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HSA 535 WEEK 6 148 CHAPTER 13 Common Sizing, Trend Analysis and Forecasted Data Exhibit 13-1 Capacity Level Checkpoints for an Outpatient Infusion Center Outpatient Infusion Center Capacity Level Checkpoints # infusion chairs 3 chairs # staff 1 RN # weekly operating hours 40 hours # of hours per patient infusion average 2 hours (for purposes of this example) Work Flow Description For each infusion the nurse must perform the following steps (generalized for this purpose; actual protocol is more specific): 1) Obtain and review the patient's chart 2) Obtain and prepare the appropriate drug for infusion 3) Interview the patient 4) Prepare the patient and commence the infusion 5) Monitor and record progress throughout the ongoing infusion 6) Observe the patient upon completion of the infusion 7) Complete charting Work Flow Comments It is impossible for one nurse to start patients' infusions in all three chairs simultaneously. Thus the theoretical treatment sequence might be as follows. • Assume one-half-hour for patient number one's steps (1) through (4). • Once patient number one is at step (5), the nurse can begin the protocol for patient number two. • Assume another one-half-hour for patient number two's steps (1) through (4). • Once patient number two is at step (5), theoretically the nurse can begin the protocol for patient number three. This sequence should work, assuming all factors work smoothly; that is, the appropriate drugs in the proper amounts are at hand, the patients show up on time, and no one patient demands an unusual amount of the nurse's attention. (For example, a new patient will require more attention.) Daily Infusion Center Capacity Level Assumption Patient scheduling is never entirely smooth, and patient reactions during infusions are never predictable. Therefore, we realistically assume the following: Chair #1 = 3 patients per day; Chair #2 = 2 patients per day, and Chair #3 = 2 patients per day, for a daily total of 7 patients infused. Chapter 13 383 Hospital A Current Assets Property, Plant, &Equipment Other Assets Total Assets Year 1 $1,600,000 6,000,000 400,000 $8,000,000 Year 2 $ 2,000,000 7,500,000 500,000 $10,000,000 Assignment Exercise 13-2: Trend Analysis Refer to the Metropolis Health System (MHS) comparative financial statements at the back of the Examples and Exercises section. Required Perform trend analysis on the MHS statement of revenue and expenses. Practice Exercise 13-ID: Contractual Allowance Assumptions: L Your unit's gross charges for the period to date amount to $200,000. 2. The uniform gross charge for each procedure in your unit is $100.00. 3. The unit receives revenue from four major payers. For purposes of this exercise, assume the revenue volume from each represents 25% of the total. (The equal proportion is unrealistic, but serves the purpose for this exercise.) 4. The following contractual payment arrangements are in effect for the current period. The percentage of the gross charge that is currently paid by each payer is as follows: Payer 1 = 90% Payer 2 = 80% Payer 3 = 70% Payer 4 =50% Q: How many procedures has your unit recorded for the period to date? Q: Of these, how many procedures are attributed to each payer? Q: How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer? ~ Assignment Exercise 13-3 As a follow-up to the Practice Exercise above, new assumptions are as follows: 1. Your unit's gross charges for the period to date amount to $200,000. 2. The uniform gross charge for each procedure in your unit is $100.00. 384 EXAMPLES AND EXERCISES, SUPPLEMENTAL MATERIALS, Al"lD SOLUTIONS 3. The unit receives revenue from four major payers. The number of procedures performed for the period totals 2,000. Of that total, the number of procedures per payer (stated as a percentage) is as follows: Payer 1 = 30% Payer 2 = 40% Payer 3 = 20% Payer 4 = 10% 4. The following contractual payment arrangements are in effect for the current period. The percentage of the gross charge that is currently paid by each payer is as follows: Payer 1 = 80% [Medicare] Payer 2 = 70% [Commercial managed care plans] Payer 3 = 50% [Medicaid] Payer 4 = 90% [Self-pay] Q: How many procedures are attributed to each payer? Q: How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer? Q: How much is the total net revenue for each payer, and how much is the total contractual allowance for each payer? ~signment Exercise 13-4.1: Forecast CapacityLevels Review the information in Exhibit 13-1 "Capacity Level Checkpoints for an Outpatient Infusion Center." The exhibit assumes three chairs and one 40-hour RN, for a realistic capacity level of seven patients infused per day. Required Prepare another Infusion Center Capacity Level Forecast as follows: Assume the same three infusion chairs, but add another nurse for either four or six hours per day. How would this change the daily capacity level for number of patients infused per day? ~Signment Exercise 13-4.2 Required Prepare another Infusion Center Capacity Level Forecast as follows: Increase the number of infusion chairs to four, and add another nurse