| Table 1. HealthWays Clinic, Monthly Expense Budget Report, June 2018. | |||||||||
| Item | June 2018 | May 2018 | 2018 YTD | ||||||
| Budget | Actual | Difference | Actual | Budget | Actual | All blue shaded cells require your answers. | |||
| Physician FTE | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | ||||
| Nurse PractitionerFTE | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | ||||
| Encounters: | |||||||||
| Established patients | 275 | 291 | 286 | 1650 | 1671 | ||||
| New patients | 25 | 18 | 27 | 150 | 164 | ||||
| Total encounters | |||||||||
| Expenses: | |||||||||
| Physician Salaries & Benefits | $10,500 | $10,502 | $10,509 | $63,000 | $63,149 | ||||
| NP Salaries & Benefits | $20,000 | $20,992 | $20,191 | $120,000 | $122,001 | ||||
| Clerical (2 FTE) Salaries & Benefits | $6,667 | $6,771 | $6,683 | $40,000 | $41,978 | ||||
| Total personnel expense | |||||||||
| Medical supplies | $7,500 | $8,136 | $7,994 | $45,000 | $47,883 | ||||
| Office supplies | $623 | $583 | $508 | $3,498 | $3,407 | ||||
| Rent | $2,917 | $2,917 | $2,917 | $17,502 | $17,502 | ||||
| Depreciation | $333 | $346 | $346 | $1,998 | $2,050 | ||||
| Capital Expenses | $3,333 | $3,480 | $3,480 | $19,998 | $20,439 | ||||
| Overhead | $167 | $167 | $167 | $1,002 | $1,002 | ||||
| Total non-personnel expense | |||||||||
| Total health center expense | |||||||||
| Interpretation: | |||||||||
| I. Answer the following question related to the results of your calculations: What interpretations can you make based on the data? What is happening in regard to such measurables as: | |||||||||
| 1. The full-time equivalents (FTE) for HealthWay employees: | |||||||||
| 1. Answer: | |||||||||
| 2. The number of encounters, both new and established: | |||||||||
| 2. Answer: | |||||||||
| 3. Non-personnel expenses: | |||||||||
| 3. Answer: | |||||||||
| 4.Total expenses: | |||||||||
| 4. Answer: | |||||||||
| II. If these trends continue, what could it mean for HealthWays? What strategies might they employ to address any issues your analysis suggests? | |||||||||
| Answer: |
| W2A2 Practice Design |
| Refer to the Healthcare Budget Guide for an example of what to include and how it should look. |
| Estimated Expenses for an educational program titled “Cultural Humility in the Emergency room” | |||||||
| Start up Expense | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Grand Total |
| Clinical Educator wkly rate (1clinical educator/$70/hr) | $ 1,400.00 | ||||||
| 1hr Travel RN Training (4 Travel RNs/$45/hr) | $ 180.00 | ||||||
| FTE RN Training (69 FT RN/$35/hr) | $ 2,415.00 | ||||||
| Patient Care Assistance Training (PCA) (18PCAs/$18/hr) | $ 324.00 | ||||||
| Case Manager Training wkly rate (35/hr*20*52) | $ 700.00 | ||||||
| Teaching Material (pamphlet) | $ 15,000.00 | ||||||
| Cost to make Advertising Posters | $ 5,500.00 | ||||||
| In Service Education Completion Certification | $ 30,000.00 | ||||||
| Utility (electricity) Expense | $ 2,400.00 | ||||||
| Furniture (desk, Chairs, tables) | $ 32,000.00 | ||||||
| Laptop | $ 24,000.00 | ||||||
| Mic, Projector | $ 52,000.00 | ||||||
| Printer | $ 8,000.00 | ||||||
| Building Constructed for a Classroom | $ 45,000.00 | ||||||
| Total Start up Expenses | $ 218,919.00 | $ – 0 | $ 218,919.00 | ||||
| Operating Expense | |||||||
