Finance and Accounting: King Abdulaziz Medical City - Essay Example

?Topic I used to work for the King Abdulaziz, medical which is a Riyadh based hospital. The main source of revenue comes from the patients which they pay as fees for their treatment in the hospitals. A major portion of the financing is accomplished by government allocated budget and the revenue received from private consultations. The hospital in which I work for is a super specialty hospital providing varied health services. A source of the funding does also come from the service providers who deal with various diagnostic tools and apparatus which are used to carry on with the daily investigation of the patients. The service providers are in tie-up with the hospital for usage of their products. The hospital also receives grants, accreditations, certifications from various organizations. However the main source of revenue can be accounted to the fees received from the patients. The various expenses incurred by the organization lies in the staffing. The hospital has a considerable strength of manpower which includes Doctors, Nurses, Technicians, Pathologist, Clerical staff, and other support staffs. The hospital also spends a considerable amount of money behind installation of latest technological equipment for providing world class facilities for its patient. It also has to maintain a high level of cleanliness and hygiene as it is one of the important issues. King Abdulaziz, medical city does not concentrate on profit making. The hospital focuses on the quality of health care and looks to provide the best of services to the patients. It thrives to provide relief to the ailment in the best possible ways. According to respondent 1, King Abdulaziz, medical city also looks after profit making. It has to maintain a profit margin as without profit it cannot look to provide the best of services and would have stopped its operation because of shortage of capital, which is contrary to my view mentioned. Topic 2: King Abdulaziz, medical city is one of the leading hospitals in the Saudi Arabia. It has the capability to accommodate 690 patients, besides it has 132beds for admission of emergency cases and 25 beds are allocated to the surgical patients. The hospital has one of the best trauma centers in the country. It is equipped with specialized Burn Unit, Surgical ICU, Endoscopy Unit, Operating Rooms, and Neuro-Surgical and Surgical Units. To reduce the extended stay in the hospital, King Abdulaziz, also provides home health care services. In the home health care service the patients are monitored properly and regular follow up is initiated. The hospital has fifteen different departments which deal with various kinds of diseases and illness of patients. The departments are listed below  King Abdulaziz Cardiac Center  Department of Anesthesiology  Department of Emergency Medicine  Department of Dental Care  Intensive Care Department  Department of Hepatobiliary Sciences and Liver Transplant   Long Term and Extended Care Center   Department of Medical Imaging  Department of Medicine  Department of Obstetrics and Gynecology  Department of Pediatrics  Department of Surgery  Department of Pathology and Laboratory Medicine  Department of Infection Prevention and Control  Department of Oncology  (Medical departments, n.d) The amount of actual cost involved in providing the heath service is not known to me in exact figures but the quality of service provided and its wide variety suggests that the cost range is on the higher side. If the staffs do have an idea behind the cost the hospital has to maintain in providing the service to the patients, it will definitely help the organization in the long run. The employees will also try to provide their best of efforts and the maintenance of the high cost equipments could be done in a much better way Topic 3: Often in organization, the management provides a variety of information and updates to the employees in a regular basis. Often the information provided to them is of no use or of little use. The results of these efforts from the management do lead to loss of resources. The employees should be receiving only that much amount of information which is relevant for their own working. The employees should be provided with documents which highlight the aims and objectives of the organization in a proper way. This would provide a thorough insight to the employer regarding the workings carried out by the organization. Documents relating to the nature of duty of the employee should also be provided and what the organization expects out of him should also be clearly highlighted. For employee working as management staff, history of patients’ summary admitted under particular department should not be addressed. Often some employees have to work between two departments and in that case the proper understanding of the departments and their connection needs to be highlighted. The employees should be provided with any sort of helping information for the betterment of his job provided it does not affect the confidentiality of the business. The above suggestion is very much possible in real sense. Distribution of proper document to the proper person was not a big deal to in reputed, large scale concerns like King Abdulaziz medical. Topic 4: The sale of the Mersey Hospital in Tasmania to The commonwealth government was a result of politically inspired decisions. The hospital is situated near Devonport in