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Pearland Medical Center owns a small satellite clinic, specializing in General Practice, located at nearby Pearland airport. General Practice Clinicâ€™s sole payor is Air Health, a health care plan that covers the airport employee population. Air Health has been paying on a fee-for-service basis; however, recently, its covered population increased and it proposed a capitation contract for the next year with an annual capitation payment of $150 for each of its 20,000 covered members.
Previous experience indicates that the covered population will average 2 visits per year to General Practice Clinic. General Practice Clinic generates annually $1,150,000 fixed cost, which includes $550,000 in direct cost and $600,000 in allocated overhead. Each visit to General Practice Clinic generates $45 in variable costs.
- Construct the base pro forma profit and loss statement on the capitation contract based on the number of visits for the clinic.
- What is the clinicâ€™s contribution margin on the contract? What is the clinicâ€™s breakeven point under this capitation contract in the number of visits?
- Construct the base pro forma profit and loss statement on the capitation contract based on the number of members for the clinic.
- What is clinicâ€™s breakeven point under this capitation contract in the number of members?
- Should the clinic accept the contract terms?
- What elements of CVP analysis change when a clinic moves from a fee-for-service to a capitated environment?
- How do provider incentives change when it moves from a fee-for-service to a capitated contract?
Length: 3 pages, excluding reference page.
2-3 references should be cited inside the essay NO PLAGIARISM
Reference page should include links so that I may check over the work cited