for either four or six hours per day. How would this change the daily capacity level for number of patients infused per day? Chapter 14 385 CHAPTER 14 Assignment Exercise 14-1: Comparable Data in a Graph ReviewFigures 14-1through 14-5.Each of the five figures presents a graph depicting some type of comparative data. Required Locate healthcare information that can reasonably be compared. (1) Prepare your comparative data. (2) Using your data, create one or more graphs similar to those found in Figures 14-1through 14-5. ,f.Assignment Exercise 14-2: Cumulative Inflation Factor for Comparable Data ReviewTable 14-3and the accompanying text. Assumptions: Two hospitals report their annual projected revenue for five years to the local newspaper for a story on the area's future economic outlook. However, Hospital 1 has applied a cumulative inflation factor of five percent per year while Hospital 2 has not applied any inflation factor. Thus the information is not properly comparable. Projected Revenue Year 1 Year 2 Year 3 Year4 Year5 Hospital 1 $20,000,000 $22,500,000 $27,500,000 $27,500,000 $30,000,000 Hospital 2 $20,000,000 $21,000,000 $25,000,000 $24,000,000 $26,000,000 Required ReviseHospital2's projections by applying a cumulative inflation factor offive percent per year. ~ Assignment Exercise 14-3 The head of your department is a prominent researcher. Ahealth research foundation has asked him travel to London to give an important speech at a conference. He will then travel to Paris to tour a research facility before returning home. Although his travel expenses are being funded by the foundation, he willstill need to take along some personal money. Consequently, he asksyou to figure the exchange rates for $500 and for $1,000 in both pounds and euros. He explains that he is trying to judge the spending power of U.S. dollars when converted to the other currencies so he can decide how much personal money to take on the trip. 386 EXAMPLES AND EXERCISES, SUPPLEMENTAL MATERIALS, AND SOUJTIONS Required Locate the current exchange rates for pounds and euros and compute the currency conversion for $500 and for $1,000. --{CAssignment Exercise 14-4: The Discovery The Chief Financial Officer at Sample Hospital has just discovered that the hospital's Chief of the Medical Staff's son Jason, a student at the local community college, is paid $100 per week year round for grounds maintenance at the hospital's Outpatient Center. The CFO, no fan of the Chief of Medical Staff, now wants you to prepare a report that compares the relative costs of lawn care at each of three locations; the hospital itself, the outpatient center, and the hospital-affiliated nursing home down the block. Required Review the available information for grounds maintenance at the three facilities. Decide how to convert this information into comparable data. Then prepare a report, based on your assumptions, that presents comparable costs of grounds care. Also provide your assessment of what the best future course of action should be. Relevant Information So far you have assembled the following information. Now you need to decide how it can be converted into comparable data. Introduction to the Three Facilities Sample Hospital is an older 100-bed hospital. The new Outpatient Center, built last year, is across the street and the Golden Age Nursing Facility is down one block, on the corner. All three facilities are part of the Metropolis Health System. (Appendix 25-A contains some financial details about Sample Hospital.) The hospital is located in the midwestern sunbelt; there is occasional frost in the winter but no snow. Grounds Maintenance Tasks That Should Be Performed at All Three Sites • Mowing and edging • Walk sweeping • Raking leaves • Blowing off parking lot • Flower bed maintenance (where necessary) • Hedge trimming and minor tree pruning (major tree trimming is performed by a contractor on an as-needed basis and thus should be disregarded) Figure Ex-1 provides a map that illustrates the layout of the grounds for each facility and their proximity to each other. Chapter 14 387 _11__ 11_1LJ II I Outpatient I Parking - t-, Parking -; iil '" ISample Hospital '" I I I Figure Ex-l Sample Hospital Map Washington Street Jefferson Street Jackson Street I I Grounds Maintenance Arrangements for the Three Facilities The current grounds maintenance arrangements vary among the three facilities as follows: 1. Sample Hospital uses its Maintenance department employees for grounds care. The hospital pays these employees $15 per hour plus 15% employee benefits; it is estimated they spend 1,000 hours per year on grounds maintenance work. Another estimated 120 hours per year are spent on maintaining the lawn care equipment. The employees use a riding lawn mower, edger, and blower, all owned by the hospital. The hospital just bought a new mower for $2,995 less a ten percent discount. It is expected that the mower should last for fiveyears. 