Q4 VIP-MD is a health maintenance organization (HMO) located in…
Question Answered step-by-step Q4 VIP-MD is a health maintenance organization (HMO) located in… Q4VIP-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 $366 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 $323. 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 Year1 to 4 45,488 48,777 $ 11,147,6725 to 14 82,256 84,463 10,059,43215 to 19 95,673 95,687 8,436,62420 to 24 66,046 67,682 9,539,22425 to 34 133,296 132,354 26,432,00835 to 44 166,676 175,246 38,881,90845 to 54 85,296 90,689 22,741,73655 to 64 99,024 101,723 28,691,51265 to 74 156,088 161,359 49,517,94475 to 84 67,695 72,265 33,432,56085 years and older 23,299 26,649 24,286,275 1,020,837 1,056,894 $ 263,166,895Required: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 $348. 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.) Accounting Business Financial Accounting FINC 405 Share QuestionEmailCopy link Comments (0)
