Background on the Case Study Cardinal Health Care System (CHCS) is a for-profit organization that operates three health care subsidiaries— an acute care hospital, an outpatient clinic, and a long-term care nursing facility. The board of directors at CHCS are concerned with their inability to control overhead cost. The presidents of the three health care subsidiaries are complaining about the policy on allocating all corporate overhead cost based on the revenue generated by each of their departments 1. Fred Bird is the newly appointed chief financial officer (CFO) saddled with the task of solving the problem of increasing overhead cost of the health system. The CFO found that the main service areas driving the cost at CHCS, to the tune of $10 million, are the Information Systems and Databases, Personnel and Employee Relations, Communications/Advertising, …show more content…
The current policy on cost allocation (based on revenue) offers no incentive to the service departments staff to control cost and is putting the subsidiaries under pressure to reduce their direct costs to meet profit target. 3. Across-the-board resistance from service department staff who think they are treated as the scapegoat, and the subsidiaries who are anxious about the consequences of over- or under-estimating their service demands. Proposed Solution to the Problem Implement a charge-back procedure to create a direct link between the amount of resources needed to provide services and the demand for such services1. Solution alternatives 1. Service departments should identify the cost per unit of service provided, health care subsidiaries should forecast demand for services in each of their departments to enable the CFO to develop a charge-back plan and identify target service areas for budget cut based on low demand for services1. 2. Explore other areas that may be contributing to the increasing overhead cost 3. Implement across-board budget cut if overhead cost continues to increase
...-based, charge-based, and contractual payment systems. (p. 7). CRC Press. Retrieved from http://books.google.com/books?id=sCzhN9HruM0C&dq=fee schedule based payment&source=gbs_navlinks_s
To guarantee that its members receive appropriate, high level quality care in a cost-effective manner, each managed care organization (MCO) tailors its networks according to the characteristics of the providers, consumers, and competitors in a specific market. Other considerations for creating the network are the managed care organization's own goals for quality, accessibility, cost savings, and member satisfaction. Strategic planning for networks is a continuing process. In addition to an initial evaluation of its markets and goals, the managed care organization must periodically reevaluate its target markets and objectives. After reviewing the markets, then the organization must modify its network strategies accordingly to remain competitive in the rapidly changing healthcare industry. Coventry Health Care, Inc and its affiliated companies recognize the importance of developing and managing an adequate network of qualified providers to serve the need of customers and enrolled members (Coventry Health Care Intranet, Creasy and Spath, http://cvtynet/ ). "A central goal of managed care is containing the costs of delivering care, but the wide variety of organizations typically lumped together under the umbrella of managed care pursue this goal using combination of numerous strategies that vary from market to market and from organization to organization" (Baker , 2000, p.2).
In addition to this business plan, we must also address the financial issues plaguing this organization. To illustrate some of these issues lets look at some of the trends here at OCB and within our Industry: For example, OCB’s clinic operations profitability in 1990 was 60%, and now in 1996 our profitability is only 37%, which is down 23 percentage points! We can blame some of this on rising costs of overhead, consumables, etc, however this is happening as the industry as a whole is growing 5% annually, and as our customer base, largely senior citizens, population is growing at almost 1% as year. We should be capitalizing on these industry trends, however, as you all know, not all the trends work in our favor. For example, our lifeblood, the Insurance company’s managed care organizations, and government healthcare reimbursement programs shows a downward trend of allowable payments for our services (DRGs) For example in 1995 the DRG price of ...
Excessive system overhead costs are assigned to Midwestern Medical Group (MMG) in the Midwestern System. $110,000 per physician compared to a benchmark of $50,000 per physician. The medical group was also compelled to provide staff benefits to match benefits provided by the hospitals, benefits that most independent groups did not provide. Concerning this issue, this outline further elaborates
It is vital that the operating budget ties in with long-term strategies by planning, setting objectives, and forecasting the future. According to Mr. Wright, Robertwood Johnson University Hospital adopted the GE Model of “operation excellence” with long-term strategies in their operating budget. With the ” operations excellence” strategy, the organization has over the years transformed the operating budget by accurately tracking and constantly improving their revenue cycle yearly by setting payment practices to generate revenue to achieve specific financial objectives of greater demand with the maximum revenue margins along with eliminating waste and streamlining the budget by cutting expenses and prioritizing programs that do not give them a high return on investment (Langabeer II & Helton, 2016) (Jones, Joseph & Taylor, 2013). With the “operation excellence” strategy, Robertwood Johnson University Hospital has progressed continuously over the years by implementing long-term strategies that have made the organization financially successful.
The CareGroup Case Study comprises various components. The core concepts were broken down into the history of CareGroup itself, CareGroup’s IT, the collapse of the network, dealing with the collapse of the network, and the lessons learned from the entire situation (McFarlan, F. Warren, and Robert D. Austin, pg.1). CareGroup was formed on the basis of three major Massachusetts hospitals; Beth Israel, Deaconess, and Mount Auburn (McFarlan, F. Warren, and Robert D. Austin, pg.1). After a surprising merger of Mass General and Brigham and Women’s Hospital, all three hospitals in CareGroup suffered great financial losses (McFarlan, F. Warren, and Robert D. Austin, pg.2). Due to the multi-million dollar financial losses, CareGroup felt they needed a change, which is when they added Halamka to their team, naming him their CIO (McFarlan, F. Warren, and Robert D. Austin, pg.3).
