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A hospital expects 5,000 admissions for the year, but that number could vary by 1,000 more or less. Its fee-for-service is $4,000 under the current prospective payment system. Under a capitation reimbursement system, the hospital must cover 5,000 patients at a capitation payment of $4,000. The hospital's variable costs are $1,250 per admission and its fixed costs are $13,750,000. Which of the following is most true? O The hospital's operating leverage is relatively low, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the capitation reimbursement method is riskier than the prospective payment method. O The hospital's operating leverage is relatively high, so the prospective payment reimbursement method is riskier than the capitation method. The hospital's operating leverage is relatively low, so the prospective payment reimbursement method is riskier than the capitation method.

A hospital expects 5,000 admissions for the year, but that number could vary by 1,000 more or less. Its fee-for-service is $4,000 under the current prospective payment system. Under a capitation reimbursement system, the hospital must cover 5,000 patients at a capitation payment of $4,000. The hospital's variable costs are $1,250 per admission and its fixed costs are $13,750,000. Which of the following is most true? O The hospital's operating leverage is relatively low, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the capitation reimbursement method is riskier than the prospective payment method. O The hospital's operating leverage is relatively high, so the prospective payment reimbursement method is riskier than the capitation method. The hospital's operating leverage is relatively low, so the prospective payment reimbursement method is riskier than the capitation method.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter11: Simulation Models
Section: Chapter Questions
Problem 47P
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A hospital expects 5,000 admissions for the year, but that number could vary by 1,000 more or less. Its fee-for-service is $4,000 under the current prospective payment system. Under a capitation reimbursement system, the hospital must cover 5,000 patients at a capitation payment of $4,000. The hospital's variable costs are $1,250 per admission and its fixed costs are $13,750,000. Which of the following is most true? The hospital's operating leverage is relatively low, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the prospective payment reimbursement method is riskier than the capitation method. The hospital's operating leverage is relatively low, so the prospective payment reimbursement method is riskier than the capitation method.
Transcribed Image Text:A hospital expects 5,000 admissions for the year, but that number could vary by 1,000 more or less. Its fee-for-service is $4,000 under the current prospective payment system. Under a capitation reimbursement system, the hospital must cover 5,000 patients at a capitation payment of $4,000. The hospital's variable costs are $1,250 per admission and its fixed costs are $13,750,000. Which of the following is most true? The hospital's operating leverage is relatively low, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the capitation reimbursement method is riskier than the prospective payment method. The hospital's operating leverage is relatively high, so the prospective payment reimbursement method is riskier than the capitation method. The hospital's operating leverage is relatively low, so the prospective payment reimbursement method is riskier than the capitation method.
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