W6A4 HEALTHCARE BUDGET REQUEST – BUDGET DEVELOPMENT

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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	0	1.0	1.0	1.0
Nurse PractitionerFTE	3.0	3.0	0	3.0	3.0	3.0
Encounters:
Established patients	275	291	16	286	1650	1671
New patients	25	18	(7)	27	150	164
Total encounters	300	309	9	313	1800	1835
Expenses:
Physician Salaries & Benefits	$10,500	$10,502	(2)	$10,509	$63,000	$63,149
NP Salaries & Benefits	$20,000	$20,992	(992)	$20,191	$120,000	$122,001
Clerical (2 FTE) Salaries & Benefits	$6,667	$6,771	(104)	$6,683	$40,000	$41,978
Total personnel expense	37167	38264	(1098)	37383	223000	227128
Medical supplies	$7,500	$8,136	(636)	$7,994	$45,000	$47,883
Office supplies	$623	$583	40	$508	$3,498	$3,407
Rent	$2,917	$2,917	0	$2,917	$17,502	$17,502
Depreciation	$333	$346	(13)	$346	$1,998	$2,050
Capital Expenses	$3,333	$3,480	(147)	$3,480	$19,998	$20,439
Overhead	$167	$167	0	$167	$1,002	$1,002
Total non-personnel expense	14873	15628	(755)	15412	88998	92283
Total health center expense	52344	54205	(1843)	53112	313802	321250
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: Physician FTE stays at 1.0, suggesting that the clinic has met its physician staffing goals. The clinic is managing its physician personnel and fulfilling medical service capacity, thus this consistency is good. The Nurse Practitioner FTE is steady at 3.0, meeting budget. This shows that the clinic has maintained its nurse practitioner staffing levels, ensuring workforce stability.
2. The number of encounters, both new and established:
2. Answer: June 2018 interactions were 309, falling short of budget. However, the clinic maintains near to its aim due to the little fluctuation. Existing patients' interactions surpassed the budget by 16, indicating increasing demand. Unfortunately, new patient encounters dropped 7. HealthWays must determine why new patient visits vary to continue growth and outreach.
3. Non-personnel expenses:
3. Answer: Non-personnel expenditures were $755 below budget, showing the clinic spent less. Effective cost management or supplier agreements may have improved the clinic's finances.
4.Total expenses:
4. Answer: June 2018 health center costs were $1,843 below budget. Overall cost reductions may come from personnel and non-personnel expenses.
II. If these trends continue, what could it mean for HealthWays? What strategies might they employ to address any issues your analysis suggests?
Answer: If the trends continue: Positive trends: Stable FTEs, decreasing non-personnel spending, and below-budget total expenses suggest solid financial management. The clinic may keep running smoothly. Concerns: The decrease in new patient contacts may indicate a need for marketing or outreach. Strategies for HealthWays: Create marketing methods to attract new patients. This might entail community engagement, web marketing, or healthcare-provider relationships. Monitor and optimize non-personnel spending to be cost-effective. Financial Planning: Despite encouraging developments, HealthWays should routinely assess and adapt its budget. This enables long-term financial sustainability. Overall Recommendations: Keep track of patient demographics and adapt services to community requirements. Increase efficiency and save expenses by investing in technology and processes. Explore relationships with other healthcare providers to increase services and attract more patients.

W2A2 Practice Design

Expenses/Cost	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Grand Total
Start up expenses
expense 1 Dr. Debra Sullivan: Change these names to reflect your start-up expenses. Add more lines if you need more start up expenses or delete lines if you don't need all4 expenses.
expense 2
expense 3
expense 4
Total start up expenses
Operating Expenses
expense 1 Dr. Debra Sullivan: These costs may include human resources/personnel, equipment and supplies, marketing, training, and many more .Make sure you calculate for a full year for each column.
expense 2
expense 3
expense 4
expense 5
Total operating expenses
Total Expenses
		Dr. Debra Sullivan: Total start-up and yearly expenses for each year in this row.	Revenue/Savings
Source 1 Dr. Debra Sullivan: Dr. Debra Sullivan: Revenue is the income derived from the reimbursement for providing goods or services. Revenue is based on the price or reveue per unit. Remember that charges may not be fully reimbursed. The calculation for a revenue stream could be revenue per unit (RU) multiplied by Units of service ((UOS) less reimbursement rate (RR)(for example 80%). For a service, you must first calcuate a unit of service (see chapter 4 of your textbook) and then follow the formula, (RUUOS)RR=Revenue. For a producr you would use the price. Cost avoidance has to do with any action that avoids having to incur costs in the future. In a business setting, cost avoidance is a measure that lowers potential increased expenses as a way of decreasing a company’s future costs. For purposes of this assignment, should your selected solution not generate a finite revenue (actual money being collected), you will use cost avoidance. An example is adding a new FTE to decrease overtime. An example in Penner, Table 10B.1 outlines costs of cleaning patient privacy curtains to decrease hospital acquired infection. Remember, if you choose this type proposal, you will need to break down costs and revenue in terms of units and explain a monetary value per unit.
			Dr. Debra Sullivan: If you see a red tab on a cell, there are further tips. Do not enter any information in gray cells	Dr. Debra Sullivan: This is where you total the start up expenses	Dr. Debra Sullivan: These costs may include human resources/personnel, equipment and supplies, marketing, training, and many more .Make sure you calculate for a full year for each column.	Source 2
Source 3
Source 4
Total Revenue/savings
		Dr. Debra Sullivan: Dr. Debra Sullivan: Total all revenue/saivings for each year in this row.	Return on Investment
		Dr. Debra Sullivan: For each of the 5 years and the grand total ,calculate the ROI using the following formula ROI = (Total Revenue –Total expense) /Total Expenses

