Business Consultant Proposal for Formulating Costing & Pricing Consultancy Services - Essay Example

NAFEES HOSPITAL.CO. B.S.C. (C) Proposal for formulating costing & pricing consultancy services Preface: This proposal has been developed by in response to Nafees request for a proposal for consultancy services to review costing and pricing framework in addition to review theater utilization and staffing level to support the growth and development of the hospital. The content of this proposal outlines our understanding, methodology, approach, scope of work and deliverables. Horizon confirms herewith that they are fully committed to the hospital and will make every possible effort to carry out the assignment in accordance with international professional standards. Table of Contents 1. SCOPE OF WORK: 4 2. APPROCH AND METHODOLOGY: 4 2.1 Diagnostic phase (Value assessment) 4 2.1.1 Specific objectives: 4 2.1.2 Specific tools: 8 2.2 Implementation planning phase (Value Architecting) 8 2.2.1 Specific objectives: 8 2.2.2 Specific tools: 10 2.3 Implementation support phase (Value development) 10 3. DELIVERABLES: 11 Reference List 12 1. SCOPE OF WORK: The scope of work for the project under this proposal letter involves the following: Addressing all elements of cost incurred by the hospital and indentifies shared costs that require allocation. Review of all types of costs & expenses and provide the hospitals with advices about the best way to control costs. Create a costing module that suite the hospital and which can be used as a base for pricing hospital services. Review theatre utilization and advice the hospital with best way of cost effectiveness plus reviewing staffing level. 2. APPROCH AND METHODOLOGY: To deliver the scope of work under this project, Horizon shall apply the best costing method to deliver the aforementioned services. 2.1 Diagnostic phase (Value assessment) 2.1.1 Specific objectives: Strategic understanding and analysis of the hospital Before identifying the income and expenses of Nafees Hospital, an understanding regarding the strategic position of the organization is important. Hospital is a place where the patients who are suffering from some critical illness are treated. This signifies that hospital is a place where people affected with any form of disease are treated. Nafees has tie ups with various medical centres from where they get updated results related to various development in medical field. In this regard, the business that is dealing in hospital, should not only concentrate on generating profit, but also look towards taking care of the sick people. Full review of expenses Though the business of hospitals is purely based on dedication, patient care and compassion but like other business they also look for generating revenue. The flow of revenue not only affects the delivery of service related to patient care, but also for the financial health of the organization. In order to generate revenue it is very important for the business to identify its expenses. The major expenses that the hospital incurs are research and teaching, labour cost, test and technology, liability costs and other supplies and capital expenses. Research and teaching: Hospitals conducts research and teaching facilities in order to make their services better and make their employees serve the patients better. This helps the hospital in upgrading themselves and provides modern facilities and techniques to the patients. Therefore, huge expenses are incurred in this. Labour Cost: Labour cost is the most significant expense that is incurred by each and every organization and hospital is not an exception in that case. The employees of a hospital include the directors, doctors, nurses and other official and administrative staffs. The salary and benefits are also huge in this regards, which is another major expense for the hospital. Technology and Tests: Advanced technology helps the doctors not only in diagnosing critical illness but also curing these. New arthroscopic equipments, surgical robots and CY scan are some of the modern technologies that are there in hospital. Capital expenses: the hospital may also incur expenses related to construction work related to expansion of the hospital and procuring of equipments. These are some of the heavy expenses that the hospital may suddenly incur. Miscellaneous expenses: Apart from the above mentioned major expenses the hospital also incurs some other expenses in order to run their daily operation smoothly, like the electricity bill, telephone bill, office expenses etc. Liability cost: The hospital have high chances to incur sudden, unanticipated liability cost resulting from any mistake, even after the best effort from the administrator and the health care provider (Shepard, Hodgkin and Anthony, 1999). Full review of services provided by the hospital Nafees hospital provides a wide range of expert services under one roof with state-of-the-art facilities, modern technology and medical equipment to ensure high degree of accuracy and safety. Apart from this, the patients will also find the latest developments in this hospital, as it has tie up with some popular medical centres that provide Nafees with the latest developments in the medical field (Ibn Al Nafees Hospital, 2011). Analyze the competitors in Bahraini market Bahrain offers one of the best and largest medical facilities of which the larger countries in this region should boast on. The region has four state-run hospitals and three private hospitals, which are capable of handling nearly all critical medical cases. Apart from this, there are small regional and maternity hospitals. The government has also taken significant steps in making the medical facilities of the region flourish by attracting pharmaceutical and other medical research companies (Telegraph Media Group Limited, 2013). American Mission Hospital and Bahrain Specialist Hospital are the major competitors that offer high threat to Nafees hospital. Both the hospitals offer huge variety of services, apart from the dental and common medical services. These competitors are having large number of experienced doctors, who are specialized in providing expert services. Identify and analyze a benchmark for the hospital International Hospital of Bahrain is the benchmark hospital for Nafees hospital. They are proud to have one of the region’s best talents working with them. The groups of specialist are ready round the clock to serve the patients with full dedication. The equipments that are used by the doctors are remarkable and are backed by modern technology. Apart from this, though they are not non-profit organization but still they are engaged into charitable works (International Hospital of Bahrain, 2013). Conduct SWOT analysis of the hospital SWOT analysis is conducted for the hospital in order to gain a clear understanding regarding the strength and weaknesses of the organization and opportunities and threat that the organization will face. Strength The services offered by the hospital are one of the strong points of Nafees hospital. The medical packages offered by the hospital are quite attractive and affordable to common people. While conducting operation, the hospital not only provides expert doctors, but