Break Even Point for a HMO
We are attempting to develop a break-even for a capitation contract with a major HMO. Our hospital has agreed to provide all inpatient hospital services for 10,000 covered lives. We will receive $38 per member per month to cover all inpatient services. It is anticipated that 93 admissions per 1,000 covered lives will be provided with an average length of stay equal to 5.0, or 465 days per 1,000. We anticipate that our hospital will incur fixed costs, or readiness to serve costs, of $1,860,000 for these 10,000 covered lives. Variable costs per patient-day are expected to be $600. in 300 to 350 words, answer the following questions
- What are the limitations of using break-even point, and how would you incorporate this point with management strategic planning?
- What is the role provided by break-even point, and how would you calculate this point?
- What is the role provided by break-even point, and how would you calculate this point?