HCS 405 Simulation Review Paper
Simulation Review
Alfredo A. Garcia Jr.
HCS/405 Health Care Financial Accounting
June 16, 2014
John Pi
A simulation review that was intended to show how a hospital may determine its revenue along with expenditures based on the information provided by the Elijah Heart Center (EHC) was utilized to make an overall decision with careful analysis of the system and employees of EHC. The following will show the information obtained from the simulation.
The simulation allowed two types of cost cutting options to play with. The first option was to minimize the amount of the agencies staff within the facility. The reason this option was chosen is because contract laborers require more money for hire. Normally the higher pay is offered …show more content…
due to the fact the contract laborers are not awarded benefits by the hiring organization. However, it is not necessary to eliminate all agency staff members. The hospital personnel can evaluate each position and determine which position is most valuable to keep and the most important to the hospital. This is an important move for the hospital because most contract laborers do not have the same in house experience as hospital employees because hospital employees have consistent and direct care of the patients.
The second option was to change the skill mix. Even though hiring unlicensed personnel is not an ideal choice, this option will conserve money. The unlicensed personnel usually do not hold much experience, training, or education which allows hiring personnel for very little pay. Another advantage of the second option is unlicensed personnel can be utilized universally throughout the hospital under the direction of licensed personnel. Simple task can be assigned to unlicensed personnel to free up more important task to be accomplished by the licensed personnel.
The goal of the cost-cutting options was to achieve a cost saving target of $750,000. With the options chosen, that has been exceeded with a cost saving total of $811,249 in the first quarter. However, while loan option two was chosen, this was not the ideal option for the organization. Without clearly thinking and precise review, the Medicare reimbursement was forgotten. Had this been fully considered before, the organization would have been producing more revenue in the following quarters because the loan would have been paid off sooner.
For the High-Speed CT Scanner (H-SCTS) the refurbish loan was chosen. This was done because there is ten useful life years in a new H-SCTS, and with a refurbished loan there are five years still remaining. Also, this type of equipment is at a medium technology change level, so the loan could be paid off before the equipment needed replaced. This piece of equipment is very costly. Purchasing under a refurbished loan the organization can save 30-50 percent of a new H-SCTS cost, and there would be less time and money spent on training. So, money could be saved in more ways than one.
The X-Ray equipment was purchased under a new loan. This was decided because the useful life years are so high, and the technology change level is very low. Also, the X-Ray equipment is within a reasonable budget area.
The Ultrasound System was purchased under an operating lease.
This was chosen because the piece of equipment has such a very short amount of useful life years, and is rather expensive. While the technology level is very high, the technology for this certain piece of equipment is projected to change every few years, and there is only a few years of useful life remaining on the operating lease. The organization needs to be careful of investing large amounts of money on equipment that is going to need to be replaced often. Also, with a lease/rental on this “short-lived” piece of equipment, the organization is more apt to replace it on time, ensuring it always remains within new technology …show more content…
limitations.
While the options chosen were not the best equipment acquisition strategy for the organization, there were some good choices made. The H-SCTS was purchased using a refurbished loan, which was the best option for the organization. Because there is a useful life of ten years, the organization can use the equipment for the remaining five years and the upgrade. This is a very economical option seeing how the refurbished loan is less expensive and will show a lesser amount on the asset balance sheet.
The X-Ray equipment was purchased new.
While this could be a legit purchase at a bargain price due to the amount of useful life years, this was not the best option for the organization. The X-Ray equipment should have been purchased under a capital lease. Taking this route, the X-Ray equipment holds a high present value or payments compared to the other purchase options.
The Ultrasound System equipment was purchased using an operating lease, and that was the best option for the organization. The lower upfront payment and lower monthly installments of an operating lease will benefit the organization. The upgrade option under the operating lease is also beneficial to the organization due to the high level changes in technology. Furthermore, while the organization may pay more over a period of time for an operating lease, they will always keep up-to-date with advancements in technology which is most important for quality patient care.
The funding option for capital expansion was private bank funding. While this option was not the best, and should have been HUD 242 Loan Insurance Program, there were fewer years of loan maturity. The interest on this option is higher than the other, but the maturity date was less. Furthermore, there is a flexible refinancing and prepayment option with no set period for using
funds.
Cutting costs and increasing revenue takes much needed time and review of staffing/patient needs. To ensure that patients receive the best quality care while maintaining enough adequately trained staff can be worrisome.
Due to the constant changes in technology, Medicare reimbursement requirements, and useful life years, choosing equipment can potentially be detrimental to an organization. Much planning and revision needs to be done in order to ensure the most “bang for the organization buck”.
