Concept Architecture
Concept
Theoretically, Per Member Per Month (PMPM) is a healthcare financing and utilisation metric that expresses costs, payments or service utilisation as an average monthly amount for each enrolled member of a health plan or covered population. It is a standard measure in health economics, actuarial science and managed care because it normalises expenditure across populations of different sizes and observation periods. The concept is grounded in rate calculation and population-based costing.
Mathematically, PMPM is calculated by dividing the total cost or payment incurred during a reporting period by the total number of member-months. A member-month represents one enrolled individual covered for one month. By accounting for both enrolment size and duration of coverage, PMPM provides a standardised measure for comparing healthcare expenditure and utilisation across plans, providers and time periods.
In practice, PMPM is widely used by insurers, managed care organisations, accountable care organisations and health economists to monitor healthcare spending, forecast budgets, evaluate capitation arrangements, estimate intervention costs and compare financial performance across healthcare systems.
Purpose
Used to standardise healthcare costs and payments across enrolled populations, evaluate financial performance, support capitation payment models and facilitate health economic and actuarial analyses.
Mathematical Formulae
Primary Formula
PMPM = Total Cost � Total Member-Months
Supporting Formulae
Member-Months = Number of Enrolled Members ? Number of Months
Annual Cost = PMPM ? Total Member-Months
Related Mathematical Methods
- Capitation payment
- Cost per patient
- Budget impact analysis
- Actuarial analysis
- Cost forecasting
- Population-based costing
Example
A health plan incurs healthcare expenditures of �18,600,000 during one year while covering an average of 25,000 members.
Member-Months = 25,000 ? 12
= 300,000
PMPM = �18,600,000 � 300,000
= �62.00
The health plan therefore reports a Per Member Per Month cost of �62.00.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
| Division | =A2/B2 | Calculate PMPM from total costs and member-months. |
| Multiplication | =A2*12 | Calculate annual member-months from average enrolment. |
| SUM | =SUM(B2:B13) | Calculate total annual healthcare expenditure. |
| SUMPRODUCT | =SUMPRODUCT(B2:B13,C2:C13) | Calculate weighted member-month totals across multiple plans. |
| IF | =IF(D2>75,"Above Target","Within Target") | Compare PMPM with budget or benchmark values. |
VBA (Optional)
Automate calculation of PMPM values across health plans, provider groups and reporting periods while generating financial dashboards and budget monitoring reports.
Sources
- Centers for Medicare & Medicaid Services. Medicare Managed Care Manual.
- Glied S, Smith PC, editors. The Oxford Handbook of Health Economics.
- Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes.
- Briggs A, Claxton K, Sculpher M. Decision Modelling for Health Economic Evaluation.
- World Health Organization. The World Health Report: Health Systems Financing.
- OECD. Health at a Glance.
Related Concepts (2)
Frequently Asked Questions (6)
What is per member per month?
A standard unit expressing a capitated payment as the fixed monthly amount received per enrolled member, regardless of services actually used.
Source: Kongstvedt 2012
What monthly per-member unit is per member per month?
Per member per month is a standard unit expressing a capitated payment as a fixed monthly amount per enrolled member. It expresses the payment as a rate, so much for each member each month. It is expressed per enrolled member, one figure for every person on the provider's list. It does not depend on the services actually used, so the amount is the same whether the member seeks much care or none. It is the standard way of stating capitation, the methodology of paying a fixed amount per patient. A fixed monthly amount per member is what it names. Kongstvedt (2012) sets this out.
Source: Kongstvedt 2012
What does per member per month express?
Per member per month expresses a capitated payment as the fixed monthly amount received per enrolled member, so it states the capitated payment as a set amount each month for each enrolled member, regardless of services actually used. This expression of a capitated payment defines it. So per member per month is a standard unit expressing a capitated payment as the fixed monthly amount received per enrolled member, regardless of services actually used.
Source: Kongstvedt 2012
Per what does per member per month express a payment?
Per member per month expresses a payment per enrolled member each month, so the capitated payment is stated as a fixed monthly amount for each enrolled member, regardless of services actually used. This per-member, per-month basis defines it. So per member per month is a standard unit expressing a capitated payment as the fixed monthly amount received per enrolled member, regardless of services actually used This independence from services used is what makes per member per month a fixed monthly amount per enrolled member.
Source: Kongstvedt 2012
Does per member per month depend on services used?
Per member per month does not depend on services actually used, so the fixed monthly amount received per enrolled member is expressed regardless of how many services the member uses. This independence from services used defines it. So per member per month is a standard unit expressing a capitated payment as the fixed monthly amount received per enrolled member, regardless of services actually used This relationship is what makes per member per month the standard monthly unit for expressing a capitated payment.
Source: Kongstvedt 2012
How does per member per month relate to capitation?
Per member per month relates to capitation as the unit that expresses it: capitation is a payment methodology giving a fixed amount per enrolled patient over a defined period regardless of services used, and per member per month expresses a capitated payment as the fixed monthly amount received per enrolled member. So per member per month states capitation on a monthly basis, connected as the methodology and the standard unit expressing its payment.
Source: Kongstvedt 2012
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 17 Mar 2026
Content version: 1.0.0
Canonical Identity
- Term code
- HS-HP-PP-076
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