| 8hr of Clinical Education per day (1educator/$70/hr/day) | $ 204,400.00 | $ 210,532.00 | $ 216,847.96 | $ 223,353.40 | $ 230,054.00 | $ 1,085,187.36 | |
| Laptop Maintenance | $ 5,200.00 | $ 5,200.00 | $ 5,200.00 | $ 5,200.00 | $ 5,200.00 | $ 26,000.00 | |
| 1hr of RN’s training per day (1hr RN/$35/hr/day) | $ 12,775.00 | $ 13,158.25 | $ 13,553.00 | $ 13,959.59 | $ 14,378.38 | $ 67,824.21 | |
| 1hr of Travel RN training per day (1travel nurse/$45/hr/day) | $ 16,425.00 | $ 16,917.75 | $ 17,425.28 | $ 17,948.04 | $ 18,486.48 | $ 87,202.56 | |
| 1hr of PCA training per day (1PCA/$18/hr/day) | $ 6,570.00 | $ 6,767.10 | $ 6,970.11 | $ 7,179.22 | $ 7,394.59 | $ 34,881.02 | |
| Total Operating Expenses | $ 245,370.00 | $ 252,575.10 | $ 259,996.35 | $ 267,640.24 | $ 275,513.45 | $ 1,301,095.15 | |
| Total Expenses | $ 218,919.00 | $ 245,370.00 | $ 252,575.10 | $ 259,996.35 | $ 267,640.24 | $ 275,513.45 | $ 1,520,014.15 |
| Revenue/Savings | |||||||
| Decrease in adverse drug event $5776/ patient | $ 11,552.00 | $ 17,328.00 | $ 23,104.00 | $ 11,552.00 | $ 28,880.00 | $ 92,416.00 | |
| Decrease in neglegent surgical injuries $58766/patient | $ 176,298.00 | $ 293,830.00 | $ 293,830.00 | $ 293,830.00 | $ 293,830.00 | $ 1,351,618.00 | |
| Decrease in fall $6694/patient | $ 870,324.00 | $ 1,004,220.00 | $ 1,004,220.00 | $ 1,004,220.00 | $ 1,004,220.00 | $ 4,887,204.00 | |
| Total Revenue/Saving | $ 1,058,174.00 | $ 1,315,378.00 | $ 1,321,154.00 | $ 1,309,602.00 | $ 1,326,930.00 | $ 6,331,238.00 | |
| ROI The formula for ROI is grand total revenue/savings minus grand total expense is divided by total expenses. | 3.312565% | 4% | 4.08% | 3.89% | 3.82% | 3.17% | |
| CASH FLOW Cash flow is revenue minus expense in each year | $ (218,919.00) | $ 812,804.00 | $ 1,062,802.90 | $ 1,061,157.65 | $ 1,041,961.76 | $ 1,051,416.55 | $ 4,811,223.85 |
| Net Cash flow Net cash flow is cash flow from current year added to net cash flow from previous year. | $ (218,919.00) | $ 593,885.00 | $ 1,656,687.90 | $ 2,717,845.55 | $ 3,759,807.30 | $ 4,811,223.85 | $ 9,622,447.71 |
| Payback Period Payback period = final year with a negative cash flow + (absolute value of Net cash flows in that year divided by total cash flow in the following year) | 155.88% |
| W6A4 Budget Development |
| Bring forward your work from W4A3 and add ratios as directed in the Healthcare Budget Guide |
| W8A5 Estimated Expenses | |||||
| Refer to the Healthcare Budget Guide for directions on completing this Expense Forecasting scenario | |||||
| Expense Forecasting | |||||
| Based on the information provided, prepare an expense forecast for 20X1 using the template below: | |||||
| Spending during January- June 20X1 (6 months) | |||||
| · Fixed expense items: $210,000 | |||||
| · Variable expense items: $1,200,000 | |||||
| · One time expense: $50,000 of fixed expense money was spent on preparing for a Joint Commission survey | |||||
| Procedures preformed during January- June 20X1 (6 months) | |||||
| · Your department has performed 20,000 procedures during the first six months | |||||
| On November 1,20X1, two new procedure technicians will begin work. The salary and fringe benefit costs for each is: | $ 96,000.00 | yearly | |||
| Description | Fixed | Variable | TOTAL | ||
| Year to Date Expense | |||||
| Adjustments | |||||
| Add back “One Time” credits | |||||
| Deduct “one Time” expenses | |||||
