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Capitation, Rate Setting, and Risk Sharing

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I need help with an excel problem in my healthcare finance class. I am completely stuck and don't know what to do! Attached is the problem. Please help!!!


Chapter 17 -- Capitation, Rate Setting, and Risk Sharing

Families First is a managed care plan that has been asked to submit a premium bid to ABC Company, a large
manufacturer in its service area. The premium bid includes the primary care for all of the ABC employees.
ABC has provided information about the age and gender of its employees, and Families First has identified
average primary care utilization rates from its own databases. This information is shown below:

ABC Company Average Primary Care
Number of Number of Visits per Year
Age Band Males Females Males Females
20-29 285 325 2.10 3.18
30-39 96 100 2.60 3.52
40-49 53 57 3.28 3.93
50-59 36 36 4.14 4.43
60+ 7 5 4.98 5.04

Each primary care physician can handle about 3,000 patient visits per year, for which he or she is paid
$180,000. What primary care rate (PMPM) will Families First propose to ABC Company?

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Solution Preview

We need to find the number of primary care visits on average, each year, from the employees of ABC company. Since we know the primary care rate per physician, all we need to determine is the number of physicians necessary.

For each age band and gender, ...

Solution Summary

We find the number of primary care visits from the employees of ABC company and determine the number of physicians necessary.

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PASP is a physician specialty association and represents another membership fee that physicians must choose to pay because membership is voluntary and does not affect their relicensure. Physicians need to feel they are getting a good return on their investment both in joining and maintaining their membership because of issues of increasing competition from other specialists, challenges in getting reimbursement for services rendered, and managed care contracts that keep them very busy with the increase of the number of patients they must see.


Managed care has had a profound impact on the way healthcare is delivered and paid for in the U.S. The physician members of PASP will be significantly impacted by managed care. Any membership marketing pieces that PASP creates must reflect that PASP understands the challenges that managed care poses for its members. PASP should also be able to identify ways that members of PASP can get help in meeting these challenges. You believe that specialty physicians just leaving residency and setting up their practices is one possible market for new members. You have compiled a list of these physicians and will e-mail them a link asking that they accept a free 8-week e-mail subscription of a weekly electronic "tip of the week" to help increase their awareness of key terms used by managed care organizations.

Identify eight managed care contracting terms and write a brief definition of each term. Remember to cite all sources and be sure to write each definition using your own words.

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