Assessing Hospital Performance: South Florida Community Hospital - Case Study Example

South Florida Community Hospital Assessing Hospital Performance: Expansion of Outpatient Services CASE STUDY QUESTIONS Review the South Florida Community Hospital’s (SFCH) surgical services financial performance (Exhibits A). Discuss key statistical and financial cost variances between inpatient and outpatient cases. Why are the outpatient surgical cases more profitable? The South Florida Community surgical services financial performance comes with drawing various statistical and financial cost variances. Financial management in hospitals requires finances to ensure proper running. The main source of finance arises from sponsors and investors willing to invest in the organization. The South Florida Community Hospital is a good profit making company that depends on finances accrued from loans, donations, subscriptions accrued from members or sales made from surgeries undertaken in the organization. Investment aims at attaining at certain goals at the end of a certain period. South Florida Community Hospital is a profit making company that works to ensure profit is generated at the end of each financial year. Sources of finance for such companies include capital, loans from banks, retained capital or governmental financing. The cases involving outpatient surgical cases are more profitable as they require financial investment in particular refers to generating more money by offering it as capital into an organization expecting interest after a period (Kunders, 2004). 2. Based on exhibit B surgical case by category; performance a variance analysis on the top 10 most profitable surgical categories in comparison to bottom 10 least profitable. Which are the most profitable procedures? Which are the least profitable procedures? Based on the exhibit B surgical case at the hospital, the South Florida Community performance variance works with ensuring basic categories including implants, computer assisted surgery, biomaterials surgery. The most profitable procedures include the implants, and computer assisted surgeries, as they require high technological output. The south Florida Community Hospital has a strategic fit between the vision of the country and key elements of the healthcare administration with considerations to domestic and global environments. The vision of the country was to broaden healthcare and provide cost effectively treatment. This could only be achieved by employees working together and having confidence and trust in each other. This diversity of the industry has to reflect on the customers and the communities that health care administration serves. Health care administration choose to implement perforce in its strategy, having in mind the existence of other control application versions which included the Microsoft systems Visual Studio (Kunders, 2004). The business functionality was Health Care Administration’s vision, so this would be achieved by Perforce, which will ensure functionality of the required needs in labeling, code branching and documenting of audit trails. A key element was usability of the system in improving health; Perforce was found easy to use, and it will also reduce training costs. To the global environment, Perforce would accelerate and broaden adoptions. This portal has added exposure of the product to new markets offering more than 50,000 items for purchase The least profitable surgeries include the biomaterial surgeries. There is committed positioning between business strategies, customer needs and overall teaching model and how the organization value has been established. Strategies are commitments of undertaking sets of actions and leaving others. Health Care Administration health uses their resources, knowledge and expertise from their manufacturers and patient care providers to assist their customers. Technologies for drug delivery have been developed to distribute pharmaceuticals to different areas as a way of marketing their products. They have also bettered their services by providing consulting to improve their quality and efficiency. Organizational values have been established by these improvements in services delivery to patients, manufacturers and suppliers. Health Care Administration being a distributor of pharmaceuticals it has improved operations and clinical performance to other health care providers (Teagarden). Health Care Administration repackaging of bulk pharmaceuticals into smaller volumes has helped retail pharmaceuticals and hospitals efficiently use this product. To customers they have provided a system that can streamline purchases and inventory management. Locally based pharmacies can now market themselves through internet based programs, and educate patients some activities with the help of Health Care Administration. The business strategy in operations and services improvement has extended to consulting and information systems, which help providers of health care, reduce the cost of supplying and increase their efficiency in operations (Kunders, 2004). 3. Focusing on outpatient surgical cases (using exhibit A, C, D); discuss financial strengthens and weakness. The financial strengths and weaknesses of surgeries come with ensuring a healthy administration of individuals. The organizational value in Health Care Administration is created by diversity. Health care administration has provided development assistance to people to promote a sustainable business model. To small businesses, Health Care Administration has given them a fair and equitable opportunity to grow. This policy has been extended to workshops, universities and other minor institutions to ensure they also get that equal opportunity. Health care administration has upheld its value of diversity and improvement of other institutions that provide healthcare. Organizational value was created through a decision of reorganizing the countries into two operating units. Health care supply chain that provided prescriptions on pharmaceuticals, medical products, clinical, and medical products that would manufacture medical equipments, and technologies that included infusion and medical dispensing, respiratory care and infection prevention products to