Hcs 571 Week 1 Exercise Research Paper

FINANCIAL INDICATORS
DECISION MAKING
SIMULATION FORM
Asha Thomas, Deborah Krause, Liz Gomez,
Krystal Balzer, Felecia Williams
Team C
HCS/571
Shawishi T Haynes
July 9, 2012
University of Phoenix

COST CUTTING OPTIONS

COST CUTTING LOAN OPTIONS
Option 1 Vs. Option 2
Amount: $1,500,000
Interest Rate: 9.45%
Monthly Installment:
$131,490
Term (Months): 12
Prepayment Limitations: 0

Amount: $ 1,500,000
Interest Rate: 9.00%
Monthly Installment:
$131,177
Term (Months): 12
Prepayment Limitation: 6

Strategies for Equipment Acquisition
Equipme
Cost nt Per
Unit
($)
High-Speed
CT Scanner 750,000

X-Ray
Machine

Useful
Life in
Yrs.

10

15
320,000
5

Technolog y Obsolesce s Medium, not expected to change drastically
Low, very mature technology
High,
FUNDING OPTION
Three funding Options were offered
 Tax – Exempt Revenue Bonds
 HUD 242 Loan Insurance Program
 Private Bank Funding

POTENTIAL RISKS
•

•

•

Tax Exempt
Unable to spend the money in three years and escrow of the receivables.
HUD
The higher issuance cost and not utilizing some of the more favorable options of the loan Private

ADVANTAGES OF FINANCIAL RISKS
Cost Cutting Measures

Equipment Acquisition

Reducing Agency Staff
CT Scan-refurbished changing the length of stay X-Ray -capital lease and Loan option 1
Ultrasound operating lease
Implementing this strategy will reduce cost drastically without significant dip in revenue

CT equipment loan -is medium technology equipment with a useful life of ten years. The equipment could become obsolescent in a period of five years or less, and will need upgrading

Decreasing the length of stay increases the turnover of patients thus increasing the number of admissions and adding to the revenue. The discharge process should start at admission and a collaborative

X-ray having the option of buying the equipment at a bargain price or taking a new lease.

Loan option 1 will help to solved the current cash flow problem for the next three months

Ultrasound is a high technology with a useful life of five years. An operating lease has a lower upfront payment and lower monthly installments. Funding Option

The Funding option of
HUD242 loan insurance program This program enables hospitals to have their dept finance as an investment grade, which provides lowest borrowing rates available in the capital markets.
And this type of bonds are callable after eight years and no foreclosure fees.

DISADVANTAGES OF FINANCIAL RISKS
Cost Cutting
Measures

Equipment
Acquisition

Reducing Agency Staff changing the length of stay and Loan option 1

CT Scan-refurbished
X-Ray -capital lease
Ultrasound operating lease

It is a temporary fix and

Non-compliance on behalf of the companies

Reducing the agency staff may lead to staff shortage causing burnout and fatigue to existing staff resulting in higher call in rates and staff turnover. Damage equipment

With the economy as it is
Medicare reimbursement rates can decrease again

Mal-use of equipment

there are too many variable that can change

Funding Option
The Funding option of HUD242 loan insurance program

If taken any other option the repercussion of it would be disastrous. INITIAL OUTCOME
COST CUTTING OPTIONS
OPTIONS
MEMBERS
 Reducing benefits
1
 Reducing agency staff
4

Skilled nursing mix
1
 Reducing length of stay
4

INITIAL OUTCOME
LOAN OPTION- Option 1 All members
EQUIPMENT ACQUISITION
 CT SCANNER
Refurbished loan 3

Capital lease
2





X-RAY

Capital lease
Buy
1

4

ULTRASOUND Operating lease

5

INITIAL OUTCOME
EHC EXPANSION
 Tax-exempt revenue bonds
1
 HUD 242 loan insurance program4

TEAM OUTCOMES
COST CUTTINGReducing agency staf
Reducing length of stay
LOAN Option 1
EQUIPMENT ACQUISITION
CT scanner- Refurbished loan
X-ray - Capital lease
Ultrasound- Operating lease
EHC EXPANSION HUD 242 Loan insurance program Conclusion

References
The Kaiser Family Foundation, 2012. U.S. healthcare costs. Retrieved from
kaiseredu.org/Issue-Modules/US-health-carecosts.