Assume that Valley Forge Hospital has only the following three payer groups:
Number of Average Revenue Variable Cost
Payer Admissions per Admissions per Admissions
Penn Care $1,000 $5,000 $3,000
Medicare 4,000 4,500 4,000
Commercial 8,000 7,000 2,500
C. What overall net income would be produced if the admission rate of the capitated group were reduced from the commercial level by 10 percent?
D. Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to $2,200