Analyzing Finacial Indicators for Decison Making Paper free essay sample

Analyzing Financial Indicators for Decision Making Paper Bruce Conner HCS/405 February 21, 2011 Debbie Allen Analyzing Financial Indicators for Decision Making Paper Why are most hospitals in the United States economically susceptible? During the recession the health care industry was often faced with many obstacles. Government funding has been cut; people are not able to afford health insurance and just an all around downturn in the economy. The analysis of financial stability is directly involved with good decision making and planning. Hospitals have the challenge of making adjustments according to the economy, patient need, and quality of care. The analysis simulation showed some points on how to direct financials so that the Elijah Heart Center can make good use of funds to the best of the organizations ability. Capital Shortage for Elijah Heart Center The cost cutting option selected was changing skill mix and reducing agency staff. The reason I choose changing skill mix is because, this method will help with the economic problems that is facing the hospital. Hiring unlicensed individuals will cut overhead cost â€Å"this option will allow nurses to delegate simple tasks in order to concentrate on more complicated tasks† (University of Phoenix, 2011, pp. 1-12). This aspect will help to navigate, and clear up loose ends. The skill mix will allow other personnel to cross-train and learn skills to assist with issues that may arise. The other cost cutting option I selected was reducing agency staff. My logic for this was because the organization would be adding more personnel there would be a need to reduce at some place.The agencies usually charges a fee for recruiting health professionals, if the company stopped using the agency, the company can save money and utilized the funds for other objectives. Agency staffing is a great tool to use by managers; managers usually use agencies to save time. Managers are busy and often times do not have time to recruit and interview perspective employees, so they hire agencies to do this. In some aspect the agency is good because of time management; however, t cost money and this is an aspect that I felt the organization can do without. The loan option chosen was option one. The reason I elected that one was because of the amount of interest saved and paid out versus option two. Option one had an interest rate of 9. 45% with a total interest paid of 56,589 and an interest saved of 21,297. Though option two had a lower interest rate, the amount of interest saved was a little less than option one. My basic motivation for choosing option one was interest.If the interest rates are lower this can help the hospital to save money in that aspect, even though the savings are not that much, it adds up resulting in a better money management. My decision was the same as the optimal goal. Both the cost cutting measures and the loan option was the same. Funding Options for Equipment Requisition The equipment option that I selected was operating lease for high speed CT scanner, x-ray machine, and ultrasound system. The focus of my choices was the liability cost.The options stated showed that the organization would have higher liability cost than operating lease. The operation lease has a 100% upgrade option. This can be important when purchasing equipment. Medical equipment is always changing, manufactures are always finding ways to make a product better, and sometimes there is equipment recall that would require an organization to change the machine anyway so my thoughts are it would be cost-effective for the organization to have the ability to upgrade without cost.What I did not factor was the annual maintenance. Annual maintenance is crucial to an organization such as a hospital. If an important machine was to stop working while in use this could cost the hospital unnecessary funds. Furthermore the government may have some sort of regulation that requires a hospital to have annual maintenance on the equipment and if the maintenance is not meet the company can be fined. This is also important, maybe more important than the upgrade.The optimal goal was for the high speed CT scanner was refurbished equipment strategy, the x-ray machine was capital lease, and the ultrasound system was operating lease. The parts that I did not factor would make a difference on the financial difference; however, my thoughts are liability is the most effective means of cutting cost in the future for the hospital. Funding option for financial Expansion The financial expansion was a rather challenging; however, I decided to choose the HUD 242 Loan Insurance Program.My focus was this hospital was going through the largest expansion the organization has ever ventured. â€Å"The plan includes a new heart hospital, more than a hundred new private rooms, a consolidation of women’s services, and expansion of surgical suites, radiology and endoscopy services†. (University of Phoenix, 2011, pp. 1-12). The reason for my choice was HUD had the lower interest rate and there was no period for which the funds can be used. I think that element is important because, it is big when an organization is going through an expansion, and timing is very crucial.If the hospital is not able to begin expansion at a certain time, the company does not want to feel pressure to use funds. Lower interest rates are beneficial to any organization that is going to develop their facility. My knowledge of HUD is that there are usually lower interests rates than most financial institutions, and that was my incentive. What did I learn? The simulation was rather interesting and I learned that, making expansion resolution takes an enormous amount of decision making and organizational planning; this requires many people to assist in coming to the right choice.An organization has to know where to cut corners so there are funds to make major changes. Managers making a choice on employee reduction, or cutting benefits, or changing skill mix. The managers must weight out options and come up with the best conclusion at the time. I learned that equipment purchase can take a massive amount of thought, as far as loan option upgrades and maintenance. My thoughts before this was purchase equipment make sure there is a warranty and that is it. So doing the simulation exposed me to all that goes into the purchase.It’s not as simple as it seems. In making my decisions I was pleased with my cost cutting decision. My strategy was to look at the definition of what the options were, and go from there. Changing skill mix was a new term that I learned; however, I found it interesting and thought it made sense. The part I would do differently would be the equipment simulation. I would pay more attention to maintenance and upgrade. I would also pay more attention to monthly installments options for leasing.The expansion portion was attention-grabbing because of past research, so I felt good with that part of the simulation. The elements of doing this simulation that I could use in future jobs would be analytical thinking, thinking further than the surface is important. In financials it important at some point to see into the future that may sound strange; however, it is realistic. Forecasting is important because these decisions that made are supposed to be utilized for a certain amount of time and if something comes up this could destroy all the hard work that was done.I will be able to think about how interest affects liability and vice verse. I know that paying close attention to balance sheets and cash flow statements is beneficial to the financial success of the an organization. Communicating changes to other personnel is important and staying open to change and learning can be a benefit to any organization. Hospitals have financial issues because of several elements. One would be the economy and the inability for people to pay for medical care. This element leaves few options for individuals. Either some people would have to go the emergency room for medical care or just not receive medical care at all. Another issue would be â€Å"because of financial cuts, reduction in Medicaid reimbursement, cuts in Medicare payments, and discounting pressure in managed care†. (University of Phoenix, 2011, pp. 1-12). These elements put hospitals at an immense risk and will usually result in an expansion and changes being made to the facility. The issue is will the organization be able to make these changes with the downturn in funding? This is where optimal decision making comes into effect.Elijah Heart Center made the decision to develop the facility with thoughts of more return and better quality of care for patients. This is a wise choice; however, it can pose a risk if the cost of development outweighs the amount of return in. These are elements that managers have to think about in making decisions. The outcome is unknown, but without making changes a company can never see what could have progressed.