Question

You are attempting to develop a break-even for a capitation contract with a major HMO. Your hospital has agreed to provide all inpatient hospital services for 10,000 covered lives. You will receive $48 per-member-per-month (PMPM) to cover all inpatient services. It is anticipated that 93 admissions per 1,000 covered lives will be provided with an average length of stay equal to 5.0, or 465 days per 1,000. You anticipate that your hospital will incur fixed costs, or readiness to serve costs, of $2,000,000 for these 10,000 covered lives. Variable costs per patient-day are expected to be $600. Calculate the break-even point in patient-days under this contract.

Show all your calculations as well as a break-even point graph.

Answer 1

Details	No /Amt $
No of patient days /1000 patient per month	465
No of patient days /10000 patient per month	4,650
Service fees /patient /month	$                        48
Service fees / year =48*10000*12	$           5,760,000
Variable Cost per patient cost	$                      600
Total Variable cost for 4650 patient days=	$           2,790,000
Total Fixec ost for 10000 covered lives	$           2,000,000
So Revenue for effetive 4650 patient days	$           5,760,000
Total Variable cost for 4650 patient days=	$           2,790,000
Contribution for 4650 patient days	$           2,970,000
Contribution/patient day =2970000/4650=	$                      639
Total Fixec ost for 10000 covered lives	$           2,000,000
So BEP Patient days=200000/639=	3,131
so BEP under the contract is 3,131 patient days