be applicable in hospital and healthcare facilities. A third unit would complement Health Care pharmacy services and the medicine Shoppe. Health Care has succeeded in its business strategy due to improving customer’s experience. Increasing the range of value added services provides customers with improved margins over the long term. 4. SFCH has a dedicated C-Section surgical suite on the third floor of the hospital with three (3) surgical suites including pre & post recovery room area. In reviewing SFCH surgical case analysis on C-Sections financial performance (exhibit E); calculate the utilization percentage of the surgical suites base on an average an average of 84 minutes per C-Section. Discuss cost variables Type of C Section No. of C Section cases per year No. of days Total no. of minutes @ 84 per C section Total hours Total days 765 396 1478 33264 554 23 766 1138 3313 95592 1593 66 1534 4791 128856 2148 89 Actual use of surgical suite for c section Available Total Hours PT Mon – Fri 8 hrs per day 8 7am – 3pm Per week 40 8hrs Per year 2080 Available for 3 surgical suites 6240 Total actual hours used for C section 2148 % of total 34.4% The utilization percentage for surgical suites for C sections for the 3 surgical suites is 34.4% in a period of 1 year. The cost variables for the C section are the cost of the doctors and the nurses. 5. In reviewing the projected surgical cases (excluding c-sections) on exhibit F/G as well as attached SFCH Patient Flow Optimization -data sheet; discuss opportunities on how to accommodate growth of surgical cases based on existing surgical suites and operational days/hours. Consider question 4 review in your opportunities. There is an opportunity for growth of surgical cases at SFCH. There are 6 existing suites and 3 are dedicated to the C section. The C- Section utilization rate for the 3 suites is at 34.4%. The 3 surgical suites are not utilized at full capacity. The 3 suites are idle 65.6 % of the time. This translates to 4092 hours available. Hours used Hrs not used Total hrs available Total hours used for C section 2148 4092 6240 % of total 34.4 65.6 According to exhibit F an OR is utilized an average of 1600 hours per year. There are 4092 hours available with the dedicated c section suites which technically means that 2 OR rooms are not being used all year round (4092/1600 = 2.6) The growth in surgical cases can be accommodated in some of the surgical suites dedicated to the c section. The 3 suite for c section could be reduced to 2. When 2 surgical suites are used c section, the utilization rate is 51.6%. 2011 No. of cases % cs 1534 29.2 other 3713 70.8 total 5247 In 2011 C sections represented 29% of the total number of surgical cases. The C section uses 6 suites which is 50% of the available suites for 29% of surgeries. There is need to decide whether the c section require all the 3 suites in order to create more room for the other surgical cases. The reallocation of the 6 existing suites will accommodate the growing number of surgical cases. 6. In review of surgical patient demographics (age/pay or mix), high volumes of outpatient surgical cases and type cases; prepare a ‘Market Analysis’ of surgical services. A market analysis indicates the attractiveness of a market in a particular industry. The following analysis will indicate the attractiveness of surgical services as SFCH in the health sector. It will indicate the market size, trends, growth rate, key strengths opportunities, weaknesses and threats in this market The following is an analysis based on 5247 surgical cases in 2011 indicating demographics of age, pay mix, revenue, and types of surgery. Number of cases, average age, cost and income No. of Cases % Average Age Total Direct Cost Net Income % of Net Income IP 1357 26 53 9,023,165 2,544,295 24.2 OP 3890 74 44 9,188,140 7,956,951 75.8 5247 10,501,246 100 The outpatient contributes 75% of the net income from surgical cases. There is an opportunity for growing the output patient surgical section. The average age of patients for out patient is 44 compared to 53. The area constitutes young people who are lees likely to undergo in patient surgery as compared to the older ones with an average age of 53 for in patient surgical cases Payer Mix Payer Mix Net Revenue % of total revenue Other Managed Care 29,540,736 73 Mcaid.Mcare HMO 4,681,039 12 Medicaid/Medicare 4,684,695 12 Other 1,271,549 3 Self Pay 267,726 1 40,445,745 100 The highest revenue 73% comes from patients who pay through other managed care. Types of Surgery Types of Surgery no. of cases % of total cases Net Revenue General Surgery - GI 1346 26 13,288,154 Gynecology 1863 36 12,465,852 Other 2038 39 14,691,739 5247 100 40,445,745 The market size for surgical services is indicated in the following projections. There is an increasing demand for outpatient surgical services compared to inpatient services. FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 In Patient 1,742 1,843 1,931 2,005 2,060 Out Patients 3,600 3,811 3,997 4,149 4,256 5,342 5,654 5,928 6,154 6,316 The market analysis indicates there is an opportunity in the surgery on outpatient basis as per the figures indicated above. The key success factors include the young families living around the hospital. The young women and children will require health services on an outpatient basis. The hospital is ranked highly among doctors and patients. The medical staff is young and progressive open to new ideas and technology in the health sector. There is no issue of default in payment as 73% of the revenue comes from patients who have managed care. 7. Based on information presented; prepare a 5 year financial statement projection on expanding the surgical area. The following information was provided by the architect to expand existing hospital surgical area from six (6) operating suites to twelve (12). The plan would include expanding foot-print of hospital with all the supporting surgical components (pre & post areas): a. Gross Square footage required 25,550 @ $500 per SF b. Additional 20% of Construction cost for soft cost (fees for architect; licenses; etc.) c. Estimate equipment cost at 40% of construction cost d. Financing - debt cost of 10% e. Compute Return of Investment The