Alfredo A. Garcia Jr.
HCS/405 Health Care Financial Accounting
June 16, 2014
John Pi
A simulation review that was intended to show how a hospital may determine its revenue along with expenditures based on the information provided by the Elijah Heart Center (EHC) was utilized to make an overall decision with careful analysis of the system and employees of EHC. The following will show the information obtained from the simulation.
The simulation allowed two types of cost cutting options to play with. The first option was to minimize the amount of the agencies staff within the facility. The reason this option was chosen is because contract laborers require more money for hire. Normally the higher pay is offered …show more content…
due to the fact the contract laborers are not awarded benefits by the hiring organization. However, it is not necessary to eliminate all agency staff members. The hospital personnel can evaluate each position and determine which position is most valuable to keep and the most important to the hospital. This is an important move for the hospital because most contract laborers do not have the same in house experience as hospital employees because hospital employees have consistent and direct care of the patients.
The second option was to change the skill mix. Even though hiring unlicensed personnel is not an ideal choice, this option will conserve money. The unlicensed personnel usually do not hold much experience, training, or education which allows hiring personnel for very little pay. Another advantage of the second option is unlicensed personnel can be utilized universally throughout the hospital under the direction of licensed personnel. Simple task can be assigned to unlicensed personnel to free up more important task to be accomplished by the licensed personnel.
The goal of the cost-cutting options was to achieve a cost saving target of $750,000. With the options chosen, that has been exceeded with a cost saving total of $811,249 in the first quarter. However, while loan option two was chosen, this was not the ideal option for the organization. Without clearly thinking and precise review, the Medicare reimbursement was forgotten. Had this been fully considered before, the organization would have been producing more revenue in the following quarters because the loan would have been paid off sooner.
For the High-Speed CT Scanner (H-SCTS) the refurbish loan was chosen. This was done because there is ten useful life years in a new H-SCTS, and with a refurbished loan there are five years still remaining. Also, this type of equipment is at a medium technology change level, so the loan could be paid off before the equipment needed replaced. This piece of equipment is very costly. Purchasing under a refurbished loan the organization can save 30-50 percent of a new H-SCTS cost, and there would be less time and money spent on training. So, money could be saved in more ways than one.
The X-Ray equipment was purchased under a new loan. This was decided because the useful life years are so high, and the technology change level is very low. Also, the X-Ray equipment is within a reasonable budget area.
The Ultrasound System was purchased under an operating lease.
This was chosen because the piece of equipment has such a very short amount of useful life years, and is rather expensive. While the technology level is very high, the technology for this certain piece of equipment is projected to change every few years, and there is only a few years of useful life remaining on the operating lease. The organization needs to be careful of investing large amounts of money on equipment that is going to need to be replaced often. Also, with a lease/rental on this “short-lived” piece of equipment, the organization is more apt to replace it on time, ensuring it always remains within new technology …show more content…
limitations.
While the options chosen were not the best equipment acquisition strategy for the organization, there were some good choices made. The H-SCTS was purchased using a refurbished loan, which was the best option for the organization. Because there is a useful life of ten years, the organization can use the equipment for the remaining five years and the upgrade. This is a very economical option seeing how the refurbished loan is less expensive and will show a lesser amount on the asset balance sheet.
The X-Ray equipment was purchased new.
While this could be a legit purchase at a bargain price due to the amount of useful life years, this was not the best option for the organization. The X-Ray equipment should have been purchased under a capital lease. Taking this route, the X-Ray equipment holds a high present value or payments compared to the other purchase options.
The Ultrasound System equipment was purchased using an operating lease, and that was the best option for the organization. The lower upfront payment and lower monthly installments of an operating lease will benefit the organization. The upgrade option under the operating lease is also beneficial to the organization due to the high level changes in technology. Furthermore, while the organization may pay more over a period of time for an operating lease, they will always keep up-to-date with advancements in technology which is most important for quality patient care.
The funding option for capital expansion was private bank funding. While this option was not the best, and should have been HUD 242 Loan Insurance Program, there were fewer years of loan maturity. The interest on this option is higher than the other, but the maturity date was less. Furthermore, there is a flexible refinancing and prepayment option with no set period for using
funds.
Cutting costs and increasing revenue takes much needed time and review of staffing/patient needs. To ensure that patients receive the best quality care while maintaining enough adequately trained staff can be worrisome.
Due to the constant changes in technology, Medicare reimbursement requirements, and useful life years, choosing equipment can potentially be detrimental to an organization. Much planning and revision needs to be done in order to ensure the most “bang for the organization buck”.