This memorandum focuses on the Arapahoe County cost-benefit analysis. The Human Resources Department has developed a pilot program for the Human Services Department. This program will suggest to employees who already receive their health insurance through the County, that they take a fixed stipend to help toward health, retirement, and other benefits rather than the traditional package. The purpose of the pilot program is to manage the County’s increasing costs for health care insurance. The cost-benefit analysis will allow for an evaluation of the pilot program in the Human Services Department and make some changes to control risks and uncertainties that impact the Net Present Value (NPV). This analysis relies completely on accuracy of the …show more content…
The stipend is $5,000 for each participant each year, so the stipend increases by the County’s standard escalation rate of 3.5%, then it is prorated by 50% to $ 2,500 for the first year (Transition Year) when the benefits are paid only for the first six months. The cost of the first year is $ 12,500 and the on-going costs for the Operational Years will increase by the value of 3.5%. The stipend as a recurring cost will yield a benefit return for the department. Another significant aspect is the one-time payments of $10,000 for each of the 5 participants for retirement. Then the actual cost will be $50,000, which is a cost-benefit. The cost- benefit indicates that the department will be able to cover all its expenses and it will begin to make a profit …show more content…
The discount rate is a significant element which is considered the value of future cash flows, whether they are earnings or obligations. By applying net present value (NPV), which is a useful tool, the department can determine whether a project will result in a net profit or a net loss. In this case, by calculating the NPV, the department found out that the NPV is positive, indicating that the benefits outweigh the costs, and the project will pay for itself making a profit over time. Therefore, the pilot program is worthwhile and the investment would add value to the department. Another major metric for cost-benefit analysis is cost-benefit ratio, which plays an important role in this project. The total discount benefits are divided by the total discounted costs, which equals 1.07. The benefit-cost ratio of this project is greater than 1, which shows that the benefits are greater than the costs. Also, the payback period is the one main piece of the sensitivity analysis in this project because it tells us how long the initial investment is at risk. By calculating the NPV, which is a negative number, the department can estimate if the NPV for the third Operational Year is still a deficit. However, when the sum turns positive in
A cost-benefit analysis is “whenever people decide whether the advantages of a particular action are likely to outweigh its drawbacks” (Benefit-Cost Analysis, n.d.). The analysis estimates the economic value placed upon a
Commonly associated with pay for employees, benefits is the second biggest obstacle for management. Like Volkswagen starts employees off at the basic pay the unions would achieve, a similar benefits program should be implemented (Greenhouse, 2014). The passing of the Affordable Health Care Act has made it possible for many citizens to receive coverage but it is basic at best. GMFC should create a plan based off of the Health Care Act and unionized plans and allow for extras to be added on. This allows for employees to pick the benefits package that works best for them.
Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.
It is enthralling to note that in spite of the advances in healthcare systems, such as our hospital’s ability to provide patients with lower cost, managed One being the Health Maintenance Organizations (HMO), which was first proposed in the 1960s by Dr. Paul Elwood in the "Health Maintenance Strategy”. The HMO concept was created to decrease increasing health care costs and was set in law as the Health Maintenance Organization Act of 1973, after promotion from the Nixon Administration. HMO would, in exchange for a fee, allow members access to employed physicians and facilities. In return, the HMO received market access and could earn federal development funds.
...eting tool that show the differences between the present value of revenues and the present value of expenses. The project can be profitable when the net present value is positive. In other words, the present value of revenues is greater than the present value of expenses. Profitability index is another tool for evaluating investment projects, which is the ratio of the PV of benefits on the PV of costs. A project can be beneficial if the profitability index is greater than 1. Also, it has the same idea as NPV that In other words, the present value of benefits is greater than the present value of costs. However, these two methods (NPV and Profitability Index) have been used to evaluate the proposal of implementing EHR.
Miller, H. D. (2009). From volume to value: better ways to pay for health care. Health Affairs
This object is one of the financial goals to invest properly. Marriott used discounted cash flow techniques to evaluate potential investment. It is beneficial because it is considered present time value. Projects which increase shareholder value could be formed with benchmark hurdle rates, the company can ensure a return on projects which results in profitable and competitive advantage.
The purpose of this paper is to examine the status of health care reform implementation in the state of Ohio. Throughout the paper, I will discuss if the health care reform has been effective as well as name some of the positive and negative outcomes. Furthermore, I will discuss how the health care reform is impacting community health. Discussion on the effect of health care reform on the economics in Ohio will conclude this paper.
Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of capital (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total debt. With the information provided several assumptions had to be made to obtain reasonable values (life period of 30-years, Capital expenditures not to exceed $1 million dollars, depreciation to stay constant at $1.15 Million and a discounted rate of 10%). Based on our analysis, the company has a stand-alone value of $51 Million at the end of fiscal year end 1990 with a net present value of cash flows of $33 million that does not include the cash and non-current assets a cash of and non-current assets.
The current health care reimbursement system in the United State is not cost effective, and politicians, along with insurance companies, are searching for a new reimbursement model. A new health care arrangement, value based health care, seems to be gaining momentum with help from the biggest piece of health care legislation within the last decade; the Affordable Care Act is pushing the health care system to adopt this arrangement. However, the community of health care providers is attempting to slow the momentum of the value based health care, because they wish to maintain their autonomy under the current fee-for-service reimbursement system (FFS).
A continuous and appropriate financial management is highly essential to sustain and integrated a healthcare program. To build a sustainable integrated program cost calculation and pro formas are necessary to create monthly metrics, program accountability and fiscal sustainability this
Opting for coverage by a registered health spending account (RHSA) allows employees to choose the benefits that most benefit them. Health insurance covers only a certain number of services, which may not help everyone. Health spending accounts also aid employers financially as they allow them to save money. Instead of needing to pay for typical health benefits, a certain amount of money can be distributed to employees by means of an RHSA, which employees can then use as they please.
Discounted cash flow is a valuation technique that discounts projected cash inflows and outflows to evaluate the potential value of an investment. There are three discounted cash flow methods: Net Present Value (NPV), Profitability Index (PI) and Internal Rate of Return (IRR). The net present value discounts all cash inflows and outflows at a minimum rate of return, which is usually the cost of capital. The profitability index refers to the ratio of the present value of cash inflow to the present value of cash outflows. The internal rate of return refers to the interest rate that discounts cash inflow projections to the present to ensure that the present value of cash inflows is equivalent to the present value of cash outflows (Brown, 1992).
Accomplished Team Lead responsibilities consistently through unrivaled, systematic execution of 19 performance functions outlined in OPM General Schedule Leader Grade Evaluation Guide (GSLGEG), which exceeded minimum 14.
Making an investment towards a new project/product/company is hardly a simple process. Numerous factors including costs, benefits, time, and resources need to be taken into account before a decision to pursue a new project should be ventured into. At the end of the day prioritising projects and investing funds into projects that have the most potential towards favourable return on investment should be considered. Investment appraisal should not only be used for projects with a monetary return, it is also pertinent to use the tools where the return may not be easy to quantify such as training or development programs. Investment