The Importance of Hospital Existence - Assignment Example

Case Study, Health sciences and medicine In medical science, the existence of hospital is very much important to give proper services to the people of any locality. In modern days establishing a hospital is not a case of social service any more as more and more number of private players are now started to enter in the healthcare business. In USA, establishing new hospitals are now becomes a competition among several private players. With the innovation of science and technology more number of critical cases are now getting diagnose more easily and more high standard of treatment are in place for the patients. As there is a continuous development in the medical science various drug manufacturing companies are also started to invest more in their R & D, and now coming up with more effective medicine. Those medicines are of generally high cost. Tying up with hospitals in modern cities is also helpful for the pharma companies as well as there is a continuous source of income for them. In this case analysis, the main objective is to analyze the case of three different hospitals in USA from three different places: Alabama, Louisiana, and Mississippi. All these 3 places are close to border area near the gulf coast and are prone to various kinds of extreme weather conditions; thunderstorms, hurricanes, tornadoes, and tropical storms. The three different hospitals are Glenwood Regional Medical Center, West Monroe, LA; Coosa Valley Medical Center, Sylacauga, AL and Anderson Regional Medical Center, Meridian, MS. An Overview of Data: All the three hospitals mentioned above are in the cities in which there are chances of number of natural calamities take place every year. Therefore all the three hospitals have to have all kinds of emergency services in place to give the people of all three areas a timely service during the crunch time. To analyze the profitability of all the above three hospitals here is a broad sample survey based on two different drugs in each cases. For each hospital there are two samples of Diagnosis related group. For Coosa Valley Medical Center two diagnosis groups are simple pneumonia and Degenerative nervous system disorders; for Anderson Regional Medical Center two groups are chronic obstructive pulmonary disease group and Heart failure & shock group of patient and for Glenwood Regional Medical Center these two are heart failure/shock and Cardiac arrhythmia & condition disorders. Here is the analysis of all there hospitals based on the top 2 DRGs. Question 1: Analysis of the Data: Name of the DRG Name Avg. Cost Avg. No. Of Prfit/Loss Volume Hospital     Payment Cases     Coosa Valley Medical Center 195-194-193 6218 5804 143 Loss -59202   057-056 7005 10250 106 Profit 343970               Anderson Regional Medical 192-191-190 7002 5428 281 Loss -442294 Center 293-292-291 6891 6444 267 Loss -119349               Glenwood Regional Medical 293-292-291 6220 6551 319 Profit 105589 Center 310-309-308 4389 4934 243 Profit 132435 From the above table it is very clear that if one consider the top 2DRGs of each hospitals then Glenwood Regional Medical center is booking profit in both the cases where as Anderson Regional Medical Center is booking loss in both the cases. Another interesting thing coming out from the above table is for DRG 293-292-291 the purchase price is different for Glenwood Regional Medical center&Anderson Regional Medical Center so as the number of patient. For the Anderson Regional Medical Center the number of patient for DRG 293-292-291 is 267 whereas for Glenwood Regional Medical center it is 319. Likewise the purchase price is also different in both the cases so as the payment against the same DRG. Another thing is very clear from the above table and that is the profitability of any particular medical center is not depending on the number of cases/patient taking admission to the hospital, but at the same time the entire process of treatment and cost associated with the treatment used to play a very important role in that case. Here is the graphical analysis for all the three hospitals taking into consideration top 2 DRG in each case. From the above analysis it is very clear that there are number of differences existing in the data. As discussed earlier there is a marked difference in same DRG for two different hospitals. The difference is there for both the cost price and payment made by the patients as well. Another striking difference is in the volume of profit. Out of 5 different DRGs, maximum profit was recorded by Coosa Valley Medical Center for DRG 057-056. But the noticeable thing is the number of cases is lowest among all 5 DRGs in three different hospitals. Another striking thing is the volume of loss incurred by Anderson Regional medical center despite having large number of cases. From the above analysis it is very clear that to book profit high number of cases is not the only criteria, the medical center need to have a significant differences in the cost and selling price to minimize the loss they have incurred in the other front. Question: 2 Other factors influence the outcome of the data: The profitability of any hospital is not only dependent on the number of beds the hospitals have but at the same time also dependent on how much successful the management is to treat the patient accordingly. One must consider the fact that to charging high amount for same kind of diseases is not a good move for any hospital. It can give short term profitability but to gain long term profit one have to be competitive in terms of prices and services. In the country like USA, average hospitals are barely breaks even but at the same time there are also some hospitals which are known to be huge profit centers. As par the review done by the Forbes magazine in 2010 there are certain hospitals which are able to make 25cents or in some case more in every $1 payment make by the patients. In the year 2010, there are 24 hospitals in the USA with 200 or more beds made an operating profit of 25% or more. From this data it is clear that number of bed is a factor in booking substantial profit. Whelan in his report has mentioned that “profitable hospitals may be using local monopoly to overcharge insurers and patients. Others see the high profits simply as sign of efficiency and good quality”. (Whelan, 2010) There is another school of thought according to which the hospitals which are able to book profit successfully are the one where the standard of treatment and service is higher than the rest. Apart