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NURS 6211 Week 4: Understanding Revenue-Cost Classifications

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NURS 6211 Week 4: Understanding Revenue and Cost Classifications essay assignment

NURS 6211: Finance and Economics in Health Care Delivery | Week 4 essay assignment

Imagine you are the nurse manager at a small university medical clinic. As you sit in your office, preparing the budget for the coming quarter, what types of factors do you need to consider? You need to ensure that you have enough money to keep the facility operational. You have to consider how you will be reimbursed for services provided. Will you be paid per student or per individual service performed? Consider the daily costs of operating the clinic. How much will you need to pay nurses and receptionists? How much will you need to cover the purchase of medical supplies? What if there was a flu epidemic on campus? How would that affect your costs?

As a nurse manager, you need to understand how cash flows in or out of your organization or department, and the importance of tracking cash flow to keep operations running smoothly. This week, you consider the different reimbursement approaches used by health care organizations and how fixed and variable costs impact cash flow and net revenue.

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Learning Objectives

Students will:

  • Distinguish between fee-for-service and case-based service
  • Evaluate reimbursement approaches used by health care organizations
  • Calculate fixed, variable, and semi-variable costs

There are a number of different options for determining how to charge for services provided at a health care organization. In the case-based service approach, one set fee covers an entire procedure. For example, if you needed knee replacement surgery, the fee would include preliminary visits, the surgery, and follow-up visits. However, in a fee-for-service approach, every different step would incur a separate cost. The reimbursement approach taken has significant ramifications for how care is provided.

To prepare:

  • Review the information in this week’s Learning Resources focusing on reimbursement for services. How are these approaches the same or different in your own setting?
  • Identify an example of a fee-for-service approach and a case-based service approach.
  • Reflect on the benefits and limitations of each approach.
  • Review the article, “Which Health care Payment System is Best?” and examine the additional reimbursement strategies described. Consider the viability of these alternative strategies within your own organization (or one with which you are familiar).
  • Examine how the nurse-to-patient ratio is affected by the payment approach used and consider how this can impact quality of service.

By Day 3

Post an example that illustrates the difference between a fee-for-service payment and a case-based service payment. Explain the benefits and limitations of each approach. Assess the viability of utilizing, within your own organization (or one with which you are familiar), the two alternative reimbursement strategies described in “Which Health care Payment System is Best?” Analyze how the nurse-to-patient ratio is affected by the payment approach selected and how these impact quality of service.

Read a selection of your colleagues’ responses.

By Day 6

Respond to at least two of your colleagues on two different days. Expand on a colleague’s posting concerning the viabilities of the different reimbursement strategies. Suggest an alternative that might work within their organization and provide the reasoning behind your choice. Highlight any personal experiences with alternate strategies and how the strategy used impacted service.

Assignment: Looking Ahead: Application Assignment Net Revenue and Budgeting essay assignment

You will begin this assignment in Week 4 and it will be due by Day 7 of Week 5.

No one can predict the future, but accountants and financial managers must try and do exactly that! By examining net revenue, costs, and cash flow, you can get a clearer picture of what to expect in your organization’s (or one with which you are familiar) fiscal future. Using these metrics to look forward will enable you to more effectively plan budgets that accomplish organizational goals.

When developing a budget, what variables do you have to take into account? In health care organizations, two of the largest groups of factors that you must consider are first, volume, and second, staffing and supply. The number of patients and tests performed each day, as well as employees and their pay rates are all crucial pieces of information when determining a budget.

NURS 6211 Week 4: Understanding Revenue-Cost Classifications

In this Assignment, you address five scenarios: net revenue, fixed and variable costs, cash flow, volume budget, and staffing and supplies budget.

Note: For those Assignments in this course that require you to perform calculations you must:

Use the Excel spreadsheet template for the Week 5 assignment.
Show all your calculations and formulas in the spreadsheet.
Answer any questions included with the problems (as text in the Excel spreadsheet).
A title and reference page are NOT needed in this assignment. Put your name and assignment at the top of the Excel spreadsheet.

For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials.

