Assumptions Total Cost $100,000 Total Volume 1,000 Average cost $100 Payer volumes Medicare (payment rate = $95) 400 Medicaid (payment rate = $75) 100 Managed Care #1 (payment rate = $110) 300 Managed...

B. Start with the original assumptions. The hospital is facing pressure from public interest groups to control the prices it charges to the uninsured. Assume that, through various efficiencies, the hospital is able to cut its per-visit cost by five percent. It also negotiates a seven percent increase with managed-care plan #1. Assuming all other factors are unchanged, what is the new required price?

C. Start with the original assumptions. Notice that managed care plan #1 receives a much lower price in return for sending a larger volume of patients. Managed care plan #2 (MC#2) wants to pay a lower cost per case and is willing to send 250 more patients (350 total from MC#2) to the clinic in return for a rate of $110 per case. Assume that the average cost per case drops to $90, due to the economies of scale. All other assumptions are unchanged. What is the new required price?

D. Start with the assumptions in problem (c). Now, assume that the additional volume does not enable enough economies-of-scale to reduce the average cost per case as much as originally anticipated. Assume now that the average cost per case drops to only $95. What is the new required price?