- Reflect on the expenses and revenues you considered in the Week 4 Assignment.
- Consider any other expenses that you have yet to account for in the development, launch, and implementation of the healthcare product or service you have proposed.
- Consult with your internal finance counselor to help identify and estimate any hidden expenses that may not be obvious.
W1A1 HealthWaysBudget
| Table 1. HealthWays Clinic, Monthly Expense Budget Report, June 2018. | |||||||||
| Item | June 2018 | May 2018 | 2018 YTD | ||||||
| Budget | Actual | Difference | Actual | Budget | Actual | All blue shaded cells require your answers. | |||
| Physician FTE | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | ||||
| Nurse PractitionerFTE | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | ||||
| Encounters: | |||||||||
| Established patients | 275 | 291 | 286 | 1650 | 1671 | ||||
| New patients | 25 | 18 | 27 | 150 | 164 | ||||
| Total encounters | |||||||||
| Expenses: | |||||||||
| Physician Salaries & Benefits | $10,500 | $10,502 | $10,509 | $63,000 | $63,149 | ||||
| NP Salaries & Benefits | $20,000 | $20,992 | $20,191 | $120,000 | $122,001 | ||||
| Clerical (2 FTE) Salaries & Benefits | $6,667 | $6,771 | $6,683 | $40,000 | $41,978 | ||||
| Total personnel expense | |||||||||
| Medical supplies | $7,500 | $8,136 | $7,994 | $45,000 | $47,883 | ||||
| Office supplies | $623 | $583 | $508 | $3,498 | $3,407 | ||||
| Rent | $2,917 | $2,917 | $2,917 | $17,502 | $17,502 | ||||
| Depreciation | $333 | $346 | $346 | $1,998 | $2,050 | ||||
| Capital Expenses | $3,333 | $3,480 | $3,480 | $19,998 | $20,439 | ||||
| Overhead | $167 | $167 | $167 | $1,002 | $1,002 | ||||
| Total non-personnel expense | |||||||||
| Total health center expense | |||||||||
| Interpretation: | |||||||||
| I. Answer the following question related to the results of your calculations: What interpretations can you make based on the data? What is happening in regard to such measurables as: | |||||||||
| 1. The full-time equivalents (FTE) for HealthWay employees: | |||||||||
| 1. Answer: | |||||||||
| 2. The number of encounters, both new and established: | |||||||||
| 2. Answer: | |||||||||
| 3. Non-personnel expenses: | |||||||||
| 3. Answer: | |||||||||
| 4.Total expenses: | |||||||||
| 4. Answer: | |||||||||
| II. If these trends continue, what could it mean for HealthWays? What strategies might they employ to address any issues your analysis suggests? | |||||||||
| Answer: | |||||||||
W2A2 Practice Design
| W2A2 Practice Design |
| Refer to the Healthcare Budget Guide for an example of what to include and how it should look. |
W4A3 Estimated Expenses
| W4A3 Estimated Expenses |
| Refer to the Healthcare Budget Guide for an example of what to include and how it should look. |
W6A4 Budget Development
| W6A4 Budget Development |
| Bring forward your work from W4A3 and add ratios as directed in the Healthcare Budget Guide |
W8A5a Expense forecasting
| W8A5 Estimated Expenses | |||||
| Refer to the Healthcare Budget Guide for directions on completing this Expense Forecasting scenario | |||||
| Expense Forecasting | |||||
| Based on the information provided, prepare an expense forecast for 20X1 using the template below: | |||||
| Spending during January- June 20X1 (6 months) | |||||
| · Fixed expense items: $210,000 | |||||
| · Variable expense items: $1,200,000 | |||||
| · One time expense: $50,000 of fixed expense money was spent on preparing for a Joint Commission survey | |||||
| Procedures preformed during January- June 20X1 (6 months) | |||||
| · Your department has performed 20,000 procedures during the first six months | |||||
| On November 1,20X1, two new procedure technicians will begin work. The salary and fringe benefit costs for each is: | $ 96,000.00 | yearly | |||
| Description | Fixed | Variable | TOTAL | ||
| Year to Date Expense | |||||
| Adjustments | |||||
| Add back "One Time" credits | |||||
| Deduct "one Time" expenses | |||||
| Adjusted total for year to date expense | |||||
| Annualization | |||||
| Divide by months (fixed) | 6 | ||||
| Multiple by months (fixed) | 12 | ||||
| Divide by volume | 20,000 | ||||
| Multiply by volume | 40,000 | ||||
| Annualized Amounts | |||||
| Adjustments | |||||
| Add back "One Time" expenses | |||||
| Deduct "One Time" credits | |||||
| Expense two new technicians | |||||
| Expense Forecast as of 12/31/X1 |
W8A5b Breakeven Analysis
| W8A5 Breakeven Analysis |
| Refer to the Healthcare Budget Guide for directions on completing this Breakeven Analysis |
| Break-Even Analysis Scenario |
| You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420. |
| Price to be Charged |
| Collection Rate |
| Average Collection per Service |
