20 Jul IS THIS AN OFFER THAT ST. SEBASTIAN SHOULD ACCEPT?
ve read everything you can about the leg Show more Please answer PART B!!!! Case #1 A Market on the Move Youve read everything you can about the legislative environment (both regionally and nationally) and spoken to several brokers who together advise most of the local employers in the region. You believe the most important changes that are about to hit this region are the following: 1. As Medicare reduces DSH and other payments reimbursement from Medicare will drop from 30% of charges to 28% 2. The health exchanges established in the ACA have not been much of a factor in the region so far but thats about to change. The two largest payers in your state both plan to really step up in the exchanges and market these plans aggressively both to currently un-insured and those with current but unattractive employer-based coverage. They believe that by 2017 theyll have 25% of all commercially insured patients in exchange-based products. 3. There has been a change in both governor and the makeup of the state legislature which means your state will engage in Medicaid expansion next year. Thus more people will have coverage and the uninsured population will diminish but not go away entirely. Your best estimate is that uninsured visits community-wide will reduce from 72500 to 8300. You estimate that of the patients who have new coverage half will be Medicaid recipients and half will enter the commercial plans. The assignment as you consider how to guide the CEO answering the following questions should help: Part B 4. In this city there are two major payers who together cover 85% of the commercial insured lives. They have both approached St. Sebastian about forming narrow networks as a vehicle for selling products in the exchanges. Your hospital has an excellent reputation and both payers would like to sell a product that features your hospital as the only in-network option for adult care. So in exchange for agreeing to a reimbursement rate of 120% of Medicare St. Sebastian would garner 75% of the hospital visits in the exchanges. For the rest assume Pediatric continues to serve the same number of patients (i.e. same as youve projected for 2017 previously) and the remaining visits are evenly split between Mercy and University. Is this an offer that St. Sebastian should accept? 5. You strongly suspect that both payers also made this offer to your competitor Mercy. Based only on what you know about the financials are they likely to accept this deal? If the payers are going to choose only one partner do you advise your CEO to aggressively pursue a first to sign strategy or hang back and allow Mercy to act first? 6. Thus far weve assumed that all costs are variable (i.e. $2100 per visit for Pediatric) but is that necessarily true? Suppose for a moment that each hospitals cost structure is essentially fixed? How does that change your answers to #2 3 4 and 5 above? Show less
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