Simulation Review Paper on Elijah Heart Center

Last Updated: 18 Apr 2023
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Elijah Heart Center (EHC), is a healthcare organization focused on cardiac health. The facility is equipped to handle the full spectrum of cardiovascular services for physicians and patients. The hospital also provides outpatient services for less invasive procedures and clinical care. Although the organization’s patient volume is stable and increasing in volume rapidly, there is a deficit in regards to profitability. As the senior financial consultant, I will present plans for short term and long term goals if needed. I will also recommend specific measures to modernize the hospital and provide specific plans for hospital expansion.

Financial Portfolio Elijah Heart Center has managed to stay in operation due to excellent patient services. In the process of great patient care, poor financial decisions have been made in the past that now hinder the profitable spectrum of the organization. Research data revealed that issues that have affected this organization’s financial budget. The data revealed that (EHC) gave large discounts to manage care companies. The nursing staff was affected because higher wages were paid to outside agencies who supplied contract nurses.

Of course when dealing with government health funded insurance carriers such as Medicare, the reimbursement levels are well below budget standards. Insurance rates are not current and based on past medical costs which stunts the financial growth of the hospital. Liabilities have increased and ? of the liabilities are related to accounts payable. The hospital equipment will need replacement soon due to extensive usage. Another issue is the constant placement of unused equipment in patient’s rooms. This causes conflict because if the equipment is placed in the patient’s room, it is considered is supposed to be charged to the patient.

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Phase 1 Capital Shortage Bridging a working capital shortage is one of the strategies that can help increase the hospital’s revenue if a true concrete plan can be formulated. Once all data was received, suggestion from the Executive Board was taken into consideration before any final decision was to be made. The main focus to be considered while bringing forth a strategic plan, is to understand the healthcare business as a whole. According to Baker and Baker (2009), The health care industry is a service industry.

It may have inventories of medical supplies and drugs, but those inventories are necessary to service delivery, not manufacturing functions. With this information in mind, two specific cost cutting options were chosen geared toward staffing and patient care. The first option addressed was to decrease the staff hired from outside sources. Nursing and other employees who were hired via contracts worked for higher rates of pay. This rate is normally double the amount of the staff employee. Depending on the specific position and pay grade, large quantities of contract workers drains the current financial budget and reserves.

The goal being strived for is the ability to take money being paid out to contract workers, and use it to hire staff at a reasonable rage of hire. This leads into the second option that was chosen. Changing the skill mix is a great strategy to help retain employees, add to their skills to make them more of an asset, and increase the employee morale. It is known that without contract staff to supplement nursing the strain of patient care would increase. That is why it is necessary to utilize the staff already in house that known the routine to be open to learning more skills.

The asset to this strategy is that the nurses who are hired for full time status will enter an organization that promotes advanced clinical learning. The projected outcome of this plan is a net savings of at least 90% the first year, and an increase of financial savings by the second net year. Loan Options A decision in regards to loan options is a strategic method that can be harmful to the company deficit if not chosen correctly. After consulting with the executive team, the decision to select a refurbished loan with a lower interest rate of 9% was better than selecting a new loan with an interest rate of 9. 5%. Having the option to refinance a new loan would not be as lucrative or flexible in the first years of loan repayment. Outcome of Decision The outcome of these two decisions showed major improvements among the internal/external working environment as well as decreased overloaded expenses. The loan (option 2), was the best choice @ $1,500. 000, with a low interest rate of 9. 00%. The interest rate is lower than loan (option 1), at 9. 45% interest. The Monthly payments of $131. 177 versus $131. 490 was also appealing. The cost cutting strategies worked for (EHC) and improvement was immediately seen.

Phase 2 Funding Options for Equipment Acquisitions The working capital shortfall is now under control at (EHC). With the increased patient flow, the technological aspects of the hospital must now be addressed. After meeting with the Board of Directors, Gilbert Sanchez stated the desire to purchase medical equipment to continue to provide excellent care to clients. The option was given after consultation to either buy new or refurbished medical equipment by acquiring a loan, or acquiring the equipment on lease (capital or operating).

In large healthcare organizations, there is constant competition between departments for funding request for new equipment and supplies. According to Baker and Baker (2009), the reason for new equipment is needed must be clearly stated. The acquisition cost must be a reasonable figure that contains all appropriate specifications. The number of years useful life that can be reasonably extended from the equipment is also an important assumption. Mr. Sanchez provided all the necessary information needed. A different and daring approach was used to purchase the equipment needed for the hospital.

The High Speed CT Scanner, X-Ray Machine and Ultrasound were all purchased on a Refurbished Equipment Loan. The optimal choice was to purchase the High Speed CT Scanner on a Refurbished Equipment Loan, the X-Ray Machine on a Capital Lease. The choice made for this issue was concrete. The most cost efficient method was used to revamp the equipment in use at the present time. The refurbished loan amount was purchased at a 9 % interest rate.

When checking the balance sheet, the total assets and total liabilities were the same at $230. 621. Phase 3 Options for Capital Expansion Now that the capital shortage and equipment acquisition were addressed and the financial improvement of the hospital is rising, there is now a need for added space. The executive committee have plans to add 100 new private rooms as well as consider the expansion other departments such as surgical suites, endoscopy, surgical suites, and women’s service. Other expansions include 5 operating suites along with seven Cardiac Catheterization Labs. Also, twenty critical care patient rooms were also on the list to be added. The options available for selection included, Tax-Exempt Revenue Bonds, HUD 343 Loan Insurance Program and Private Bank Funding.

I chose Private Bank Funding. The interest rate is slightly higher than the other options but the Net Present Value (NPV) was better than the total cost of the project. The total cost was $75,000 and the (NPV) came to $180. 250. According to Baker and Baker (2009), the Net Present Value, is a discounted cash flow method. It is based on cash flows in that it takes all the cash (incoming and outgoing) into account over the life of the equipment over this life of the equipment ( or if applicable, over the life of the relevant project).

The strategic collaboration between the Board Executives and myself resulted in a great outcome, bringing overall improvement to the organization. I learned the importance of financial budgeting and streamlining with the focus on staff and patient satisfaction. I honestly would not change my decision on this simulation. I feel confident in my decisions as the consultant. I will take what I have learned from this assignment and apply the methods used to maintain a competent financial budget as well as monitor and maintain adequate employee staffing ratios.

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Simulation Review Paper on Elijah Heart Center. (2017, May 07). Retrieved from

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