Which of the following statements about the relationship between underlying cost structure and financial risk is...

Which of the following statements about the relationship between underlying cost structure and financial risk is most correct?

a. If a provider is primarily capitated, risk is minimized when variable costs are a large part of total costs.

b. If a provider is primarily capitated, risk is minimized when fixed costs are a large part of total costs.

c. If a provider is primarily fee-for-service, risk is minimized when fixed costs are a large part of total costs.

d. If a provider is primarily fee-for-service, risk is minimized when total variable costs are a large part of total costs.

e. Both b. and d. above are correct.

Expert Solution

Following are the statements which underlying the relationship between the cost structure and financial risk.

If a provider is prinarly capitated, risk is minimized when fixed costs are the larger part of the total cost.

And if a provider is primarily fee for service, risk is minimized when total variable costs are a larger part of total costs.

Answer: option (e) i.e., both b and d above are correct.

Rahul Sunny answered 2 years ago

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