Question

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Course Title: HSM 543 Health Service Finance Class

Week 6: You Decide Assignment

Professor’s Name:

Scenario

you sat in the CFO chair, studied a real world hospital Accounts Receivable (AR) problem with your team, and came up with a Process Improvement Plan to reduce Days in Accounts Receivable and improve cash flow to you hospital. Well the great news is that your plan worked! This morning your Days in AR stand at 67. Not perfect.... but much better, and you have five payrolls of cash on hand right now. Things are looking up for Community Memorial! And then just before lunch you get a call from the Bill Jacobs, Human Resource Director at Commercial Intertech (CI), the largest employer in the community. Bill says, "I wanted you to hear it from me first. We signed a contract yesterday with MegaPlan Health. They will be the managed care organization for all 4,500 of our employees and their families. About 9,000 patients total. I'm sure that you will want to get a contract with MegaPlan as soon as possible. I noticed that your hospital is not on their Preferred Provider Network (PPN), and I am pretty sure that you will want to be, so that our employees can continue using the facility." By the time you thank Bill for the heads up, the acid is already churning in your stomach. In the hospital world, MegaPlan is known for cut-throat tactics, negotiating steep discounts with hospitals, and fighting every claim the hospital makes. Commercial Intertech has every right to contract with any health insurance provider they like, but now you have a problem. If you cannot get a decent contract with MegaPlan and become part of their Preferred Provider Network (PPN), many local patients may bypass your hospital and go the next closest PPN facility. Delivered to your office this afternoon, by no coincidence, is a contract proposal from MegaPlan. It calls for the hospital to provide a 35% discount from charges to MegaPlan and all of its members. And it includes service pre-authorization requirements which will make life very difficult for your business office. You know from experience that the hospital loses money whenever the discount from charges exceeds 20%.

Your Role

You are the hospital CFO, trying to solve the managed care problem.

Key Players

Dr. John Evans, Chief of Staff

Katrina Eaton, CEO

Linda Freed, Business Office Manager

Nancy Stritmatter, CNO

Assignment

Given the scenario, your role and the information provided by the key players involved, it is time for you to make a decision.

What will you do? Whose advice makes the most sense to you in this situation, and how will you proceed?

Understanding

Here you are to demonstrate a strong grasp of the problem at hand. Also, demonstrate an understanding of how the course concepts apply to the problem.

Provide at least 3 paragraphs that contain at least 5 sentences.

Analysis

Here, you are to apply original thought to solving the business problem. Also, apply concepts from the course material correctly toward solving the business problem.

Provide at least 3 paragraphs that contain at least 5 sentences.

Execution

Here you are to type your answer clearly and succinctly using strong organization and proper grammar. Use citations correctly

Provide at least 3 paragraphs that contain at least 5 sentences

References

At the top of page 3, provide your references in APA Format. Provide at least 3 references for your paper.

Some of the Course Keys concepts

Financial planning

Strategic Budgeting

Strategic planning

Management and decision making

accounts receivable

Third party payers

Cost shifting

Incremental cost

Working capital

Current assets

current liabilities

financial statements

future trends

Answer 1

Being a CFO I would like to improve working capital position. In case working capital position is not so good, we would not be able to procure medicines,equipments etc which affetcs our hospital's image in the society. Present AR 67 days should be reduced to 30-45 days to get the reimbursement from TPA. Since new plans is charging 35% we would negotiate with Mr. Bill Jacob's office to make reimburse with in 30-40 days. By doing this current asset position will be improved.

I would collect curent datas from our key players ( Business office manager and CNO) who are in touch with patients and employees both. Under a new scheme as proposed, Under mega plan, we can accept only upto 4500 patients. In case patients are more than this number, it would not be acdeptable. Chief of staff / busniess office manager will provide the strength of previous years.

At this stage strategic planning would be required. In case our patients are more than 4500, we should directly approach to TPA (Mega Plan Health) rather than through Bill Jacob's office. I would contact directly to TPA and negotiate properly to reduce the discount from 35% to 25% which seems to reasonable. Thus we will save discount amount.

We would also request to Mega Health Plan to remoe the condition of Pre-authorization requirement for any patient to assist the patients which would increase number of patients in hospital. It will be the duty of Business office manager to review the recovery is being made within stipulated period (30-45 days) from TPA.

Before negotiating with TPA/ Bill Jacob, the following should be considered :

> Availability of nearby hospitals. If there are more hospitals we would not be in a position to negotiate properly.

> We should collect datas through Dr. John (Chief of staff) about nearby hopspitals ( who are TPA agency, numbr of patients, discount to TPA, AR-days from TPA/ agency, staff employed etc)

> Considering the above a fiancial budget would be prepared to analysis about working capital to meet out day to day expenditures and other current liabilites.

> Capital Budget should also be prepared to buy the new equipments and instruments , construction of new wards,etc.

> It will be gthe duty of Business manager to review the same as per budget planned.

> Excess staff ( nursing, clerical, doctors) should be removed to emplyees cost..

> Its respnsibility of CEO (katrina) to see visualize the future trend of the business of hospital about new technology,efficiency of staff , retired doctors from Govt hospitals who have much knowlege about their profession who may attract patients were in touched with them in the past.

> Experienced doctors should be recruited to enroll number of patients in hopspital.

> I would like to review the fee structure whether is comparable with other hospitals. Reasonable fee will increae number of patients.

> I would also advise to staff to maintain good behaviour with the society to get more business.

> Inventory ( medicines, chemicals,etc) should be minimum as per requirement. Excess purchase will create current liabilities. Inventory should be verified physically with computer record.

> Old equipments (Furniture & Fixtures) , Macheries would be sold out to improve the liquidity.

> Payment to suppliers ( medicines, equipments) will be made within stipulated time to get more discounts from them

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