17 Jun Commercial Insurance Reimbursement and Capitation

This assignment will help you apply key concepts in revenue cycle management by analyzing how healthcare organizations are reimbursed under both fee-for-service and capitation payment models. You will calculate patient and insurance responsibilities, forecast revenue, and prepare an executive summary with recommendations for leadership.

Scenario
You have recently joined Nash Medical Center and Clinics as the Billing Manager. One of your first responsibilities is to review how the organization is reimbursed for patient services. Leadership has asked you to:

Calculate how much patients and insurance companies owe for different services.

Forecast monthly and annual revenue under a capitation agreement.

Prepare an executive summary highlighting your findings, key trends, and any recommendations for improvement.

Your work will help senior leadership evaluate the organization’s financial performance and make informed decisions about future payer contracts.

You were provided with the following report.

Service

Charge

UCR

Patient’s Copay

Patient’s Coinsurance

Insurance Pays

Patient Owe

Internal medicine

$120.00

$120.00

Physical therapy

$150.00

$97.00

X-ray

$115.00

$73.00

MRI

$1,845.00

$147.00

Specialty visit

$165.00

$90.00

Specialty visit

$75.00

$70.00

Lab test

$32.00

$19.00

Lab test

$45.00

$29.00

Mammogram

$151.00

$95.00

Instructions for this assignment:
Assignment Instructions
Part I: Fee-for-Service Reimbursement Calculations
You have been provided a table listing charges and usual, customary, and reasonable (UCR) amounts for multiple services.

Assume deductibles have been met for all patients.

Apply 80/20 coinsurance: insurance pays 80%, patients pay 20%.

Include copays:

$20 for primary care visits

$40 for specialty visits

$0 for all other services

Your tasks:

Calculate the patient’s copay (if applicable).

Determine the patient’s coinsurance (20%).

Calculate the insurance payment (80%).

Find the total patient responsibility (copay + coinsurance).

Part II: Capitation Revenue Forecast
The medical center has negotiated a $750 per member per month (PMPM) capitation rate for 6,525 members. The expected cost is $610 PMPM.

You will calculate:

Monthly revenue and monthly profit

Annual revenue and annual profit

Variance between annual revenue and the budgeted amount of $1,575,000

Possible reasons for any differences, such as membership changes or cost fluctuations

Part III: Executive Summary
After completing your calculations, prepare a 3–5 page executive summary (excluding title page, abstract, and references) that includes:

Introduction: Purpose and scope of your report

Reimbursement Findings: Key results from Part I, including patterns or trends

Capitation Forecast Findings: Key results from Part II, including any budget variances

Recommendations: At least two actionable strategies to improve revenue cycle efficiency or forecasting accuracy

Conclusion: Summary of financial insights for leadership