Throughout this course, you’ve examined the importance of anticipating financial fluctuations that may impact your organization’s ability to provide services. While financial managers have no time machines or crystal balls, they do have expense forecasts. Expense forecasting is one of the preeminent tools that financial managers can use to prepare their organizations for future fiscal turbulence. In this Assignment, you will examine a scenario and generate a corresponding expense forecast in Excel.

Before pursuing an opportunity or making a major purchase, financial decision makers must first ascertain if the expenditures are justified. Determining whether a new process, system, or purchase will yield worthwhile returns is no easy task. However, managers have a variety of tools to help them decide whether the new expenditure is warranted. Analyzing a venture’s benefit/cost ratio, marginal profit and loss statement, and break-even points enable nurse managers to make educated decisions about how they choose to commit their funds.

Note: For those Assignments in this course that require you to perform calculations you must:Use the Excel spreadsheet template for the Week 3 assignment
Show all your calculations and formulas in the spreadsheet.
Answer any questions included with the problems (as text in the Excel spreadsheet).

Expense Forecasting

In this Application Assignment you calculate scenarios focusing on benefit/cost ratio analysis, marginal profit and loss statements, and break-even analysis. For these scenarios, you will utilize the provided figures to perform calculations and then make recommendations about the viability of the investment opportunities

Expense Forecasting Scenario

Your department has performed 20,000 procedures during the first six months (January–June) of 20X1. Spending during that period of time was $210,000 for fixed expense items and $1,200,000 for variable expense items. Of those amounts, $50,000 of fixed expense money was spent on preparing for a Joint Commission survey. Volume is anticipated to be 10% higher in the second half of the year. On November 1st, two new procedure technicians will begin work. The salary and fringe benefit costs for each are $96,000/year. Based on the information provided, prepare an expense forecast for 20X1.

Annualization for Fixed:  (Adjusted Total for Year to Date Expense/6) * 12 =Total Annualized Amounts

Annualization for Variable (Adjusted Total for Year to Date Expense/ 20,000) * 40,000 =Total Annualized Amounts.

Financial Analysis Cycle

Marginal Profit and Loss Statement Scenario

You are examining a proposal for a new business opportunity – a new procedure for which demand is expected to be 1,400 units the first year, growing by 600 units a year thereafter. The price charged per procedure is $1,000. The collection rate is anticipated to be 80%. Each procedure consumes $300 of supplies. Salary cost is estimated to cost $540,000 each year, fringe benefits are 25% of salaries, rent for the facility is $55,000/yr and operating cost are $120,000/yr.

Questions:

1. Develop a marginal profit and loss statement for this business opportunity.Based on that analysis, should this opportunity be pursued?

Break-Even Analysis Scenario

You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420.

Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation?  Explain your decision.

Benefit/Cost Ratio Analysis Scenario

You are considering the acquisition of a new piece of equipment with a useful life of five years. This new technology will make your clinical operation more efficient and allow for a reduction of 10 FTEs. The equipment purchase price is $4,500,000 plus 10% installation fee. The purchase price includes service for the first year, an item that has an annual cost of $10,000. There is a potential for additional volume of 150,000 units in the first year, growing by 30,000 each year thereafter. The price charged per unit is $15.00 with a 50% collection rate. The staff being eliminated are paid $12.50 per hour. The fringe benefits rate is 20%. The hurdle rate is 7.5%.

Questions: After reviewing Dr. Ward’s Video and the calculations below, please answer the following questions:

• What is meant by  benefit/cost ratio, average payback period and ROI  and why are the all  important to understand when purchasing new equipment?
• Based on this information, would you pursue this opportunity?
• Explain your decision  in 250-500 words in the text box below.

References:

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic  tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and  Bartlett Learning.

Chapter 14, “Trend Analysis, Common Sizing, and Forecasted Data” (pp. 149-160)
The focus of this chapter is the use of trend analysis and forecasting to develop future budgets and make financial decisions about capital purchases, programs, and personnel.
Chapter 15, “Using Comparative Data” (pp. 161-173)
In this chapter, you are introduced to the criteria for identifying other health care organizations that are comparable to your own. Data from these organizations can then be used to evaluate your own organizational performance.
Chapter 19, “Estimates, Benchmarking, and Other Measurement Tools” (pp. 223-231)
In this chapter, you continue exploring the concept of financial benchmarking. The chapter focuses on the importance of benchmarking for identifying performance gaps.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.
Retrieved from the Walden Library databases.
Chapter 5, “Working Capital Management” (pp. 187–231)
This chapter examines the concept of working capital. The authors explore the specifics of current assets and the management of the working capital cycle.
Chapter 11, “Responsibility Accounting” (pp. 468–497)
Review: This chapter explores the trend toward the decentralization of health care organizations and the challenges this presents. This chapter also describes responsibility centers, or organizational units intended to achieve specific tasks.