cost of extending the surgical suite from 6 to 12 within the existing hospital area is as follows;-. Footage 12,775,000 25,550@500 Architectural costs 2,555,000 20% construction cost Equipment 5,110,000 40% construction cost Financial cost 1,277,500 10% fin cost Total Cost 21,717,500 Return on Investment = Revenue from the investment – Cost of the Investment Cost of Investment The number of suites will increase fro 6 to 12 suites. The net revenue from 6 suites as at 2011 for 5247 cases is 2,544,295. It will be estimated that the revenue from 12 suites will be 5,088590 per year. Assume 5 year investment period. Revenue for 5 years will be 79,569,510. The ROI = (79,569,510 – 21,717,500) / 21, 717,500 = 2.7 5 Year Financial Projection on expanding the Surgical Area 2012 2013 2014 2015 2016 No. of Projected Cases 5342 5654 5928 6154 6316 Net Revenue per case @ 7708 41,176,136 43,581,032 45,693,024 47,435,032 48,683,728 Total Cost per case @3470 18,536,740 19,619,380 20,570,160 21,354,380 21,916,520 Net Profit 22,639,396 23,961,652 25,122,864 26,080,652 26,767,208 8. SFCH has available adjacent property to hospital that can be used to build a free standing surgical center. Discuss the advantageous of a free standing ambulatory surgical center as opposed to a hospital based. What are the reimbursement differences? Discuss the cost impact Advantages of a free standing ambulatory surgical centre Easy access for patients seeking surgical procedures. Faster service for surgical patients which means faster turn around. 75% of net income comes from outpatient surgical cases. A stand alone center will increase revenues and attract more patients. Abilty to introduce additional services especially for the women in the area. Increase in employment of staff. The reimbursement differences is that the initial cost of building the surgical centre will be high but the projected revenues from out patient surgeries justify the building because the pay back period will be low. Once the cost of the investment has been paid back, the building will be owned by the hospital and there will be no rental charges. This will increase the revenue of the hospital. 9. How would healthcare reform affect growth opportunities in surgical services? Discuss impact on cost and reimbursement. 1) Health care reforms aid in securing better health care services to organizations. The excellent ability to plan strategically in domestic and global environments is evident in Health Care Administration where talents are incorporated to perform at their best. In a global environment, Health Care Administration understands this diversity of the market place. This global environment is threatened by disintermediation elimination of the intermediary. This internet-facilitated disintermediation was a substantial threat to the environment of health care service providers. Although health care administration health has utilized information technology to manage their problem in the Pharmaceutical industry, still careful monitoring of those items is a vital move. Earlier they thought that Health Care Administration would increase their customer base, but it was not interactive enough to attract visitors (Malhotra, 2009). Health Care Administration has a strong believe in the internet as an effective marketing tool and their will to continue investing in it may eventually reap those benefits. Health Care Administration has fought the challenge of software that is embedded in medical devices. This software has only improved productivity for developers, for project managers and testers, but it has left out the customer base which is a key element to its business operations. The delivery of value in line with health care administration purpose has been left out, which is helping customers across the health care industry from manufacturers to providers of patient care. Some high performing techniques can be integrated in a customer focused management that positions strategies to increase the customer satisfaction. Some changes in how the business is done can improve the customer satisfaction, improve products and strengthen the experience and commitment of each employee in the organization. When a substantial number of customers are satisfied then there is an increase in profits (Malhotra, 2009). 10. Prepare a presentation with your recommendations based on the above findings. What would information would you have needed that would enhance your review. The CEO needs a financial feasibility study for the expansion of surgical areas for the hospital. There are three options namely: 1. Expansion of existing surgical areas. There are 6 surgical suites with 3 assigned to C-sections. The analysis shows that the three suites under the C section are underutilized with a utilization rate of 34.4%. The CFO has the option of reassigning the use of the suites. It is recommended that the C section utilizes 2 suites while the other surgical operations utilize the other 4 surgical suites. The hospital will not incur any additional costs in this scenario. 2. Opportunities within the building. The hospital can increase the operating rooms from 6 to 12. The return on investment for this is 2.6. The financial projections for the next 5 years justify the investment. An increase in the number of rooms will increase revenue especially through from outpatient surgeries that have a high demand. The revenue will be able to pay back the cost of expansion within 3 years. 3. The third option is the addition of a new building adjacent to the hospital. The exact cost of this option need to be calculated together with a return on investment. Comparisons should be made between expansion of existing hospital space and the additional building. The value of the return on investment will indicate which option to use. It is recommended that in the short term the hospital should look at the current utilization of the surgical suites and reassign to a level that maximizes the utilization and maximizes profitability (Malhotra, 2009). References Kunders, G. D. (2004). Hospitals: Facilities Planning and Management. New York: McGraw-Hill Education. Malhotra, A. K. (2009). Hospital Management: An evaluation. New Delhi: Global India Publications. Read More