Tasmania. Before the selling of the hospital to the Common wealth took place, Mersey hospital was running under the discretion of the Australian government, but it was privatized by the purchase of the hospital by the organization named Health scope (Wynne, 2005). But the problems with Mersey hospital never ceased and the demand for the hospital to come under the government by the people was rising at a high. Later the government did come to the rescue and arranged suitable package for the hospital to come under its wing. A restructure was promised to the hospital. But later after the ownership of the hospital moved into the hands of the government situations again started growing worse. The Australian government decided to restore an ICU in the hospital for the cause of the patients. But the striking feature was that the hospital lacked specialists to carry out the ICU. The maintenance cost of the hospital was not provided by the government and the state government decided to sell the ownership to the commonwealth at a price of mere 1dollar. The commonwealth in turn promised to run the hospital and promise a monetary help o f 64 million dollar. The price for the contract being so low can be accounted to the fact that the common wealth did not aim to earn profit out the organization but it tried to improve the facility for the sake of the people (Denholm, 2007) The government was obviously benefited out of the transfer as the responsibility of the hospital was taken by the commonwealth Government Topic 5: The cost structure of the King Abdulaziz, medical city can be segregated into fixed cost and the variable cost. In accounting terminology fixed cost refers to the expenses or the cost beard by the organization which remains constant throughout and is not influenced by the rate of output, whereas variable cost changes significantly according to the level of output. In the hospital which I worked for the fixed cost which is incurred are as follows: Capital expenditures Employee salaries and benefits Building maintenance Maintenance of utilities Overhead Maintenance of Ambulance Building Lease expenses (If any) The variable cost of the hospital depends on the quality of service which deals directly with the patient activity. The different variable cost are mentioned below Health care worker supplies Patient care supplies Diagnostic and therapeutic supplies Medications Laboratory test Nursing expenses In order to reduce the operating cost the organization can achieve it many ways. According to me to achieve a reduction in the operating expenses the hospital should try to decrease the office supply expense. The hospital should try to opt for more and more automation and reduce the paper consumption. The hospital should negotiate with a single vendor providing of the supplies it needs. Through a single vendor more discounts and benefits may be gained from the hospitals point of view it should take care that the overtime ran by the employees do not increase considerably and at the same time it should take care that a shortage of staff is not there. In order to curtail the operating expenses the hospital may also stop providing perks and allowances to the employees, (Emanuel, 2010) which may become highly de motivating for the employees and people like me will be highly dissatisfied about working over there. Topic 6: The King Abdulaziz, medical city has a strong management team and a dedicated Finance team which makes planning for the organization. In respect of the Budgeting techniques adopted, I observed that the company generally proceeded with the participatory approach in which various departmental budgets are made first and they are combined by the administrator after making necessary changes and then the final organizational budget is formed. The financing part of the hospital comes from the government allocated budget and so the calculations relating to the main source of revenue earning are not compiled in a major extent by the organization. The organization focuses on departmental budgets to a large extent. However I have noted down some significant deficiencies in the process of the budgeting followed by the organization. In any budgeting approach the study of the external environmental factor is almost very crucial. The trends in the current economy and the situations all around should be studied. For example in the current economy with increase in price the administrator should be aware that the staffs of the organization requires an increase in the pay package and thus the allocation of the extra funding is done on the budget. But this was not the case followed by the organization where I used to work for. The administrator used to gather the departmental budgets, but not much of concern was put into the area highlighted. The modes of funding were often unrecognized and so measures to identify the modes of proper investment for the patient care was not properly planned. As a result of the shortage in the budgetary planning there is a critical implication in the organization. Often when there is provision for funding the management finds it difficult to invest it in proper way as budgetary planning control is lacking. Topic 7: In order to achieve organizational effectiveness, and efficiency in the running of any organizations the administrator aims to use the limited resources in the best possible way. The allocation of the resources to long term projects is done in most careful