I will discuss the best options for the healthcare center; this will include evaluating funding options for capital expansion, what the best option would be when it comes to upgrading the hospitals equipment, and how bridging a working capital shortage will help to turn financial matters around. Phase l: Capital Shortages In 1998 – 1999 New York, the hospitals lost on an average $678 million due to Medicare cuts that were imposed by the Balanced Budget of 1997.
It was difficult for managed care organizations to receive the full payments on managed care plans. I am assisting EACH in the best way possible to reach $750,000 for the first quarter. The simulation offered two options to choose from in order to receive the best loan to cover the remaining shortfall for Elijah Heart Center (EACH). I chose Loan option 1, it seemed to make more sense, and according to the simulation option 1 was the best to choose from to solve the working capital shortfall at EACH. In 3 months EACH will be receiving from Medicare and Managed Care Organizations to assist in loving the cash flow issue.
EACH will have to pay a higher rate interest at 9. 45% but there is no repayment limitation. Loan option 2 had to be prepaid within six months (impossible without going further in debt). I also suggested that reducing a great amount of agency contracted staff would be beneficial for Elijah Heart Center as well, because the contracted workers receive much higher wages than those of the staff. The full – time staff at the care center has been there a long time and have established a patient worker relationship, the staff truly care for the patients whereas, the agency come and go.
When this is implemented there will be a huge change in the “Revenue and Expenditure Projections”, and all will notice this is the most effective measure in reducing cost. I also chose changing the skill mix (first time I had heard of this), this will increase the “Revenue and Expenditure projections” in the beginning and the future months. It is a good decision to hire unlicensed assisted personnel; they may have 40 or less hospital training but they can help out by doing such work as the Stanza’s (feed, bathe, and dress the patient), and the
Registered Nurses can focus fully on his or her Job duties and the patient will receive appropriate care. By making these decisions EACH will not only save $811,249 but they would have exceeded their goal by the first quarter. The capital shortfall issue has been solved for EACH and it also is increasing. Phase II: Funding Options for Equipment Acquisition CEO Gilbert Sanchez is interested in acquiring hospital equipment such as a High- Speed CT Scanner, X-Ray Machine, and a new Ultrasound System. Mr.. Sanchez wants the best for the patients as well as the staff; having updated equipment will reduce tress, and patient wait times.
The most cost effective equipment acquisition strategy would be to purchase wisely, meaning get the best for your dollar. I liked the idea of buying refurbished medical equipment. The best option would be to purchase a refurbished High-Speed CT Scanner, do operating lease on the Ultrasound, and a capital lease on the X-Ray Machine. The High-Speed CT Scanner seems to be the smartest buy because it is the cheapest of the three, and the life p is approximately 10 years, and it is medium technology that can become obsolescent in years, it is already 5 years old, this equipment can be upgraded.
Elijah Heart Center also wants to keep up with the latest technology, and in doing the Ultrasound System would be the best option for this reason, but we would need to acquire an operating lease for the low upfront payments and low monthly payments. It does cost more to keep up with the Joneses. Phase Ill: Funding Options for Capital Expansion HAD 242 Loan Insurance Program is the best choice for the expansion of She’s project; this program provides mortgage insurance for hospitals. According to Rural
Assistance Center (2002 – 2014), “The maximum term on the loan is 25 years, loan to value may not exceed 90%, a one-time fee of 0. 8%, the fixed annual premium is 0. 5% of the remaining balance and the FAA insures 99% of the loan amount” (HAD Section 242: Hospital Mortgage Insurance Program). This insurance can be used for remodeling, construction, refinancing, equipment and what EACH needs expansion. Hospitals are able to finance as an investment grade, and the hospital will get the lowest rate possible when it comes to borrowing funds in capital markets.
The rejects Net Present Value (NP) is $221 million thru this program. In 8 years the hospital can buy back the bonds if interest rates were to decrease. In conclusion, I learned that when making money matter decisions it is best to look at all every option possible; what may seem like a good option at the time may not be good for me in the long run. Elijah Heart Center will have a promising future as long as they follow the options and strategies given. References Rural Assistance Center. (2002 – 2014). Rural Assistance Center. Retrieved from http:// www. Reconcile. Org/funding/95.
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