Ealth Care Services Reimbursement (CS2)

Instructions: Read the scenario and answer the question. Please provide a three page paper, APA format, Times Roman, 12 font, double spaced with subtitles for each question in the body of the paper (question followed by answer). Include an introduction and conclusion statement. Use at least three references. Include in-text citations for each reference.

Scenario and Questions:

Pearland Medical Center owns a small satellite clinic, specializing in General Practice, located at nearby Pearland airport. General Practice Clinici??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 clinici??s contribution margin on the contract? What is the clinici??s break even 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 clinici??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?

Optional Reference(s:

Berenson, R. A., & Rich, E. C. (2010). US approaches to physician payment: The deconstruction of primary care. Journal of General Internal Medicine, 25(6), 613-618.

Hennig-Schmidt, H., Selten, R., & Wiesen, D. (2011). How payment systems affect physiciansi?? provision behavior An experimental investigation. Journal of Health Economics, 30(4), 637-646.