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. Total cost Total volume Average cost Payer volumes Medicare (payment rate = $95) Medicaid (payment rate = $75) Managed Care # 1 (payment rate = $110) Managed Care # 2 (pay 80% of charges) Uninsured (pay 10% of charges) Total all payers Desired net income $100,000 1,000 $100 400 100 300 100 100 1,000 $5,000

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=$100 Medicare ($95/case)= 380 Fixed price payers (FP) total volume= 790 Medicaid ($75/case)= 90 MCO #1 ($110/case)= 320 patients MCO #2 (pay 80% charges)= 110 Charge payers (CH) total volume= 210 Uninsured (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 # 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: AC= AC (AC x .05)= $100-5= $95 payment MCO plan #1= payment + (payment x .07)= $110+7.7= $117.7 Then we list out our givens: AC= $95 Medicare ($95/case)= 400 Medicaid ($75/case)= 100 Fixed price payers (FP) total volume= 800 MCO #1 ($117.7/case)= 300 patients MCO #2 (pay 80% charges)= 100 Charge payers (CH) total volume= 800 Uninsured (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

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 PMPM Inpatient Visits 100 $7,000.00 $58.33 Office Visits 3,000 $45.00 $11.25 Lab/X-ray 500 $25.00 $ 1.04 Total $70.62 What 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 year Office visit utilization/member= 3,000/1,000= 3.0 outpatient visits per member per year Lab/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 PMPM Inpatient visits= 0.1 x $7,000= $700.00 700/12= $58.33 Office visits= 3.0 x $ 45= $135.00 135/12= $11.25 Lab/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 medicalsurgical care. Calculate the amounts that would complete the table below. Table: PMPM Rate Annual Category Frequency per 1,000 Hospital inpatient 400 Medical surgical Co-pay frequency per 1,000 100

Unit Cost

PMPM

Co-pay Amount

Co-pay PMPM

Net PMPM

$1,000

$33.3 3

$150

$1.25

$32.08

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.