Name: Austin Holmes

HPM 6008 – FINAL EXAM

Question # 1 (5 points)What is the primary distinction between prospective payment and retrospective payment?

Question # 2 (6 points)What are the six stages of the revenue cycle? Provide service, document services, establish charges, prepare claim/bill, submit claim, receive payment.

Question # 3 (3 points)What is the registration process, including the activities that comprise it?

Question # 4 (2 points)What are the two types of forms used for health services billing? UB-04 (hospital claims) and CMS-1500 (physicians and other non-institutional providers)

Question # 5 (6 points)What are the six elements that should be present, at a minimum, in all charge masters? Charge code, item description, department #, charge/price, revenue code, CPT/HCPCS code.

Question # 6 (3 points)What is charge explosion? A system that links services to a specific set of charges that are commonly associated with that service. This allows for more accurate charge capture, especially if a numerous amount of supplies or other resources are used.

Question # 7 (3 points)What are the three major ways that health care providers can control their revenue function? Price setting, Payer contract negotiation, Billing/coding management

Question # 8 (3 points)What are the three factors that influence pricing? Desired net income, Competitive positioning, Market Structure

Question # 9 (4 points)What are the four major activities of a health plan? Underwriting, utilization review, claims administration, and marketing

For Questions 10 and 11, start with the price-setting example from the text. The initial assumptions are provided in the table below.

Question # 10 (10 points)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?

First we begin with the price formula, as follows:

Then we list out our givens:AC=$100Medicare ($95/case)= 380Medicaid ($75/case)= 90MCO #1 ($110/case)= 320MCO #2 (pay 80% charges)= 110Uninsured (10% of charges)= 100

Next, we calculate the average price paid by FP payers by:

Then we calculate the unadjusted price as follows:

Lastly, we need to determine the average write off % for charge patients and adjust final price to account for this:

Total cost $100,000Total volume 1,000Average cost $100

Payer volumesMedicare (payment rate = $95) 400Medicaid (payment rate = $75) 100

Managed Care # 1 (payment rate = $110) 300Managed Care # 2 (pay 80% of charges) 100

Uninsured (pay 10% of charges) 100Total all payers 1,000

Desired net income $5,000

Charge payers (CH) total volume= 210

Fixed price payers (FP) total volume= 790 patients

Question # 11 (10 points)

Assume that the hospital is able through various efficiencies to cut its per-visit cost by 5%. It also negotiates a 7% increase with managed-care plan #1. Assuming all other factors are unchanged, what is the new required price?

We use the price formula from above, than we calculate our changes:Δ AC= AC – (AC x .05)= $100-5= $95Δ payment MCO plan #1= payment + (payment x .07)= $110+7.7= $117.7

Then we list out our givens:AC= $95Medicare ($95/case)= 400Medicaid ($75/case)= 100MCO #1 ($117.7/case)= 300MCO #2 (pay 80% charges)= 100Uninsured (10% of charges)= 100

Next, we calculate the average price paid by FP payers by:

Then we calculate the unadjusted price as follows:

Lastly, we need to determine the average write off % for charge patients and adjust final price to account for this:

Question # 12 (10 points)An HMO has a Point of Service (POS) option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $2,000, of which $1,200 is approved, how much must the member pay?

Since only $1,200 is approved by the plan, they will pay 80% on this. Thus,Payment by plan= $1,200 x .80= $960

If a member of a POS goes out of network, they are not protected from balance billing. Therefore, payment by patient is:Due patient= Chare - payment by plan = $2000 - $960

= $1040

Charge payers (CH) total volume= 800

Fixed price payers (FP) total volume= 800 patients

Question # 13 (10 points)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 PMPMInpatient Visits 100 $7,000.00 $58.33Office Visits 3,000 $45.00 $11.25Lab/X-ray 500 $25.00 $ 1.04

Total $70.62What per-member per-month (PMPM) rate would be required to break even, ignoring any copayments?

To calculate PMPM, first you determine the expected encounter per patient per year (annual per patient utilization rate) as following:Inpatient visit utilization/member= 100/1000 = 0.1 inpatient visits per member per yearOffice visit utilization/member= 3,000/1,000= 3.0 outpatient visits per member per yearLab/X-ray utilization/member= 500/1,000= 0.5 labs/x-rays per member per year

Next, you calculate the cost per member per year, than you divide by 12 to get PMPMInpatient visits= 0.1 x $7,000= $700.00 700/12= $58.33Office visits= 3.0 x $ 45= $135.00 135/12= $11.25Lab/x-rays= 0.5 x $ 25= $ 12.50 12.5/12= $ 1.04

Question # 14 (10 points)A nursing home contracts with an HMO for skilled nursing care at $2.00 PMPM. If costs are expected to average $120 per day, what is the maximum utilization of days per 1,000 members that the nursing home can experience before it begins to lose money?

We can work backwards by using the following formula:

Pmur= 0.20

Annual utilization rate= 200/1,000 members

Question # 15-17 (5 points each – 15 points total)Refer to the table below for problems 15 to 17. 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

CategoryAnnual

Frequency per 1,000

Unit Cost

PMPMCo-pay

frequency per 1,000

Co-pay Amount

Co-pay PMPM

Net PMPM

Hospital inpatient

– Medical surgical

400 $1,000$33.3

3 100 $150 $1.25$32.0

8

Per member utilization rate= 400/1000 = 0.40

However, patient pays co-pays, which helps cost shift some of the PMPM away from the MCO, thus,

To calculate the net PMPM, simply subtract the co-pay PMPM from the PMPM as follows:

$33.33-$1.25= $32.08

This is the final amount that the MCO pays the provider on a per patient, per month basis.