Project management Healthcare sytems

HIMT-370

Milestone #7 – Systems Analysis – Financial Analysis

Purpose

Universal Wellness Group (UWG) needs to perform a financial analysis of the system. A systems analyst needs to know how to calculate costs and benefits when conducting the analysis of system proposals, evaluating IT projects and making recommendations to management. In this milestone you will complete a financial analysis of the costs involved for a variety of systems implementation approaches.

Background

You know that UWG’s current workload requires six hours of office staff overtime per week at a base rate of $15 per hour. In addition, based on current projections, UWG will need to add another full-time clerical position in about six months. Neither the overtime nor the additional job will be needed if UWG implements the new system. The current manual system also causes an average of three errors per day, and each error takes about 20 minutes to correct. The new system should eliminate those errors.

You estimate that by working full-time you could complete the project in about 12 weeks. Your consulting rate, which UWG agreed to, is $35 per hour. If you design the new system as a database application, you can expect to spend about $2,500 for a networked commercial package. After the system is operational and the staff is trained, UWG should be able to handle routine maintenance tasks without your assistance.

As an alternative to in-house development, a vertical software package is available for about $12,000. The vendor offers a lease-purchase package requiring a $4,000 down payment, followed by two annual installments of $4,000 each. If UWG buys the package, it would take you about four weeks to install, configure, and test it, working full-time. The vendor provides free support during the first year of operation, but then UWG must sign a technical support agreement at an annual cost of $600. Although the package contains many of the features that UWG wants, most of the reports are pre-designed and it would be difficult to modify their layouts.

No matter which approach is selected, UWG probably will need you to provide about 10 hours of initial training and support each week for the first three months of operation. After the new system is operational, it will need routine maintenance, file backups, and updating. These tasks will require about four hours per week and can be performed by a clinic staff member. In both cases, the necessary hardware and network installation will cost about $12,500. In your view, the useful life of the system will be about five years, including the year in which the system becomes operational.

Tasks

1. Provide an overview of the proposed system, including costs and benefits, with an explanation of the various cost-benefit types and categories. Complete the following MS7-Cost_Benefit_Table Template.

2. Develop an economic feasibility analysis. Calculate the ROI and net present value (assume a discount rate of 10%). Use the MS7-Financial_Template.

3. Provide a brief explanation of the various alternative development strategies that should be investigated if development continues, including in-house development and any other possible strategies that you have considered.

Format

Task 1)

Cost or Benefit	Financial Impact	Description of Cost or Benefit
Eliminate three hours of overtime each week at $15 per hour	Annual savings of 6 hours * $15 hourly rate * 52 weeks * 1.5 overtime factor = $7,020 (six months of impact, or $3,510, will be available in Year 0)	Direct, operational, variable, positive benefit
Eliminate need for full time clerical position	Savings of 40hrs per week @15.00 annually 31,200	Direct, Operational, positive benefit
Eliminate 3 errors per day	4hrs per week x 15hr x52 weeks annually 3,120	Variable, direct, operational, benefit
Cost Consulting salary to develop new salary	35/hr x 40hrs x 12 weeks Salary 16,800	Fixed, direct, tangible, cost, development
Cost Database application network package 2,500	2,500	Fixed cost, direct, development
Cost alternative to in house development vertical software project 12,000	4,000 down payment, two annual payments 4,000	Development, direct, tangible
Cost Vendor technical support	Annual cost 600/year	Fixed, operational, direct
Cost initial training, support	35/hour x 10hrs x 12 weeks 4,200	Direct, variable, development
Cost routine office maintenance, file backups, and updating	4hrs/week x 15/hrs x 52weeks 3,120 annually	Variable, cost, operational
Cost network installation and hardware	12,500	Direct, fixed developmental

Task 2)

Complete by using the Microsoft Excel MS7-Financial_Template.

Task 3)

Development Strategy	Overview
In house development software	Ability to own software package at a lower cost. Meets the needs of the business.