| Variable cost per unit of service |
| Fixed Operating Costs |
| Break-Even Point =Fixed Cost/(Net Revenue per Unit-Variable Cost per Unit) |
| Capacity: |
| Demand: |
| Breakeven: |
| Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation? Explain your decision. |
Answer:
W8A5c Marginal Profit and Loss
| W8A5 Marginal Profit and Loss | |||||
| Refer to the Healthcare Budget Guide for directions on completing this Marginal Profit and Loss scenario | |||||
| Marginal Profit and Loss Statement Scenario | |||||
| You are examining a proposal for a new business opportunity – a new procedure for which demand is expected to be 1,400 units the first year, growing by 600 units each year thereafter. The price charged per procedure is $1,000. The collection rate is anticipated to be 80%. Each procedure consumes $300 of supplies. Salary cost is estimated to cost $540,000 each year, fringe benefits are 25% of salaries, rent for the facility is $55,000/yr and operating cost are $120,000/yr. | |||||
| Year One | Year Two | Year Three | Year Four | Year Five | |
| Marginal Revenue: | |||||
| Units of Volume | |||||
| Price Procedure | |||||
| Collection Rate | |||||
| Marginal Net Revenue | |||||
| Marginal Costs: | |||||
| Variable Costs | |||||
| Units of Volume | |||||
| Variable Cost Supplies per Unit/procedure | |||||
| Marginal Variable Cost | |||||
| Fixed Costs: | |||||
| Salary Costs | |||||
| Fringe Benefits | |||||
| Rent | |||||
| Operating Cost | |||||
| Marginal Fixed Costs | |||||
| Total Marginal Costs | |||||
| Annual Marginal Profit | |||||
| Cumulative Profit Margin | |||||
| Question: Below is a marginal P&L for this business opportunity. Based on that analysis, should this opportunity be pursued. Explain your decision. | |||||
| Answer: | |||||
W10-11A6 HealthWays Financials
| Option 1 Healthways Finacials | * The cells where you complete these calculations are highlighted in blue. | ||||||||||
| You have 2 data options for completing the Week10/11A6 analysis. If you cannot obtain the finacial documents for your organization (your project) use this Healthways Financials option. | |||||||||||
| Nurse-Run Clinic Scenario | |||||||||||
| Patient Encounters | FY 2018 | FY 2017 | |||||||||
| Established patients | 3,348 | 3,204 | |||||||||
| New patients | 331 | 287 | |||||||||
| Total Encounters | 3,679 | 3,491 | |||||||||
| Cash | $5,675 | $12,098 | |||||||||
| Financial Ratios: | |||||||||||
| Expense per Encounter = Total Operating Expenses / Total Encounters | |||||||||||
| Total Operating Revenue per Encounter = Total Operating Revenue / Total Encounters | |||||||||||
| Operating Margin = Net Income/Total Operating Revenue | |||||||||||
| Days Cash On Hand = (Cash + Cash Equivalents) / (Operating Expenses / Days in Time Period) | |||||||||||
| Table 2. HealthWays Clinic, Income Statement, FY 2018. | Table 3. HealthWays Clinic, Balance Sheet, December 31, 2018. | ||||||||||
| FY 2018 | FY 2017 | Horizontal Analysis | Current Assets | December 31, 2018 | December 31, 2017 | Current Liabilities | December 31, 2018 | December 31, 2017 | |||
| Gross Revenue (charges) | $558,520 | $497,221 | Cash | 5,032 | 9,877 | Notes Payable | 27,449 | 50,000 | |||
| Less write-offs & adjustments | 117,254 | 104,332 | Short-term Investments | 40,389 | 34,181 | Accounts Payable | 78,702 | 69,412 | |||
| Net Patient Revenue (collected) | $441,266 | $392,889 | Accounts Receivable | 63,392 | 59,359 | Accrued Expenses: | |||||
| +Other Revenue | 209,671 | 234,953 | Supply Inventories, at Cost | 16,029 | 14,918 | Salaries & Benefits | 38,265 | 28,274 | |||
| Prepaid Expenses & Other | 2,104 | 1,876 | Taxes | 1,419 | 1,398 | ||||||
| Total Operating Revenue | $ 650,937 | $ 627,842 | Total Current Assets | $ 126,946 | $ 120,211 | Interest Payable | 3,294 | 500 | |||
| Total Current Liabilities | $ 149,129 | $ 149,584 | |||||||||
| Operating Expenses | |||||||||||
| Salaries & Benefits | 459,171 | 445,396 | Property, Plant & Equipment (Fixed Assets) | Long-Term Liabilities | $0 | $0 | |||||
| Medical Supplies | 97,627 | 92,418 | Cost of PP&E | 56,047 | 55,701 | ||||||
| Office Supplies | 7,471 | 7,302 | Less Accumulated Depreciation | 4,194 | 3,943 | Net Assets | |||||
| Rent & Depreciation | 39,148 | 37,023 | Net PP&E (Net Fixed Assets) | $ 51,853 | $ 51,758 | Unrestricted | 28,541 | 20,569 | |||
| Other | 43,762 | 47,009 | Other Assets | $ 1,289 | 1289 | Restricted | 2,418 | 3,105 | |||
| Percentage change | |||||||||||
| Total Operating Expenses | $ 647,179 | $ 629,148 | Total Assets | $ 180,088 | $ 173,258 | Total Net Assets | $ 30,959 | $ 23,674 | |||
| Net Income | $ 3,758 | ($1,307) | Total Liabilities & Net Assets |
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