Service Category Inpatient Days per 1,000 Enrollees Average Cost per Day General

Question

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?

Explanation / Answer

Calculation of Per month Per Meber (PMPM)

Avg Cost per day per Patient is $18.75 (i.e $7967/425)

There fore PMPM is $18.75 X 30 Days = $562.50

Utilization of each patient categorry Reduces 10 pc

Avg Cost per day per Patient is $20.82 (i.e $7967/383)

There fore PMPM is $20.82 X 30 Days = $624.60

Utilization of each patient categorry Reduces 20 pc

Avg Cost per day per Patient is $23.43 (i.e $7967/340)

  There fore PMPM is $23.43 X 30 Days = $702.97

If the average cost on each service reduced by 10 pc

Avg Cost per day per Patient is $17.19 (i.e $7307/425)

  There fore PMPM is $17.19 X 30 Days = $515.79

Per Day No. Of Patients Cost General 150 $ 1,500.00 Surgical 125 $ 1,800.00 Psychiatric 70 $     700.00 Alcohol / Drug Abuse 38 $     500.00 Maternity 42 $ 1,500.00 425 $ 6,000.00 Additiona cost $ 1,367.00 10 % Premium $     600.00 425 $ 7,967.00

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