To prepare:

Review the information in this week’s Learning Resources regarding net revenue, fixed and variable costs, and cash flow, and how they are used in financial decision making.
Review the budgeting information in Week 5 Learning Resources dealing with volume, staffing, and supplies budget.
View the following tutorial videos, provided in this week’s Learning Resources.
Week 5 Application Assignment Tutorial: Cash Flow Scenario
Week 5 Application Assignment Tutorial: Fixed Variable Scenario
Week 5 Application Assignment Tutorial: Net Revenue Scenario
Week 5 Application Assignment Tutorial: Staffing and Supply Budget Scenario
Week 5 Application Assignment Tutorial: Volume Budget Scenario
Use the Week 5 Application Assignment Template, provided in this week’s Learning Resources, to complete this assignment. Carefully examine the information in each of the scenarios and provide the necessary calculations. Using this information will help you answer the questions.
Note: All the scenarios will be submitted as one document. Each scenario will be on a different tab in the spreadsheet.

Scenario 1: Net Revenue Scenario

Your clinic provides four kinds of services:

Comprehensive initial medical consultation is priced at $250
Established patient limited visit is priced at $75
Established patient intermediate visit is priced at $125
Established patient comprehensive visit is priced at $250
Question: The profile of your patients is such that the average collection rate is 75%. Assuming you have 100 visits of each type each month, what amount of new revenue will you generate in the next 12 months?

Scenario 2: Fixed/Variable Cost Scenario

You have performed a cost analysis of your health care organization and have determined the following: based on the latest three years of information, your annual cost of operations is $1,600,000 with annual volume of 10,000 procedures. You have determined that certain of your supply items are fixed in nature (those marked with an F) while others are variable (marked with a V).

Question: An insurance company that is considering directing its 1,000 units per year of procedure business to your organization has approached you. For the last three years, you have been charging a price of $165 per procedure (with a 100% collection rate). Your board has mandated that you make $5 of profit from each of the procedures. You obviously want the highest possible price, but as you enter the negotiations, what is the lowest possible price you would be willing to accept from this payer?

Hint: Calculate the variable cost.

Scenario 3: Cash Flow Scenario

Your new business venture will begin operation on July 1, 20X2. You will hire staff effective January 1, 20X2 with a cost of $40,000 per month. You know from experience that collections lag billing by 3 months (in other words, once you bill for a service, you must wait 90 days for the payment to be received.) Your business volume is projected to be as follows:

Question: If you have $380,000 of cash on hand on January 1, 20X2, how much cash will you have at the end of June 20X3? Assume a 100% collection rate.

Scenario 4: Volume Budget Scenario

You manage lab services in a large hospital. You have the following data on both the hospital’s budgeted patient days and visits for budget year 20XX along with the ratio of lab tests to patient days or visits.

Question: Based on this raw data provided , how many lab tests would you anticipate for the coming budget year? If each test is priced at $20.00, how much gross revenue would you budget? Assuming each full-time lab technician (FTE) can perform 200,000 tests each year, how many full-time lab technicians would you plan for?

Example on Template: 2 North Bldg calculated. You will need to complete 2 South Bldg, ICU and OPD

Scenario 5: Staffing and Supply Budget Scenario

Calculate the supplies budget necessary to operate your unit for the fiscal year beginning January 1, 20X8. It is your expectation that you will perform 24,820 procedures in the budget year. The following spending data is available for the period January 1 to March 31, 20X7 during which time procedure volume amounted to 3,240. Items marked (F) are considered fixed, those marked (V) are considered variable. Inflation is planned at 4%.

In reviewing performance to date, you note that in January, you purchased $150,000 of D5W fluid replacement charged to IV solutions, which represents an entire year’s supply. In addition, you returned $2,800 of office supplies for credit from the vendor in Febuary. These supplies were purchased in a previous fiscal year.

You also need to prepare the salary budget for the same fiscal year. You have determined that staff needs are for 6.5 FTEs.

A pay raise will be given to all staff on October 1st of each year at a rate of 8 percent. In making your calculations, always round to the nearest whole dollar for annual salary amounts, but keep pennies in the hourly pay rates. New staff begins the new fiscal year at $16.00 per hour.

This Assignment will be due by Day 7 of Week 5. Be sure and include all of your calculations.

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