A Healthcare Insurance Company Submits a Proposed Contract to a Medical

question 32

Multiple Choice

A healthcare insurance company submits a proposed contract to a medical provider. The payments in the proposed contract are 20-40% lower than any other third-party payer, and the insurance company refuses to negotiate. This insurance company is used by 9% of the medical practice's patients. Which of the following is the best option for the facility?

• A) Contact other local medical facilities and negotiate together.
• B) Do not sign the contract and write a letter to the affected patients.
• C) Sign the contract if the payments are close to average marginal costs per patient.
• D) Sue the healthcare insurance company.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, not reducible through diversification.

Security Market Line

A line on a chart that displays the relationship between risk and the expected return of the market portfolio. It serves as a graphical representation of the Capital Asset Pricing Model (CAPM).

Beta Coefficient

A framework for quantifying the variability, or orderly risk, of a security or investment compilation when juxtaposed with the general market.

Risk Premium

The additional return an investor demands for choosing a risky investment over a risk-free option, serving as compensation for the additional risk.