Bluefield Health Plan: Coaching Notes

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Bluefield Health Plan Coaching Notes
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Managed Care the Facts

• Companies usually pay a managed care plan a
  monthly premium, based on the number of
  employees.
• Managed care plans use the premium to cover
  payments to health care providers, administrative
  costs, and profit. Bluefields current contracts
  with providers involve fee-for-service payment.
• Physicians and hospitals are paid their asking
  fee for each patient visit or service.
• For physician visits, employees only pay the
  deductible, which is currently 15/visit.

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Question 1 Table 1 Data

• Has spending on physician services really gone up
  much more than in other areas?
• Calculate Percent Change for each category
• (New Value Old Value)
  
  Old Value

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Question 1 Allocation of Premium

• The managed care plan allocates premium income
  across functional areas.
• Hospital services may involve different claims
  and payment procedures.
• Managers in these areas set up different budgets
  and use different mechanisms to control the use
  of services.
• Calculate the of total costs for each category
  how do these compare to the allocations?

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Question 2Sample Statistics and Scatter Plot

• Create two new variables visits/employee and
  cost/visit. How do these compare over time?
• Calculate means and standard deviations consider
  confidence intervals for these variables.
• Scatter Plots
• Instructions for making scatter plots with Excel
  are on the Materials section of BUS 302 web site.
  
• There are instructions for Excel 2003 and Excel
  2007. Be sure to use the appropriate
  instructions.

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Question 3Regression Analysis

• Evaluate the time trends in visits per week and
  cost per visit.
• Use regression.
• Instructions are in the Materials section of the
  BUS 302 web site for both Excel 2003 and Excel
  2007.
• Be sure to correctly indentify the X and Y
  variables.

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Question 3Regression Analysis

• Coefficient of Determination (R2)
• The percent of variation in the dependent
  variable (Y) accounted for by variation in the
  independent variable (X). The closer to 1 the
  better.
• Regression Coefficients
• Coefficient on x-variable measures the slope of
  the trend Line. (Positive Sign - Positive
  Relationship, Negative Sign Negative
  Relationship)
• t-statistic and p-value are used to indicate the
  observed level of significance.

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Question 4 Elasticity of Demand

• Calculate the Arc Price Elasticity of Demand
• Is demand for physician services elastic or
  inelastic? Explain.
• See the discussion of elasticity on the course
  website LDC-Microeconomics Review

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Question 4

• Note a change in the deductible has two effects
• Reduces the number of visits per employee
• Reduces the cost per visit by 5
• Estimate new level of visits for each

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Question 5Evaluation of Alternatives

• How much of a rate reduction () is required of
  physicians, to meet your target?
• Consider the pros and cons of each approach.

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Question 6Rationing?

• Consider the ethical implications of restricting
  the use of services. Compare to expected results
  of the other possible approaches.
• Why not just increase the premium?
• Other considerations?