| Adjusted total for year to date expense | |||||
| Annualization | |||||
| Divide by months (fixed) | 6 | ||||
| Multiple by months (fixed) | 12 | ||||
| Divide by volume | 20,000 | ||||
| Multiply by volume | 40,000 | ||||
| Annualized Amounts | |||||
| Adjustments | |||||
| Add back “One Time” expenses | |||||
| Deduct “One Time” credits | |||||
| Expense two new technicians | |||||
| Expense Forecast as of 12/31/X1 |
| W8A5 Breakeven Analysis |
| Refer to the Healthcare Budget Guide for directions on completing this Breakeven Analysis |
| Break-Even Analysis Scenario |
| You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420. |
| Price to be Charged |
| Collection Rate |
| Average Collection per Service |
| Variable cost per unit of service |
| Fixed Operating Costs |
| Break-Even Point =Fixed Cost/(Net Revenue per Unit-Variable Cost per Unit) |
| Capacity: |
| Demand: |
| Breakeven: |
| Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation? Explain your decision. |
Answer:
| W8A5 Marginal Profit and Loss | |||||
| Refer to the Healthcare Budget Guide for directions on completing this Marginal Profit and Loss scenario | |||||
| Marginal Profit and Loss Statement Scenario | |||||
| You are examining a proposal for a new business opportunity – a new procedure for which demand is expected to be 1,400 units the first year, growing by 600 units each year thereafter. The price charged per procedure is $1,000. The collection rate is anticipated to be 80%. Each procedure consumes $300 of supplies. Salary cost is estimated to cost $540,000 each year, fringe benefits are 25% of salaries, rent for the facility is $55,000/yr and operating cost are $120,000/yr. | |||||
| Year One | Year Two | Year Three | Year Four | Year Five | |
| Marginal Revenue: | |||||
| Units of Volume | |||||
| Price Procedure | |||||
| Collection Rate | |||||
| Marginal Net Revenue | |||||
| Marginal Costs: | |||||
| Variable Costs | |||||
| Units of Volume | |||||
| Variable Cost Supplies per Unit/procedure | |||||
| Marginal Variable Cost | |||||
| Fixed Costs: | |||||
| Salary Costs | |||||
| Fringe Benefits | |||||
| Rent | |||||
| Operating Cost | |||||
| Marginal Fixed Costs | |||||
| Total Marginal Costs | |||||
| Annual Marginal Profit | |||||
| Cumulative Profit Margin | |||||
| Question: Below is a marginal P&L for this business opportunity. Based on that analysis, should this opportunity be pursued. Explain your decision. | |||||
| Answer: |
| Option 1 Healthways Finacials | * The cells where you complete these calculations are highlighted in blue. | ||||||||||
| You have 2 data options for completing the Week10/11A6 analysis. If you cannot obtain the finacial documents for your organization (your project) use this Healthways Financials option. | |||||||||||
| Nurse-Run Clinic Scenario | |||||||||||
| Patient Encounters | FY 2018 | FY 2017 | |||||||||
| Established patients | 3,348 | 3,204 | |||||||||
| New patients | 331 | 287 | |||||||||
| Total Encounters | 3,679 | 3,491 | |||||||||
| Cash | $5,675 | $12,098 | |||||||||
| Financial Ratios: | |||||||||||
| Expense per Encounter = Total Operating Expenses / Total Encounters | |||||||||||
| Total Operating Revenue per Encounter = Total Operating Revenue / Total Encounters | |||||||||||
| Operating Margin = Net Income/Total Operating Revenue | |||||||||||
