MUST BE IN EXCEL DOCUMENT (PLEASE USE EXCEL and SHOW ALL WORK)

Problem 2: Suppose HIC is preparing a premium bid for Sunnyvale Inc. (SI), a major employer in HICs service area with 2,500 members. HIC uses the cost approach to estimate primary care physician's costs for SI's members. On average, each member makes two visits to a primary care physician per year, and each primary care physician can handle 2,000 patient visits per year. Total compensation per primary care physician is $150,000 per year.

a. SI has obtained primary care bids from other HMOs in the other area and has told HIC that it can have the primary care contract for a PMPM premium of $13.00. Should HIC accept the contract? Suppose that each member makes 2.6 visits to a primary care physician per year. Should HCI accept the contract?

b. Suppose that the average of two visits to a primary care physician per year is a weighted average of two groups of SI membersa small group with a chronic disease that requires a higher frequency of visits and a large group without a chronic disease that requires a lower frequency of visits:

Average primary care

	Number	Visits per year
Members without chronic disease	2,400	1.58
members without chronic disease	100	12.08
total	2,500	2.0