2. The hospital's Chief of the Medical Staffs sonJason, a student at the local community college, is paid $100 per week year round for grounds maintenance at the hospital's Outpatient Center. A friend sometimes helps, but when that happens Jason pays him out of his weekly $100. It takes about one-and-a-half hours to mow, edge, and blow.Jason uses his dad's riding mower and blower, but Jason recently bought his own edger. Jason also buys fertilizer for the grass twice a year. 3. The Nursing Facilitycontracts with a landscape service on a seasonally adjusted sliding scale.The landscape service is paid $600 per month from April to October (mowing season); $400 per month for February, March, and November; and $200 per month for November, 388 EXAMPLES AND EXERCISES, SUPPLEMENTAL MATERL>lLS, AND SOLUTIONS December, and January. The landscape service provides all their own equipment. They also provide fertilizer and provide annuals to plant in the flower beds every quarter. Sample Hospital Property Description The grounds to be maintained are as follows: • The front lawn is grass in two sections on either side of the front entrance. Each section is about 50' by 60' . • There is a hedge along the front of the building that is about 50' on either side of the front entrance. • There are two small matching flower beds on either side of the front entrance. • Another strip of grass alongside of the building is 30' by 100'. • A third small strip of grass about 5' by 25' is by the Emergency entrance. • The walkwaydimensions are as follows: about 50' of front walk; about 30' of staff entrance walk, both of which are 5' wide. • The Emergency Department's paved patient drop-off area is about 25' by 30'. • The parking lot surface is about 200' by 250'. Along one side are overhanging trees that drop leaves and debris and are a constant sweeping problem. These are the only trees on the hospital site. Outpatient Center Pmperty Description The grounds to be maintained are as follows: • There is a strip of grass at the front of the building that is 12' wide and 65' long, split in the middle by a walkway5' wide. • There is a strip of grass at the back of the building between the building and the parking lot that is 5' wide and 50' long • All the rest of the property is paved. Nursing Center Property Description Golden Age Nursing Center occupies one whole block. The grounds have many large trees. Flowerbeds have been planted around the trees as well as along the front walk and entrance. There are also two secured patio areas at the side of the building, screened by hedges, and each has a small bed of annuals. Because of the unique design of the building, grounds maintenance requires considerable handwork such as edging with a weed eater. CHAPTER 15 Example 15A:Budgeting A static budget is based on a single level of operations, which is never adjusted. Therefore, the static budgeted expense amounts will not change, even though actual volume does change during the year. Chapter 13 383 Hospital A Curren t Assets Property, Plant, & Equipment Other Assets Total Assets Year 1 $1,600,000 6,000,000 400,000 $8,000,000 Year 2 $ 2,000,000 7,500,000 500,000 $10,000,000 Assignment Exercise 13-2: Trend Analysis Refer to the Metropolis Health System (MHS) comparative financial statements at the back of the Examples and Exercises section. Required Perform trend analysis on the MHS statement of revenue and expenses. Practice Exercise 13-111: Contractual Allowance Assumptions: 1. Your unit's gross charges for the period to date amount to $200,000. 2. The uniform gross charge for each procedure in your unit is $100.00. 3. The unit receives revenue from four major payers. For purposes of this exercise, assume the revenue volume from each represents 25% of the total. (The equal proportion is unrealistic, but serves the purpose for this exercise.) 4. The following contractual payment arrangements are in effect for the current period. The percentage of the gross charge that is currently paid by each payer is as follows: Payer 1 = 90% Payer 2 = 80% Payer 3 = 70% Payer 4 = 50% Q: How many procedures has your unit recorded for the period to date? Q: Of these, how many procedures are attributed to each payer? Q: How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer? -} Assignment Exercise 13-3 As a follow-up to the Practice Exercise above, new assumptions are as follows: 1. Your unit's gross charges for the period to date amount to $200,000. 2. The uniform gross charge for each procedure in your unit is $100.00. 426 EXAMPLES AND EXERCISES, SUPPLEMENTAL MATERIALS, AND SOLUTIO S SOLUTION TO PRACTICE EXERCISE 13-11 Year 1 Current assets Property, plant, and equipment Other assets Total assets $1,600,000 6,000,000 400,000 $8,000,000 Hospital A Year 2 Difference $ 2,000,000 7,500,000 500,000 $10,000,000 $ 400,000 1,500,000 100,000 $2,000,000 25% 25% 25% Note: The worksheet below showsHospital Awith both common sizing and trend analysis: Year 1 Current assets Property, plant, and equipment Other assets Total assets $1,600,000 6,000,000 400,000 $8,000,000 20% 75% 5% 100% SOLUTION TO PRACTICE EXERCISE 13-Ill Hospital A Year 2 Difference $ 2,000,000 20% $ 400,000 7,500,000 75% 1,500,000 500,000 5% 100,000 $10,000,000 100% $2,000,000 ( ~ )

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13 Jan 2016