Per member per month (PMPM)
Per member per month (PMPM) is a financial metric used in healthcare revenue cycle management to calculate the average cost or revenue generated per individual enrolled in a health plan within a given month.
What is Per Member Per Month (PMPM)?
Per Member Per Month (PMPM) is a commonly used metric in healthcare revenue cycle management (RCM) that measures the average cost of providing healthcare services to each member of a specific population within a given time frame, typically a month. It is a crucial financial indicator used by healthcare organizations, insurance companies, and managed care organizations to assess the cost of care and allocate resources effectively.
PMPM is calculated by dividing the total healthcare expenses incurred during a specific period by the total number of members covered during that same period. This metric provides a standardized way to compare costs across different populations and allows for better financial planning and budgeting.
How is PMPM different from other similar terms?
While PMPM is a widely used term in healthcare RCM, it is important to understand how it differs from other similar terms to avoid confusion. Let's explore some of these terms:
1. Per Capita:
Per Capita is another term used to measure the average cost of healthcare services provided to individuals within a specific population. However, unlike PMPM, which focuses on the average cost per member, Per Capita considers the entire population, including both members and non-members. Per Capita is calculated by dividing the total healthcare expenses by the total population, regardless of membership status.
2. Per Episode:
Per Episode is a metric that measures the average cost of healthcare services provided during a specific medical episode or event, such as a hospital stay or a surgical procedure. It focuses on the cost of care related to a particular event rather than the overall cost per member or population. Per Episode is calculated by dividing the total healthcare expenses for a specific episode by the number of episodes.
3. Per Diem:
Per Diem is a term used to measure the average daily cost of healthcare services provided to a patient during a hospital stay. It is commonly used in hospital billing and reimbursement. Per Diem rates are predetermined and vary based on factors such as the type of care, severity of illness, and location. Unlike PMPM, which considers the entire month, Per Diem focuses on daily costs.
Examples of PMPM in Healthcare RCM
To better understand how PMPM is used in healthcare RCM, let's consider a few examples:
Example 1: Health Insurance Company
ABC Health Insurance Company provides coverage to 10,000 members in a specific region. During a particular month, the total healthcare expenses incurred by the company amount to $500,000. To calculate the PMPM for this population, we divide the total expenses by the number of members:
PMPM = Total Expenses / Number of Members
PMPM = $500,000 / 10,000PMPM = $50
In this example, the PMPM for this population is $50, indicating that, on average, the company incurs $50 in healthcare expenses per member per month.
Example 2: Healthcare Organization
XYZ Healthcare Organization provides care to a population of 5,000 patients. During a specific month, the organization incurs $1,000,000 in healthcare expenses. To calculate the PMPM for this population, we divide the total expenses by the number of patients:
PMPM = Total Expenses / Number of Patients
PMPM = $1,000,000 / 5,000PMPM = $200
In this example, the PMPM for this population is $200, indicating that, on average, the organization incurs $200 in healthcare expenses per patient per month.
Per Member Per Month (PMPM) is a vital metric in healthcare revenue cycle management (RCM) that helps measure the average cost of providing healthcare services to each member of a specific population within a given time frame. It allows healthcare organizations, insurance companies, and managed care organizations to assess costs, allocate resources effectively, and make informed financial decisions. Understanding the difference between PMPM and other similar terms, such as Per Capita, Per Episode, and Per Diem, is crucial to avoid confusion and ensure accurate financial analysis in the healthcare industry.