1. The first is the case study ( Quantitative Analysis )

As specified in the Case, “The corporation has a perfect Management Information System (Ha! Ha!). I am providing you with the necessary data to solve the problems. Your job is to reduce operating expenses by $500,000 without reducing the quality of care or services to patients. You must also avert the nurses' strike and maintain their long-term job satisfaction. You can implement any change, use any strategy to reduce your expenses. If your strategy involves capital expenditure, then it must be paid for with interest within three years by the additional savings in operating expenses."

For the Burn Care case your report should be the typical comprehensive “Capstone” report (as long as necessary, but no longer)

Let’s Review the Case

Job One --> The hospital was given a goal of reducing operating expenses by $500,000 for the burn care unit. (p. 2), based on 1994 hourly rates.

This is Larry’s favorite case, and there are a lot of ways to approach finding the reduction. But you must keep sub-standard care to a  minimum , and you want to prevent a nursing strike. Also, remember, you should be concerned about your continued ability to attract and retain qualified nurses – unless, that is, you want to get all of them from the agency pool (but are agency nurses as good? what about quality and continuity??).

A couple of more observations and/or subtleties I am concerned you might miss:

       On page 2, the case says --> In May 1993 Mr. Adams, the regional vice-president of the corporation and an accountant by training, wrote a letter to Mr. Warden, the CEO, that he

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should discontinue the Baylor Plan as it was costing about $800,000 more in nursing payroll. Obviously,  IF  Mr. Adams is correct, finding $500,000 in savings will be easy… right??? Or, is Mr. Adams just a stupid budget weenie in administration who doesn’t understand or even have a clue??

       Remember, the “Budgeted Daily Staffing Pattern” (p. 4) is based on an assumption of 30 ADC (“average daily census”), but what happens when ADC is higher/lower? How does the pattern change? And, remember, the budget model is based on the staffing standard of 22 hours per patient per day.

       Pay attention to this paragraph --> The hospital's budgeted nurse-staffing standard in 1996 was 22 hours per patient per day (HPPD). The staff nurses on the unit, however, generally complained that the staffing levels were not sufficient to provide quality care to the burn patients. In December 1996, the hospital implemented Medicus patient acuity system for staffing and adopted 3.5 hours of direct care per acuity point as its worked nurse-staffing standard. (Bold emphasis supplied.)

       Make sure you understand the work sampling data on page 5  :)

       Make sure you understand the “Census and Acuity Data by Pay-Period” on page 3 :)

       From page 6 --> Here we are assuming that only the regular staff makes overtime under the Baylor Plan. The Flex staff is generally a part-time staff and works 8- or 12-hour shifts without overtime but they receive benefits. Agency nurses do not earn overtime or benefits from the hospital.

       Obviously, regular employees are paid OT at 1.5x for hours worked over 40 in a week. If you suggest something besides the Baylor staffing model, make sure you are explicit about how that schedule will work for “regular” employees – 24x7 staffing is very, very hard and is typically not easily divisible by 40.

       What about sick leave, annual leave, etc. for regular employees. How does that fit in?

       You can use their “Guideline for Estimating Labor Expenses,” or develop your own method of calculating labor expenses. I found their method confusing and developed my own exact method (relatively straightforward in a spreadsheet) – it wasn’t until after I developed my own that I understood how/why their’s was “close enough.” I found my

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“exact method” made it easier to evaluate alternative strategies. If you develop your own, make sure you include an explanation of your approach in an appendix.

       One more abbreviation – ALOS = average length of stay.

 In a prior semester a student asked ,

"In your message, you state "Obviously, regular employees are paid OT at 1.5x for hours worked over 40 in a week." The case states that that OT is paid at 1.25x regular pay. Am I misunderstanding or is 1.5x the OT to be paid in the solutions we offer?"

Professor replies -- >

On page 1 the case says, "During the week, nurses worked 12-hour shifts for five days (Monday-Friday), thus working 60 hours and getting paid for 70 hours (because of overtime policy) with full-time benefits." Thus, time and a half for over 40.

But I suspect the student was referring to the Guideline for Estimating Labor Expenses starting on page 5 (but I don't know, because the student did not reference the source of his/her 1.25x understanding). The Guideline works because it is dealing with an aggregate number, but it uses the term "overtime" somewhat differently than just hours worked over 40 in a week. So, both answers are correct.

I prefer to breakout the groups and calculate salary individually for the various schedules, but you can do it either way (my way or the Guideline) -- just make sure you specify your methodology and assumptions.