VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service mode
Posted: Sat May 07, 2022 8:18 pm
VIP-MD is a health maintenance organization (HMO) located in
North Carolina. Unlike the traditional fee-for-service model that
determines the payment according to the actual services used or
costs incurred, VIP-MD receives a fixed, prepaid amount from
subscribers. The per member, per month rate (PMPM) is determined by
estimating the health care cost per enrollee within a geographic
location. The average health care coverage in North Carolina costs
$368 per month, which is the same amount irrespective of the
subscriber’s age. Because individuals are demanding quality care at
reasonable rates, VIP-MD must contain its costs to remain
competitive. A major competitor, National Physicians, entered the
North Carolina market early in the current year with a monthly
premium of $325. VIP-MD wants to maintain its current market
penetration and hopes to increase its enrollees in the current
year. The latest data on the number of enrollees and the associated
costs follow: Age Enrollment in Current Year Projected Enrollment
Next Year Average Monthly Cost in Current Year 1 to 4 45,688 48,977
$ 11,147,872 5 to 14 82,456 84,663 10,059,632 15 to 19 95,873
95,887 8,436,824 20 to 24 66,246 67,882 9,539,424 25 to 34 133,496
132,554 26,432,208 35 to 44 166,876 175,446 38,882,108 45 to 54
85,496 90,889 22,741,936 55 to 64 99,624 101,923 28,691,712 65 to
74 156,288 161,559 49,518,144 75 to 84 67,895 72,465 33,432,760 85
years and older 23,499 26,849 24,286,475 1,023,437 1,059,094 $
263,169,095 Required: 1. Calculate the target cost required for
VIP-MD to maintain its current market share and profit per enrollee
in the current year. 2. Costs in the health care industry
applicable to VIP-MD and National Physicians are expected to
increase by 7% in the coming year. VIP-MD is planning for the year
ahead and is expecting all providers, including VIP-MD and National
Physicians, to increase their rates by $25 to $350. Calculate the
new target cost assuming again that VIP-MD wants to maintain the
same profit per enrollee as in the current year. (For all
requirements, do not round intermediate calculations and round your
answers to 2 decimal places.).
North Carolina. Unlike the traditional fee-for-service model that
determines the payment according to the actual services used or
costs incurred, VIP-MD receives a fixed, prepaid amount from
subscribers. The per member, per month rate (PMPM) is determined by
estimating the health care cost per enrollee within a geographic
location. The average health care coverage in North Carolina costs
$368 per month, which is the same amount irrespective of the
subscriber’s age. Because individuals are demanding quality care at
reasonable rates, VIP-MD must contain its costs to remain
competitive. A major competitor, National Physicians, entered the
North Carolina market early in the current year with a monthly
premium of $325. VIP-MD wants to maintain its current market
penetration and hopes to increase its enrollees in the current
year. The latest data on the number of enrollees and the associated
costs follow: Age Enrollment in Current Year Projected Enrollment
Next Year Average Monthly Cost in Current Year 1 to 4 45,688 48,977
$ 11,147,872 5 to 14 82,456 84,663 10,059,632 15 to 19 95,873
95,887 8,436,824 20 to 24 66,246 67,882 9,539,424 25 to 34 133,496
132,554 26,432,208 35 to 44 166,876 175,446 38,882,108 45 to 54
85,496 90,889 22,741,936 55 to 64 99,624 101,923 28,691,712 65 to
74 156,288 161,559 49,518,144 75 to 84 67,895 72,465 33,432,760 85
years and older 23,499 26,849 24,286,475 1,023,437 1,059,094 $
263,169,095 Required: 1. Calculate the target cost required for
VIP-MD to maintain its current market share and profit per enrollee
in the current year. 2. Costs in the health care industry
applicable to VIP-MD and National Physicians are expected to
increase by 7% in the coming year. VIP-MD is planning for the year
ahead and is expecting all providers, including VIP-MD and National
Physicians, to increase their rates by $25 to $350. Calculate the
new target cost assuming again that VIP-MD wants to maintain the
same profit per enrollee as in the current year. (For all
requirements, do not round intermediate calculations and round your
answers to 2 decimal places.).