(Answered):Healthcare Finance Case 2 . . . .

Question Description

Health Care Services Reimbursement

Case Assignment

Pearland Medical Center owns a small satellite clinic, specializingin General Practice, located at nearby Pearland airport. GeneralPractice Clinic’s sole payor is Air Health, a health care plan thatcovers the airport employee population. Air Health has been paying on afee-for-service basis; however, recently, its covered populationincreased and it proposed a capitation contract for the next year withan annual capitation payment of $150 for each of its 20,000 coveredmembers.

Previous experience indicates that the covered population willaverage 2 visits per year to General Practice Clinic. General PracticeClinic generates annually $1,150,000 fixed cost, which includes $550,000in direct cost