Uptown Physicians and Metro Doctors.

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1. What is target costing? Suppose a hospital offered a capitation rate for a covered population of $50 per member per month (PMPM). Briefly explain how target costing would be applied in this situation.

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2. Consider two primary care physician groups in Dallas: Uptown Physicians and Metro Doctors. Uptown Physicians is paid on a capitation basis by all, see also https://en.wikipedia.org/wiki/Married_to_Medicine for more details

of the members in its plan. Metro Doctors is paid based on Fee-for-Service, including a payment for every office visit, lab test ordered, and so forth. In March, 2020, a pandemic hits and there is a widespread lockdown that lasts for months. What will happen to the revenue streams of Uptown and Metro? Which of the two is more likely to furlough its workforce or even close its business permanently? Based on this, should the group practice prefer capitation over fee-for-service?

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