Mulva, S., & Dai, J. (2009) Health care facility benchmarking. HERD, 3(1), 28–37.
Reprinted by permission of Sage Publications via the Copyright Clearance Center.

This article describes a national health care facility’s benchmarking program. It is designed to compare measures of capital project performance.

Agency for Healthcare Research and Quality. (2013). Measuring and benchmarking clinical performance. Retrieved from www.ahrq.gov

Ettorchi-Tardy, A., Levif, M., & Michel, P. (2012). Benchmarking: A Method for Continuous Quality Improvement in Health. Healthcare Policy, e101-e119. Retrieved fromhttp://www.ncbi.nlm.nih.gov/pmc/articles/PMC3359088/

INTRODUCTION TO PROBABILITY THEORY AND HEALTH STATISTICS

Case Assignment

Part I (approximately 1–1½ pages, total):

Copy and paste the following examples (1-6 below), then respond by classifying each of the following variables as either: nominal, ordinal, interval, or ratio. Provide a brief explanation where indicated.

1. A researcher studying lifespan categorizes individuals into single, married, divorced, or widowed. What type of variable measurement is this?
2. A cognitive scientist places her subjects into categories based on how anxious they tell her that they are feeling: “not anxious,” “mildly anxious,” “moderately anxious,” and “severely anxious,” and she uses the numbers 0, 1, 2 and 3 to label categories where lower numbers indicate less anxiety. What type of variable measurement is this? Are the categories mutually exclusive?
3. A Physician diagnoses the presence or absence of disease (i.e., yes or no). What type of variable measurement is this?
4. A person weighing 200 lbs. is considered to be twice as heavy as a person weighing 100 lbs. In this case, what type of measurement is body weight?
5. A nurse takes measurements of body temperature on patients and reports them in units of degrees Farenheit as part of a study. What type of variable measurement is this?
6. Patients rate their experience in the emergency room on a five point scale from poor to excellent (1 = very poor, 2 = not very good, 3 = neither good nor bad, 4 = quite good, and 5 = excellent). What type of variable measurement is this? Is the difference between a 1 and a 2 necessarily the same as the difference between a 3 and a 4? Explain briefly.

Part II: Statistics (1/2 page)

Given what you’ve learned in this module about the meaning of “statistics,” choose one of the examples from Part I (1-6), and raise a relevant question of your own that could be answered by a statistician. Then without answering your own question, explain how a pattern could be studied or a useful prediction made based on data that are to be collected.

Part III: Quantitative vs. Qualitative Data (approximately 1–1½ pages)

A health scientist wishes to measure how well participants diagnosed with Post Traumatic Stress Disorder are coping. Explain how a variable such as coping could be measured quantitatively or qualitatively.

Assignment Expectations

Assessment and Grading: Your paper will be assessed based on the performance assessment rubric that is linked within the course. Review it before you begin working on the assignment.

The following guidance appears only in Module 1, but it applies to the assignments throughout the course:

File format: Your work should be prepared using Microsoft Word, PowerPoint, or Excel depending upon the assignment instructions. For assignments requiring video or voice recordings, use media formats that are supported by MyTLC Courses as noted in our Trident Support page.

In-text citations and references: Be sure that all information and ideas in your papers are supported by in-text citations and corresponding references at the end of the paper.

Scholarly sources: Online sources must be limited to credible professional and scholarly publications such as peer-reviewed journal articles, e-books, or specific webpages on websites from a university, government, or nonprofit organization (these have extensions .edu, .gov, or .org). Presenting consumer sources such as e-magazines, newspapers, Wikipedia, WebMD, or other commercial websites (these have extensions .com) as references is not appropriate.

Scholarly writing: Use an academic paper format, not an essay based on your opinions or experience. Avoid using the first person in writing. Synthesize what you learned from the sources you read; write papers in your own words; and cite sources within the text, as well as include a properly formatted reference list.

Use of direct quotes: Use of direct quotes should be avoided. Only use direct quotes when preserving the exact words of an author is necessary. In the rare instance that directly quoted material is used, it must be properly cited (with quotation marks and page numbers in the in-text citation); quotes should not exceed 5-10% of the total paper content.

The Writing Style Guide that is linked on the TLC Portal homepage under My Resources will help clarify expectations.

Clinical Documentation Improvement (CDI)

Physician documentation is the source by which the coder begins to select the correct diagnosis and procedure codes. There has been a lot of discussion for physicians to improve their clinical documentation.

Research Clinical Documentation Improvement (CDI) related to ICD 10 and indicate how this movement benefits the clinical coding specialist /medical coder in their day to day work.