Simulation_Review_Paper

Simulation Review Paper Nancy Young Health Care Financial Accounting HCS/405 Marty Stango February 7, 2011 Simulation Review Paper Financial Accounting from a Cardiac Care Hospital’s Perspective In 1975, the first hospital that was constructed in Kelsey is Patton-Fuller Community Hospital. They are most often dedicated to provide quality customer care; they specialize in programs that can maintain the health and welfare of the local community and other population. Patton-Fuller Health Care is a not-for-profit Community Hospital that services care such as emergency medical care, labor, delivery, physical therapy, radiology, cardiology, and surgery for all adults and children. In this paper I will be analyzing financial indicators for decision-making to understand the strengths and weaknesses of a Cardiac Care Hospital. In addition, I will be implementing strategies to improve the cash flow at Elijah Heart Center (EHC). At the same time, I will also be evaluating the funding options for obtaining medical equipment, and also the funding strategies for the success or failure of capital expansion (Apollo Group, 2011). On behalf of the summary and conclusion, I will need to explain what I learned from this simulation, what I would do differently if I performed the simulation over again, and following how I would apply what I have learned at my current or future job (Apollo Group, 2006). Phase I: Capital Shortage The board members at Elijah Heart Center (EHC) have recommended engaging my services as a Senior Consultant to execute and accomplish new strategies for his or her current problems. In the simulation, the financial accounting at EHC has reported that the revenues and quantity are increasing at a rapid rate. Even if the productivity of the employees is decreasing, it is good to consider the financial performance and to bridge the working capital shortage (Apollo Group, 2006). The first cost-cutting measures I recommended are to reduce the length-of-stay, which was not a good option. According to (Apollo Group, 2006), they advised that Revenue and Expenditure was the best opinion for EHC. The second choice was to change the skill-mix by hiring unlicensed assistive staff. This was a good option for saving costs in the long term. The loan option I chose was Option one. This was suggested as the best option. EHC will receive $2,300.000.00 from Medicare and from the managed care companies as payments in three months. This will solve EHC’s cash flow dilemma, and will help resolve the current cash flow problem. Although we will be paying a higher interest rate of 9.45%, this will help close the loan in three months (Apollo Group, 2006). Phase II: Funding Options for Equipment Acquisition Technology in medical equipment is rapidly growing. The finance department at EHC has reported that it is facing a possible operational capital shortage. The Chief Executive Officer, Gilbert Sanchez and his staff advised the senior consultant to implement two measures to accomplish the cash saving targeting at $750,000 for the first quarter. Gilbert Sanchez is concerned about purchasing a High Speed Scanner, an X-ray Machine, and a new Ultrasound System. The medical equipment at EHC will allow diagnostic tests and treatments to be completed more promptly, and the patient will not have to wait so long at his or her treatment appointments. As the senior consultant I decided the most cost-effective purchase for the High Speed CT Scanner was on a refurbished loan. For the new Ultrasound System, I chose operating lease, and finally for the X-ray Machine, I chose a Capital Lease loan (Apollo Group, 2006).. On my performance for establishing the cost-effective equipment strategies for the High-Speed CT Scanner is a refurbished loan, this was the best option for EHC. According to (Apollo Group, 2011), they advised that, A High-Speed CT Scanner is medium technology equipment with a useful life of 10 years. I chose a refurbished equipment loan. The equipment could become obsolescent in a period of five years or less, and will need to be upgraded. By buying a five-year-old CT scanner, we can use it to the end of the useful life, and then upgrade it. This is a money-saving option, as the refurbished CT scanner is not as expensive as the other options. Moreover, the loan for refurnished equipment is low at nine percent when compared to buying a new one. By buying an X-ray Machine on a capital lease is the best option for EHC. This option has a higher present value of payments compared to taking an operating lease or buying refurbished equipment. Acquiring the Ultrasound on an Operating Lease is the best option for EHC. Finally, acquiring the Ultrasound System is high technology equipment with a useful life of five years. An operating lease has a lower upfront payment and lower monthly