manner. The choice of projects to be invested in can be methodically concluded by the help of the capital budgeting techniques. Considering the case of my organization, Effective use of capital budgeting can be applied in various ways. The hospital had to invest considerable amount of money behind the purchase of equipments and tools for the diagnosis and care of the patients. The hospital often needs to replace some of the machinery on a regular basis. In these sorts of investment decisions, I think the capital budgeting techniques could have been applied. For example if the hospital is looking to replace the X-ray machine this is in use for two years, it should try to evaluate the new machine with respect to the old one. The operating revenue of the new machine and the associated cost of it should be considered. Similarly the advantage from the new machine needs to be considered as well. If it is found that the net advantage of using the new machine is greater than the old one, it should immediately go for the new one. The net cash flow of both the machines should be considered. In calculation of the cash flow, a specification of the discount rate should be done for determining the present value of future cash flow. However as the hospital dealt with care of the patient, it was not always possible to adopt to the capital budgeting techniques to come to a solution, of the tools which would have yielded better result needs to be replaced owing to the patient needs and the arrival of new technologies. Topic 8: Case mix funding was introduced to determine the amount of funding the hospitals receive. According to the thorough put of the patients in the hospitals, the funding is generally done. A part of the funding comes from the budget allocated by the government and the private consultation which is carried out. The funding is based on the amount of expenses incurred by the hospitals. In order to gather more funds hospitals decreased the number of stays of patients in the hospitals. In order to gain funding through the case mix funding it is necessary to provide the details regarding the cost incurred to receive the grants, however the case is not so with historical funding.( Spoehr,1999, p.321) According to my viewpoint it is important for the private hospitals to be aware of the cost of services provided. Besides providing a good medication facility the private organization also looks to gain profit out of the business and it analyses the cost and takes measure to control them for their on profitability. Based on the cost of service provided they actually decide the payment they need to collect from the patient. The private hospitals look to charge the patients after setting their profit margins. They are much more concerned about the revenue earned and look for methods of excessive cost cutting. Every details of the cash flow are maintained and efforts are made to maximize the returns from investment. Topic 9: After the total study of the course regarding the hospital industry and in particular King Abdulaziz medical city, I have identified various notions regarding the financing pattern of the hospitals and the steps inculcated for the effective improvement in the infrastructure. The primary motive of the hospital was in providing a good facility to the patients. The hospital never aimed at profit making, and as a result the chances of better facilities grew. Little bit of financial measures were taken but not at the sacrifice of quality and service provided. The concept of the revenues and expenses of the hospital were clear after the study. The study of the expenses part showed that the hospital dedicatedly spent a huge amount in order to help the patients with modern facilities. Various modes of increasing profitability are there with respect to the financial decision making, but the hospital provided its main concentration on the nature of service. The hospital could generally use the capital budgeting techniques for investment in long run but it considered other aspects and often ventured towards other investment which may not provide the same profitability. But decisions relating to budgeting should be done in a proper way as it provides sufficient planning for the handling of cash and funds in a proper way. Several modes of decrease in the operating expenses also need to be considered in the operation of the hospital industry. All these studies should help me in the proper understanding of the running of the hospital industry. References Denholm, M. (2007), Premier agrees to handover of hospital, The Australian, available at: http://www.theaustralian.com.au/news/premier-agrees-to-handover-of-hospital/story-e6frg6ox-1111114230425 (accessed on September 4, 2011) Emanuel, S. (2010), 7 Ways to Reduce Operating Expenses in Your Business, Associated Content, available at: http://www.associatedcontent.com/article/2604763/7_ways_to_reduce_operating_expenses.html?cat=3 (accessed on September 4, 2011) Medical departments, (n.d), ngha, available at: http://www.ngha.med.sa/English/MedicalCities/AlRiyadh/Pages/MedicalDepartments.aspx (accessed on September 4, 2011) Spoehr, J.(1999),Beyond the contract state: Ideas for social and economic renewal in South Australia, Adelaide: Wakefield Press Wynne, M. (2005), Health scope, The Mersey Hospital case, uow, available at: http://www.uow.edu.au/~bmartin/dissent/documents/health/healthscope_mercy.html (accessed on September 4, 2011) Read More