Refer to the table below for problems. A hospital and a health plan are negotiating a contract for inpatient medical–surgical care. Calculate the amounts that would complete the table below.

Table: PMPM Rate

Annual                              Copay

                                    Frequency     Unit                   Frequency      Copay       Copay         Net

Category                        per 1,000    Cost     PMPM     per 1,000    Amount     PMPM       PMPM

Hospital inpatient

Medical surgical            400      $1,000    (P1)          100        $150       (P2)          (P3)

Use the information from problems 1 - 3 in solving problems 4 and 5. Assume that you are the hospital administrator and that the health plan has offered you a capitated contract at the PMPM rate that you computed in problem 1. You believe, however, that you can control utilization better than is reflected in the table above. You believe the actual utilization will be 370 per 1,000 persons. The number of covered lives is 25,000. Your cost per case is $1,100. (For purposes of this problem, ignore marginal costs, contribution margins, etc.)

1. What is the hospital’s total revenue from this contract?

2. Would your hospital realize a profit on this contract?