installments. Because of the upgrade option, the operating lease helps to take care of technological obsolescence, even though we will be paying more for the operating lease (Apollo Group, 2006). Phase III: Carefully analyze the effects of the availability of Funding Options At the present time, Elijah Heart Center (EHC) is doing well, and profits are growing. With the number of patients increasing and waiting for heart surgery, this is also rapidly increasing. To manage the increase in patients, EHC has announced plans for a $75 million dollar expansion and improvement project to become the largest in the hospital. The project includes a new heart hospital, an additional 100 private rooms, and a consolidation of women’s services, new construction, reconstruction, and expanding the existing facilitities. Gilbert Sanchez advised the Senior Consultant to recommend finding the best funding option for the expansion plan (Apollo Group, 2006). After analyzing the effect of the three options, I chose the HUD 242 Loan Insurance Program. This is the most effective and critical funding strategy to the success or failure of the project. This was the best option for EHC’s expansion plan. The Net Present value (NPV) for the project is $221 million when funded through HUD 242 Loan Insurance Program. This is higher than the NPV for the other two options; one key reason is HUD 242 Loan Insurance Program allows the hospitals to have their balance financed as an investment that provides the lowest borrowing rates in the capital markets. With no agreement the hospital debts is often taken care of as unwanted items that are associated with high financing costs (Apollo Group, 2006). Explain what I learned from this Simulation What I learned from this simulation is when you are confronted with deadlines, critical situations, and decisions that call for action, often we respond to our instinct and make poor judgments. No matter if the issues are personnel, education, or business-related we do not take the time to consult with those who have been there. We do not investigate the resources that are available to us. There are different strategies that a business uses to solve situations. Before I use a strategy, give yourself time, you would need to do the research, (your homework), make sure you will benefit, and the company will benefit. I went back three times because I was distracted from the phone, dinner, and especially the teenager. Although the computer timed out, and this is my third time, then I finished the simulation late at night. What I would do differently, and apply what I learned to my current or future job This simulation was something very different. I have never done a simulation on the computer. A key benefit I would need to have some peace and quiet before I start a simulation. You actually cannot concentrate on figures when you are distracted. The decisions to be made on a simulation cannot make the decision on their own, because you would need to speak with the president and company officers. I would not apply this to my job, as I do not work in financial accounting. Summary and Conclusion In this simulation and in very organization to have good cash-flow they would need to have a reliable and quality patient care. To have a good cash-flow will automatically help improve the borrowing power of the organization, which will help in a secure income. In this simulation, the Senior Consultant improved the cash-flow specifications at EHC, by managing the working capital shortage. I introduced cost-cutting strategies, and decided on an appropriate loan strategy to deal with this dilemma. However, it was equally important to balance this with strategic investments. I proceeded to decide on the most cost-effective equipment strategy with the purpose to revamp the existing equipment inventory at the hospital. I analyzed the impact of the decisions on cash flow statement and the balance sheet of EHC. All of but one of my cost-cutting measures were not on target. Acquiring addition funding for EHC is a dangerous feature in the simulation. This requires careful thought, complete analysis, and the best funding options that require preparation and agreement. I also chose the best funding option for EHC. To maintain a business, the measures and strategies are very important in every industry. References Apollo Group. (2011). Patton-Fuller Community Hospital. Information Technology. Retrieved January 29, 2011. Retrieved From https://ecampis.phoenix.edu/secure/aapd/cist/vop/Healthcare/PFC/IT/ITNetDTop.htm. University of Phoenix. (2011). Health Care Financial Accounting: Analyzing Financial Indicators for Decision Making. Retrieved February 2, 2011. Retrieved From https://ecampus.phoenix.edu/secure/aapd/vendors/tata/HCsims/healthcare_accounting/he althcare_accounting_financial_indicators_simulation.html