analyzing Bay Pines Medical Centers Financial Statement

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Analyzing Bay Pines Medical Centers Financial Statement.docx 

After gaining an
understanding of the components of a financial statement, analyzing and
applying what the components represent, in terms of future planning, are the
most important aspects of working in healthcare finance. 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?