from that another factor associated with the profitability is number of units that the company have in operation. For example if one considers the case of Mayo Clinic- the two main functioning hospitals of this groups are Rochester Methodist Hospital in Rochester which is number 3 in terms of profitability in the USA in 2010 and St. Mary’s Hospital which was in 25th place. But as a whole Mayo Clinic overall is moderately profitable and the reason is the presence of a substantially non profitable hospital in Phoenix which was in operation since 1998 and another one in Jacksonville since 2008. (Whelan, 2010) So it is very clear that location as well as functionality of any hospital is a key behind booking profit for any hospital and not only the number of beds. Following are 11 different options by which any hospital can book profit under any circumstances: making a well-planned effort to revamp the revenue cycle; adding on new offers and services for every segment of customers in the society to reach out to every segment of the society; enhancing the supply chain process of the hospitals and also standardize physician preferred items by selecting better supplier; ensure continuous reviews of salary, wages and rescheduling the same as par the market standard to attract more able and efficient people on board; periodically review all kinds of orders- from top most orders up to all smaller ones as all of these order contribute equally to the overall profit; giving proper attention to quality assurance program and other healthcare reforms initiatives; try to incorporates electronic record maintenance system and also ensure planned expenses of fund in every departments; invest to promote project green “ save nature” and look to use more alternate source of energy to reduce expenses in that fields; review drug cost and equipment cost in regular basis-look for better supplier who can give more discount so that without increasing the cost /charges for the patient hospital can book more profit. (Herman, 2012) Question: 3 Does bed size & Geographical location have any impact on the Profitability of the Hospital? Generally if one analyze the above data it is very clear that bed size is not a key factor in making profit from the process. if the bed size has central role to play then Coosa Valley Regional medical center cannot be at the top in terms of profit making from the top 2DRGs. One cannot overlook the bed size but it is not the central point regarding profit. If one considers from the DRG’s side then one must take it into consideration that purchase cost of 057-056 DRG is highest among all 5 and therefore the selling price is also much higher. The selling price is nearly 50% higher than then rest 4. As there are a substantial number of patients under this DRG so the hospital is able to book a large scale profit from this DRG. Demography also plays a key role in determining the profitability of any hospital. As all the three hospitals are closer to gulf coast so number of patient affected from natural calamities are more there. Patient suffering from heart diseases and other acute serious diseases generally more frequent in this hospitals. So if they can able to ensure better service in affordable price range then the margin of profit can go up. To ensure that they have to make it sure that cost price is no way less than that of the selling prices of DRG. Case Mix Index (CMI) is also important to project the profitability of any hospital. Generally CMI is being calculated taking all the DRG cases of a particular time frame together (may be for a month) and dividing the same by number of patient. Higher CMI means that the hospitals are able to capture the complications and comorbidities (CC) and major CC cases effectively which generally accounted for higher-Weighted DRG. Generally the CMI calculation is also a comparative study to take a note of the stand of the hospital in an area where there are more hospitals available for the people to get services from. (HCPRO, 2010) On the same ground there is a shift from the usual CMI trend in case of Coosa Valley Regional Medical Center. For the DRG 057-056, the value of CMI is 0.9652 less than DRG 195-194-193, and at the same time the level of CC and MCC rate are also at 0% but still this DRG is accounted for maximum profit among those 3 hospitals and 5 DRGs. This data also makes it clear that purchase-selling price difference is another key behind booking larger profit. This is why the Anderson Regional medical center is not able to book profit from their top 2 DRGs despite having higher CMI overall than Coosa valley and also high CC and MCC rate among rest other DRGs. References 1. Herman, B. (2012) 11 Ways Hospitals and Health Systems Can Increase Profitability in 2013; Hospital CFO; retrieved on 30.5.2014 from http://www.beckershospitalreview.com/finance/11-ways-hospitals-and-health-systems-can-increase-profitability-in-2013.html on 30.5.2014. 2. What does case-mix index mean to you? (2010), Case Management Monthly; retrieved from http://www.hcpro.com/HOM-250674-5728/What-does-casemix-index-mean-to-you.html on 30.5.2014 3. Whelan, D. (2010) Americas Most Profitable Hospitals; Forbes; retrieved on 30.5.2014 from http://www.forbes.com/2010/08/30/profitable-hospitals-hca-healthcare-business-mayo-clinic.html Table: Name of the DRG Name Avg. Cost Avg. No. Of Profit/Loss Volume Hospital     Payment Cases     Coosa Valley Medical Center 195-194-193 6218 5804 143 Loss -59202   057-056 7005 10250 106 Profit 343970 Anderson Regional Medical Center 192-191-190 7002 5428 281 Loss -442294 293-292-291 6891 6444 267 Loss -119349 Glenwood Regional Medical Center 293-292-291 6220 6551 319 profit 105589 310-309-308 4389 4934 243 profit 132435 Name of the No. Of Hospital Cases Coosa Valley Medical Center 249     Anderson Regional Medical Center 548     Glenwood Regional Medical Center 562     Name of the Volume of Hospital Profit/Loss Coosa Valley Medical Center 284768     Anderson Regional Medical Center -561643     Glenwood Regional Medical Center 238024 Name of the Purchase cost Payment rcv. Hospital of top 2 DRG for top 2 DRG Coosa Valley Medical Center 13223 16054             Anderson Regional Medical Center 13893 11872       Glenwood Regional Medical Center 10609 11485 Name of theHospital Names of The Top 2 DRGs in Each Hospital 195-194-193 057-056 192-191-190 293-292-291 293-292-291 310-309-308 Coosa Valley Medical Center 143 106         Anderson Regional Medical Center     281 267     Glenwood Regional Medical Center         319 243 Read More