Question

Short Case: Decisions - what to do?
There are some individuals that believer these ratios are too heavily relied upon and that they do not truly assess an organization's financial status. In reality, they provide a comparison of where the organization stands to other similar organization within the same industry. If a 100 bed hospital on average has only 50 beds filled each day, there is a possibility that the hospital is generating revenue below its projected budget and has had to reduce staffing. It would not make good business sense to staff for 100 patients when at best you would only occupy 50 of the 100 available beds.
It is probably safe to assume that this hospital is not in a profitable state based on the number of occupied hospital beds? In its best days, it was the only hospital in the area and now there are 2 competing hospitals. The mission of the hospital has not changed since it opened; it is "to be the best primary hospital provider within 60 miles". It offers a full range of ER and hospital care (x-rays, MRIs, clinics, specialty care, etc.)
While the hospital does have an ER, it is not a Level I trauma hospital. Additionally, due the a significant loss of jobs within the local community, many of the residents no longer have health insurance and/or are on Medicare or Medicaid.
I know there is little information to work from, but give it a try.


Short Case
1. As you are the CEO, would you try to turn this situation around or prepare the hospital for closure.
2. What ratios would you use as part of your analysis and why?
3. What are some of the other areas in which the hospital would need to consider reductions to meet its budget. What are some of the other options that the hospital could pursue to address its financial status?
4. Would this hospital be a good candidate for a merger/acquisition? Please explain the rationale for your choice and identify what assumptions your decision was based on.

Answer 1

1. As a CEO, I would  try to  turn the situation around with new strategies, instead of preparing the hospital for closure. Hospitals have to rethink from the traditional way of operating , they should adopt more innovative role of a Health care facility , that provides services not only the care of sick , but also the services for Health maintanance. Hospitals vission and values have to be changed , even if the mission statement is remaining unchanged, according to the need of the present time. Hospital has to focus on one specilized area , such as Emergency care , along with the provision of general care. To compete with the other hospitals, the hospital has to provide great services and should take name in one specific area of care and should maintain the patient satisfaction by providing quality care.

2. I would use the ratio of staff not  based on number of beds , but on the average number of patients. The required number of nurses for 50 patients is enough for the hospital. Number of RN: LPN ratio also can be adjusted according to the nature of admissions. Hospital can cut off the ratio or number of staffs, who has same responsibilities or sharing responsibilities , such as more than one manager positions. Administrative or office staff ratio also can reduced according to the number of admissions and administrative responsibilities.  

3. To reduce   the costs , hospital can reduce the wages and salaries , after conducting a discussion with the staff and prior notices , also seek opinion from the staff to reduce the costs . Participating staff in the planning if cost reduction programme can ensure their co- operations.

Other ways to cut down the cost:

* Technology adoption: Tele health technology proven to reduce the readmission rate. Proper follow up through Tele health technology reduces the patient complaints and readmissions, there by the cost of readmissions.  

* Clinical decision support system can be used to enhance the diagnosis, and to prevent unnecessary diagnostic tests etc.

To improve the financial status, hospital can rent out its extra premises to commercial parties, without disrupting the hospital system. Provide quality care to the patient and enhance patient satisfaction . This has a high potential to increase hospital popularity and buisiness.  

4. Merging can be good option for the hospital . Merging is a process of combining two or more buisiness or organisation into one and to achieve the goal .

If the hospital itself , doesn't have enough budget to reform itself to another innovative health reform center, then it is better to merge with another private health care company and to continue to work. As more people in the community depends on Medicare or Medicaid services , it can reform to an HMO ( Health maintanance organisation) or MCO (Managed Care Organization) after merging or without merging .