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PhysiciansRUs is a physician practice in Metropolis. They have 20% of the market in Metropolis...

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Accounting

PhysiciansRUs is a physician practice in Metropolis. They have 20% of the market in Metropolis and 50% of their patients are insured by UAA. These 10,000 patients average 2.2 visits per year. Their average net reimbursement per office visit from United is $80. PhysiciansRUs knows that the increased copayment will reduce their visits.

How much will visits to PhysiciansRUs decline if the United copayment is increased 10%? What is their current revenue from United and what would their new revenue be?

Based on their analysis, PhysiciansRUs has told UAA that they do not support raising the copayment. UAA has responded by saying that they will increase the net reimbursement per visit to $90 to offset the reduced number of visits.

Will the $90 net reimbursement compensate PhysiciansRUs for the reduced number of visits? Why? If not, what reimbursement amount would be sufficient to keep their UAA revenues constant? (To the nearest dollar.)

Please answer all parts of the question.

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