Differential cost analysis: judging a PPO's feasibility.
The single most important financial decision that hospital management must consider when developing a PPO is the selection of an appropriate discount rate. But discounts can be a two-edged sword. If discounts are too low, the PPO will fail to attract enough employers to test whether the venture can achieve true savings. If the discounts are too high, the hospital will lose money. Differential cost analysis can help solve this dilemma. Using this framework for analysis, the differential costs and revenues of the PPO venture can be calculated and the financial feasibility of the PPO venture determined.
D003365:Costs and Cost Analysis; D005240:Feasibility Studies; D005376:Financial Management / Q000379:methods*; D005377:Financial Management, Hospital / Q000379:methods*; D007182:Income; D007348:Insurance, Health / Q000191:economics*; D011243:Preferred Provider Organizations / Q000191:economics*; D011907:Rate Setting and Review / Q000379:methods*; D014481:United States