also modern equipments and advanced technology that make the operation easy and painless. The hospital is having High Dependency Unit (HDU), where they provide three bed isolated room for the patients. The HDU is equipped with advanced monitoring devices, electronic bed and respiratory support device. The electronic bed ensures the safety and comfort of the patients. The hospital is also having own laboratory and pharmacy. The laboratory is equipped with all modern techniques for testing every type of illness. Pharmacy is present within the hospital campus, which is operating round the clock. Weakness The hospital is lacking e-services component in the services that they offer. In this era of modernization, where use of internet is highly recognized, the hospital should offer e-services. Through this e-service, the patients or their near and dear ones can book an appointment with the doctors. The hospital is also lacking in providing any information related to insurance services on their website. While other hospitals are seen to provide this information, this hospital fails badly in this aspect. Threat The hospital is getting potential threat from the competitors, since they are providing better services to the patients. Threat of substitute is also high in the field of medicine. This requires the organization to quickly adapt to the changes in this sector. Opportunity The Nafees hospital can expand into some other medical areas like ophthalmology, rheumatology and pulmonology. These can be some of the branches that can be introduced. 2.1.2 Specific tools: Workshop and meetings held with the hospital. Secondary data research of the market. 2.2 Implementation planning phase (Value Architecting) 2.2.1 Specific objectives: Select and develop an optimum cost allocating method Cost allocation deals with linking of some cost or a group of costs with one or more cost objectives. In this context, the cost is assigned to the cost objectives due to which the cost has been incurred like the department, product or any division. While allocating the cost the cost drivers should be identified, which are the cost allocation bases, due to that the cost is incurred. In case of the hospital, the cost drivers should be identified and accordingly the cost should be allocated to them. Patient care: wards, ambulatory care centres and inpatient care units are responsible for direct patient services. Intermediate: These cost centres are responsible for providing ancillary services for supporting inpatient units but are distributed among separate departments like radiology, pharmacy and laboratory. Overheads: The overhead costs that are incurred are allocated to both patient care and intermediate cost centres on certain basis (Pearson, n.d.). Develop best costing module The product and product structure is connected to the procedure or the service unit. Fix and maintain certain rates for the overhead, material and labour. The hospital should define and maintain at least 16 cost elements for the each service they provide. Should assess the impact brought by any change in cost variables. Regular review in order to maintain the costing standard (Finkler and Ward, 1999). Develop the underlying assumptions for cost control The assumption for cost control is that the cost is control by monitoring the total per unit cost of each department. This per unit cost needs to be reduced. For the hospital, the units are the patient. If the cost that the hospital incurs in treating each patient is reduced then the hospital can control cost. Apart from this, if the organization is procuring any new equipment, then they should properly evaluate the investment and the return generating from that equipment. This suggests that before reaching to any concrete decision a cost benefit analysis is mandatory. Moreover, the management should also review the return from that equipment, so that measures can be taken if things are not working as per the plans. Develop recommendation for best use of theatre The operation theatre is used for conducting operations. The operation schedule has to be planned and allocated to the definite time slots before hand, according to the complexity of the case. In simple words, the planning should be as such that the operation theatre is utilised in an optimum way. Develop recommendation for staffing level control The staffs of the hospital should be controlled and allocated on shifting basis. Since the hospital is such an organization that runs for 24 hours in a day, which makes it necessary that the employees should be allocated their work on a time slot basis. Some of the employees should be hired on a part time basis. Each department should have certain employees, who are working in part time basis. This will help in reducing the cost that the hospital incurs behind paying the salary and other benefits. 2.2.2 Specific tools: Workshop and meeting held with the hospital. 2.3 Implementation support phase (Value development) Provide adequate support to facilitate implementation of the Costing module and cost control excise in addition to theatre best use. Participate in developing and upgrading hospital accounting and billing systems in order to comply with and meet the requirements of costing module implementation. Actual implementation shall be carried out by the hospital. 3. DELIVERABLES: The following to be delivered under this project: Diagnostic Report. Cost Control Report. Project Plan document Best use of theatre report. Methodology of implanting best cost effective and pricing met 3.1 Benefits to the hospital: Develop costing module for the hospital which can be used as services pricing base. Additional competitive tool Professional Costing Methodology can be used as a base to get better insurance rates. Provide accurate costing & financial information for top management for decision making. Increase the hospital profitability Initiate new services with competitive pricing Monitor costs and develop an internal control procedure to reduce expenses Introduce new cost control parameters Initiate Key performance Indicators (KPI) to monitor hospital services performance. Develop best theatre utilization strategy Review staffing level in order to reduce expenses and increase profitability. Reference List Finkler, S.A. and Ward, D.M., 1999. Cost accounting for health care organizations: Concepts and applications. Maryland: Jones & Bartlett Learning. Ibn Al Nafees Hospital, 2011. About Us [online] Available at < http://www.ibnalnafees.com/view.php?page=about_us> [Accessed 19 September 2013]. International Hospital of Bahrain, 2013. Medical Services [online] Available at < http://www.ihb.net/index.asp?id=medical> [Accessed 19 September 2013]. Pearson, n.d. Cost Allocation and Activity-Based Costing Systems [pdf] Available at < http://www.pearsoned.ca/highered/divisions/virtual_tours/horngren/man_acc/Ch05ManAcc.pdf> [Accessed 19 September 2013]. Shepard, D.S., Hodgkin, D. And Anthony, Y., 1999. Analysis of Hospital Costs: A Manual for Managers [pdf] Available at < http://people.brandeis.edu/~shepard/w-manual.PDF> [Accessed 19 September 2013]. Telegraph Media Group Limited, 2013. Expat Guide to Bahrain: Health Care [online] Available at [Accessed 19 September 2013]. Read More