| Days Cash On Hand = (Cash + Cash Equivalents) / (Operating Expenses / Days in Time Period) | |||||||||||
| Table 2. HealthWays Clinic, Income Statement, FY 2018. | Table 3. HealthWays Clinic, Balance Sheet, December 31, 2018. | ||||||||||
| FY 2018 | FY 2017 | Horizontal Analysis | Current Assets | December 31, 2018 | December 31, 2017 | Current Liabilities | December 31, 2018 | December 31, 2017 | |||
| Gross Revenue (charges) | $558,520 | $497,221 | Cash | 5,032 | 9,877 | Notes Payable | 27,449 | 50,000 | |||
| Less write-offs & adjustments | 117,254 | 104,332 | Short-term Investments | 40,389 | 34,181 | Accounts Payable | 78,702 | 69,412 | |||
| Net Patient Revenue (collected) | $441,266 | $392,889 | Accounts Receivable | 63,392 | 59,359 | Accrued Expenses: | |||||
| +Other Revenue | 209,671 | 234,953 | Supply Inventories, at Cost | 16,029 | 14,918 | Salaries & Benefits | 38,265 | 28,274 | |||
| Prepaid Expenses & Other | 2,104 | 1,876 | Taxes | 1,419 | 1,398 | ||||||
| Total Operating Revenue | $ 650,937 | $ 627,842 | Total Current Assets | $ 126,946 | $ 120,211 | Interest Payable | 3,294 | 500 | |||
| Total Current Liabilities | $ 149,129 | $ 149,584 | |||||||||
| Operating Expenses | |||||||||||
| Salaries & Benefits | 459,171 | 445,396 | Property, Plant & Equipment (Fixed Assets) | Long-Term Liabilities | $0 | $0 | |||||
| Medical Supplies | 97,627 | 92,418 | Cost of PP&E | 56,047 | 55,701 | ||||||
| Office Supplies | 7,471 | 7,302 | Less Accumulated Depreciation | 4,194 | 3,943 | Net Assets | |||||
| Rent & Depreciation | 39,148 | 37,023 | Net PP&E (Net Fixed Assets) | $ 51,853 | $ 51,758 | Unrestricted | 28,541 | 20,569 | |||
| Other | 43,762 | 47,009 | Other Assets | $ 1,289 | 1289 | Restricted | 2,418 | 3,105 | |||
| Percentage change | |||||||||||
| Total Operating Expenses | $ 647,179 | $ 629,148 | Total Assets | $ 180,088 | $ 173,258 | Total Net Assets | $ 30,959 | $ 23,674 | |||
| Net Income | $ 3,758 | ($1,307) | Total Liabilities & Net Assets | $ 180,088 | $ 173,258 | ||||||
| Return on Assets | |||||||||||
| Financial Reports: Quick Tips for Interpretation | |||||||||||
| •income statement: positive net income indicates profitability | |||||||||||
| •balance sheet: positive equity indicates that there is a positive net worth, representing the amount remaining if an institution went bankrupt and had to liquidate | |||||||||||
| •compare changes in reports from prior year(s) to identify trends in financial performance, and with industry standards or internal benchmarks. | |||||||||||
| Financial Ratios | FY 2018 | FY 2017 | |||||||||
| Expense per Encounter | $ 175.91 | $ 180.22 | |||||||||
| Total Operating Revenue per Encounter | $ 176.93 | $ 179.85 | |||||||||
| Operating Margin | 0.58% | -0.21% | |||||||||
| Days Cash On Hand | 3.2 | 7.0 |
Interpretation/AnalysesIn your narrative analysis that you will write in the Healthcare Budget Request Template, you should address:Income StatementBalancesExpense per EncounterTotal Operating Revenue per EncounterOperating MarginDays Cash On Hand
| Option 2 Your project data |
| You have 2 data options for completing the Week10/11A6 analysis. Assuming you have access to your organization’s financial statements, you my use it. Bring forward your work from W6A4 and add any new data and calculations needed. |
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