assignment
     Due March 8 at 11:59 PM

    Before beginning work on this assignment, please review the expanded grading rubric for specific instructions relating to content and formatting.

    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:

    • 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?

    To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.

    Submission Details:

    •  Your assignment should be addressed in an 8- to 10-page document.
    •  Submit your document to this appropriate Submissions Area by the due date assigned.

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