W4A3 Estimated Expenses

Expenses/Cost	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Grand Total
Start up expenses							$ - 0
VR Equipment Dr. Debra Sullivan: Change these names to reflect your start-up expenses. Add more lines if you need more start up expenses or delete lines if you don't need all4 expenses.	$ 200,000.00						$ 200,000.00
Staff Training	$ 30,000.00						$ 30,000.00
Infrastructure Changes	$ 50,000.00						$ 50,000.00
Miscellaneous (e.g., marketing, legal)	$ 20,000.00						$ 20,000.00
Total start up expenses	$ 300,000.00						$ 300,000.00
							$ - 0
Operating Expenses							$ - 0
Disposable Materials Dr. Debra Sullivan: These costs may include human resources/personnel, equipment and supplies, marketing, training, and many more .Make sure you calculate for a full year for each column.	$ 10,000.00	$ 15,000.00	$ 15,000.00	$ 10,000.00	$ 10,000.00	$ 10,000.00	$ 70,000.00
Maintenance	$ 25,000.00	$ 30,000.00	$ 30,000.00	$ 25,000.00	$ 25,000.00	$ 25,000.00	$ 160,000.00
Ongoing Staff Training	$ 15,000.00	$ 20,000.00	$ 20,000.00	$ 15,000.00	$ 15,000.00	$ 15,000.00	$ 100,000.00
Other Operating Expenses	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 30,000.00
Total operating expenses	$ 55,000.00	$ 70,000.00	$ 70,000.00	$ 55,000.00	$ 55,000.00	$ 55,000.00	$ 360,000.00
							$ - 0
Total Expenses	$ 355,000.00	$ 70,000.00 Dr. Debra Sullivan: Total start-up and yearly expenses for each year in this row.	Dr. Debra Sullivan: Change these names to reflect your start-up expenses. Add more lines if you need more start up expenses or delete lines if you don't need all4 expenses.			$ 70,000.00	$ 55,000.00	$ 55,000.00	$ 55,000.00	$ 660,000.00
							$ - 0
Revenue/Savings							$ - 0
Patient Fees Dr. Debra Sullivan: Dr. Debra Sullivan: Revenue is the income derived from the reimbursement for providing goods or services. Revenue is based on the price or reveue per unit. Remember that charges may not be fully reimbursed. The calculation for a revenue stream could be revenue per unit (RU) multiplied by Units of service ((UOS) less reimbursement rate (RR)(for example 80%). For a service, you must first calcuate a unit of service (see chapter 4 of your textbook) and then follow the formula, (RUUOS)RR=Revenue. For a producr you would use the price. Cost avoidance has to do with any action that avoids having to incur costs in the future. In a business setting, cost avoidance is a measure that lowers potential increased expenses as a way of decreasing a company’s future costs. For purposes of this assignment, should your selected solution not generate a finite revenue (actual money being collected), you will use cost avoidance. An example is adding a new FTE to decrease overtime. An example in Penner, Table 10B.1 outlines costs of cleaning patient privacy curtains to decrease hospital acquired infection. Remember, if you choose this type proposal, you will need to break down costs and revenue in terms of units and explain a monetary value per unit.		Dr. Debra Sullivan: This is where you total the start up expenses	$ - 0	$ 150,000.00	$ 200,000.00	$ 250,000.00	$ 300,000.00	$ 350,000.00	$ 1,250,000.00
Grants	$ - 0	$ 50,000.00	$ 75,000.00	$ 50,000.00	$ 75,000.00	$ 100,000.00	$ 350,000.00
Partnership Funding	$ - 0	$ 30,000.00	$ 40,000.00	$ 30,000.00	$ 40,000.00	$ 50,000.00	$ 190,000.00
Miscellaneous Revenue	$ - 0	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 5,000.00	$ 25,000.00
Total Revenue/savings		$ 235,000.00 Dr. Debra Sullivan: Dr. Debra Sullivan: Total all revenue/saivings for each year in this row.	Dr. Debra Sullivan: These costs may include human resources/personnel, equipment and supplies, marketing, training, and many more .Make sure you calculate for a full year for each column.			$ 320,000.00	$ 335,000.00	$ 420,000.00	$ 505,000.00	$ 1,815,000.00
							$ - 0
Return on Investment	$ (1.00)	$ 2.36 Dr. Debra Sullivan: For each of the 5 years and the grand total ,calculate the ROI using the following formula ROI = (Total Revenue –Total expense) /Total Expenses	$ 3.57	$ 5.09	$ 6.64	$ 8.18	$ 24.84
							$ - 0

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	$ 180,088	$ 173,258
Return on Assets
Financial Reports: Quick Tips for Interpretation
•income statement: positive net income indicates profitability
•balance sheet: positive equity indicates that there is a positive net worth, representing the amount remaining if an institution went bankrupt and had to liquidate
•compare changes in reports from prior year(s) to identify trends in financial performance, and with industry standards or internal benchmarks.
Financial Ratios	FY 2018	FY 2017
Expense per Encounter	$ 175.91	$ 180.22
Total Operating Revenue per Encounter	$ 176.93	$ 179.85
Operating Margin	0.58%	-0.21%
Days Cash On Hand	3.2	7.0

Interpretation/Analyses In your narrative analysis that you will write in the Healthcare Budget Request Template, you should address: Income Statement Balances Expense per Encounter Total Operating Revenue per Encounter Operating Margin Days Cash On Hand

W10-11A6 Your data

Option 2 Your project data

You have 2 data options for completing the Week10/11A6 analysis. Assuming you have access to your organization's financial statements, you my use it. Bring forward your work from W6A4 and add any new data and calculations needed.