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ASK AN ADVISOR
To Join -or- Not to Join is the Question
By Staff Reporters
A new-wave West-Coast managed care organization (MCO) wanted a multi-specialty medical group to contract with them to provide medical services to all subscribers. Compensation would be in the form of a fixed-rate capitated payment system, a.k.a. per member / per month (PM/PM).
Ask an Advisor
The medical group practice administrator reviewed their request for proposal (RFP) very carefully, but is still not sure what to do. So, allow us to “crowd-source” as we ask ME-P readers, advisors and management consultants for a solution.
Key Issues
Facts to know for an informed PM/PM capitated reimbursement decision:
- annual frequency or service-rate per 1,000 patients
- unit cost of medical services per unit-patient
- co-payment dollar amount per patient
- co-payment frequency rate per 1,000 patients
- variable cost per patient
- under-capacity medical group office utilization rates, and
- fixed overhead office-cost coverage [+/-].
Assessment
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Conclusion
And so, your thoughts and comments on this ME-P are appreciated. What is your solution; accept or reject the contract proposal? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe. It is fast, free and secure.
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Filed under: "Advisors Only", "Ask-an-Advisor", Managed Care, Practice Management | Tagged: capitation, fixed rate medical reimbursement, HMO, Managed Care, MCO, medical contracting |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
A Possible Solution
One anonymous advisor suggested the following solution as there are several issues to resolve:
1) Be sure that all office fixed costs are paid, since revenues are fixed, and costs vary with patient volume.
2) Be sure there is sufficient unused office capacity for the additional patients. Additionally, one must determine the maximum amount of services provided under the PMPM rate that will make it possible to still break even.
3) Expected costs per patient must be estimated. If total PMPM cost is less than the PMPM compensation premium, the capitated contract might make economic sense for the medical group. If not, it should be rejected or re-negotiated.
What do you all think?
Ann Miller; RN, MHA
http://www.BusinessofMedicalPractice.com
[Executive-Director]
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CaroMont Health, Sg2 and GE Healthcare will work together on several initiatives aimed at tackling the rising costs of delivering healthcare, according to the Healthcare Financial Management Association.
http://www.healthcarefinancenews.com/news/nc-health-system-launch-bundled-payment-pilot
Clark
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