An HMO has just proposed an offer to promote your facility as the region’s “Center of Excellence” for obstetrical deliveries. The HMO covers 700,000 lives in the community served by your facility. The HMO has provided the following information for your consideration: the hospital cost for a normal uncomplicated delivery is $1,800 and for a complicated cesarean delivery $3,500. Furthermore, the annual rate per 100,000 lives for a normal uncomplicated delivery is 6.0 while for a complicated delivery is 1.5. The HMO proposes a capitated per member per month (PMPM) premium to the hospital to provide services to their members. What would the break-even premium be?
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