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# Fixed Costs, Net Income, Capital Plan, & Utilization Reduction

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Fixed Costs, Net Income, Capital Plan, & Utilization Reduction

Assume that Valley Forge hospital has only the following three payer groups:
PennCare 1,000 \$5,000 \$3,000
Medicare 4,000 4,500 4,000
Commercial 8,000 7,000 2,500

The hospital's fixed costs are \$38 million. a.) What is the hospital's net income? b.) Assume that half of the 100,000 covered lives in the commercial payer group will be moved into a capitated plan. All utilization and cost data remain the same. What PMPM rate will the hospital have to charge to retain its Part a net income? c.) What overall net income would be produced if the admission rate of the capitated group were reduced from the commercial level by 10%? d.) Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to \$2,200?

https://brainmass.com/math/calculus-and-analysis/624432

#### Solution Summary

The Solution analyzes the hospital's fixed costs, net income, capital plan and utilization reduction.

\$2.19