Analyzing Bay Pines Medical Center’s Financial Statement

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After gaining an understanding of
the components of a financial statement, analyzing and applying what the
components represent, in terms of future planning, are the most important
aspects of working in healthcare finance. Consider the following data and make
your best analysis of per member per month (PMPM) rates, considering reductions
in utilization or pricing.

Bay Pines Medical Center estimates
that a capitated population of 50,000 would have the following base case
utilization and total cost characteristics:

Service Category

Inpatient Days
per 1,000 Enrollees

Average Cost
per Day










Alcohol/Drug Abuse









In addition to medical costs, Bay
Pines allocates 10 percent of the total premium for administration/reserves.


On the basis of your data analysis,
respond to the following:

  • What is the PMPM rate that Bay Pines must set to cover
    medical costs plus administrative expenses?
  • What would be the rate if a utilization management
    program were to reduce utilization within each patient service category by
    10 percent? And by 20 percent?
  • Consider the initial base case utilization assumption.
    What rate would be set if the average cost on each service were reduced by
    10 percent?
  • Assume that both utilization and cost reductions were
    made. What would the premium be?

Submission Details:

  • Present your analysis as a 3-page report in a Microsoft
    Word document formatted in APA style.
  • On a separate page, cite all sources using APA format.

Assignment 2 Grading Criteria


Calculated the PMPM rate to cover
medical and administrative costs.


Calculated utilization rates
reduced by 10 percent.


Calculated utilization rates
reduced by 20 percent.


Calculated the rate with the
average service cost reduced by 10 percent.


Calculated the PMPM premium after
utilization and cost reductions.


Wrote in a clear, concise, and
organized manner; demonstrated ethical scholarship in accurate representation
and APA style attribution of sources; displayed accurate spelling, grammar,
and punctuation.




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