BUSN 651 Midterm Exam

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1.Dr. Melissa Rose is trying to decide whether to be a Medicare-participating physician for the
upcoming year. (Assume that her entire practice consists of Medicare patients or at least that her
practice has slack capacity. Her Medicare patients do not displace non-Medicare patients.)
Assume that her average charge is $120 (before Medicare’s limiting charge is applied), for which
the average Medicare-approved amount is $100. If she decides to be a non-participating
physician, she expects to accept assignment 80% of the time. For the unassigned patients
assume that she would set her charges at 110 percent of the Medicare-approved fee for a
nonparticipating physician. Assume that her Medicare patient volume is not reduced if she
chooses not to participate nor if she does not accept assignment. (Ignore bad debt and any other
factors not presented here.)
1. What will be Dr. Rose’s average reimbursement per visit if she chooses to be a
Medicare-participating physician? (This is the total from both Medicare and the patients.)
2. What will be Dr. Rose’s average reimbursement per visit if she chooses ​not​ to be a
Medicare-participating physician? (This is the total from both Medicare and the patients.)
2. An uninsured patient receives services with charges of $5,000 from a hospital. The hospital
staff bills the patient $1,000 and records $4,000 as charity care. If the hospital’s ratio of cost to
charges is 50%, what amount would the hospital recognize as charity care in Schedule H of IRS
Form 990?
3. Using the example attached, solved the following problem:

Medicare and Medicaid presently account for 50% of the volume. The hospital wishes to reduce
its dependence on government payers. Assume that Medicare volume is reduced to 380 patients
and Medicaid volume is reduced to 90 patients. The volume from managed-care plan #1 rises to
320 patients from 300. The volume from managed-care plan #2 increases to 110 patients. Thus,
total volume is unchanged at 1,000 visits. What is the new price necessary assuming all other
factors are unchanged?
4. You have been asked to develop a capitation rate for a primary care group based on the
following projections: Service Annual Frequency/1,000 Cost per Service Inpatient Visits 100
$7,000.00 Office Visits 3,000 $45.00 Lab/X-ray 500 $25.00
What per-member per-month (PMPM) rate would be required to break even, ignoring any
copayments?
5. A hospital has contracted with an HMO to provide acute care inpatient services for $1,000 per
day, subject to a 10 percent withhold. The proposed budget for inpatient services is based upon
expected utilization of 600 days per 1,000 members at $1,000 per day, or $600,000 per 1,000
members. The hospital risk pool will be split equally between the hospital and a primary care
physician group. If only 450 days per 1,000 members were utilized in the first year, how much
would the hospital be paid per 1,000 members?