Current health care systems exist in complex atmospheres that regularly change to meet the demands of health care personnel and consumers. Health care systems deal with many different cultures, values, and interests making it increasingly more difficult for management to provide their employees with a clear vision of the future (Lega, Longo, & Rotolo, 2013). Begun, Hamilton, and Kaissi (2005) explain health care centers utilize strategic planning to better understand their environments and ensure the organization’s structure, culture, and important decision-making are compatible within their current surroundings. Ginter, Duncan, and Swayne (2013) describe strategic planning as “the periodic process of developing a set of steps for an organization to accomplish its’ mission and vision using strategic thinking” (p.14). The goal of strategic health care planning is to improve performance throughout the organization (Begun et al, 2005). This paper discusses the strategic plan for Brooklyn Hospital Center including its long and short- term goals, its strategic thinking and key stakeholders, and the various strategies identified within the plan.
It would be necessary for a hospital administrator to look closely at ways to lower healthcare costs and provide more efficient care when a large employer like BRPP states they are thinking of relocating their employee inpatient hospital services to a company like InduShealth. InduShealth is offering substantially lower prices for several surgical procedures and a U.S. hospital administrator would not want to lose this large consumer population if it was possible to find more efficient methods of providing healthcare to their patients (McLaughlin & McLaughlin, 2008). One pricing strategy that a hospital administrator could advocate for is a bundled...
Palms West Hospital is a subsidiary of HCA Holdings that was founded in 1986 (Ramirez, 2016). Being a subsidiary of a larger firm, financial inquiries are focused through the larger schematics of the company. At the beginning stages of the firm, HCA Holdings Inc. acquire a great deal of their hospitals through mergers as this was their major idea for the firm’s business strategy (Management’s Discussion and Analysis of the Financial Condition and Results of Operations, 2016). The company realized the advancements happening in the health care industry and focused on several key factors in keeping up the competitive advantages they had over other firms. Delivering a high quality of service, becoming significant providers of the services, and having a wide variety of services to offer, kept HCA Holdings Inc. strong in their embryonic stages (Management’s Discussion and Analysis of the Financial Condition and Results of Operations, 2016). Their earnings rose across the board every year and provided the firm with the a measure of operating performance in accordance with overall accepted accounting principles (Management’s Discussion and Analysis of the Financial Condition and Results of Operations,
Journal of Healthcare Finance. (2008). A Framework for Cost Mnanagment and Decision Support Across Health Care Organizations of Varying Size and Scope. Journal of Healthcare Finance, 63-75.
The long-term trend affecting the organization the most is the Affordable Care Act (ACA), known as Obamacare is anticipated to be a great challenge in the healthcare industry. Increasing state and federal budget taxes poses another threat on MUSC (Harrison, 2010). Increasing pressure to reduce healthcare costs is a threat to the company. Increasing demands of physicians and administrative staff for expensive medical technology is not a cost effective solution for the hospital and poses a threat to its accountability. Adverse demographic changes pose a threat to the organization. Size and organizational complexity can conspire to create seemingly insuperable barriers when it comes to improve patient care.
Healthcare clinics are under a great deal of pressure to reduce costs and improve quality of service. In recent years, healthcare organizations have concentrated on preventive medicine practices and have tried to reduce the length of time that patients stay in a hospital. Outpatient services have gradually become an essential component of healthcare. Organizations that cannot make their outpatient component cost-effective are finding themselves financially burdened in this ever-changing industry (Caldwell, 2005).
The administration and organization of health care systems, hospital networks, and other health care settings can greatly affect health outcomes, quality of care, and patient satisfaction. One of the historical challenges in the health system has been the identification and collection of meaningful data to measure an organizations progress towards the achievement of its strategic goals and the concurrent alignment of internal operating practices with this strategy (Devitt et.al Health Q. 2005). The strategic management System (SMS) aligns organizational planning and performance measurement, facilitates and appropriate balance between organizational priorities and resolving ‘local problems, and encourages behaviors that are consistent
Retrieved from: http://www.seattlechildrens.org/about/strategicplan/ Swayne, L., Duncan, W., & Ginter, P. (2009) Strategic Management of Healthcare Organizations. (6th ed.). San Fransisco, CA: Jossey-Bass.
Cheyenne Regional Medical Center (CRMC) is community-owned, not-for-profit hospital that is familiar yet unique with its organizational structure. The organization chart is typical of publically owned hospitals with county commissioners appointing the governing board and the governing board responsible for selecting the CEO and other executive positions. Although the structure is typical of a not-for-profit, Cheyenne Regional is surprisingly top heavy with twelve executive positions. These positions are not accidental but created in response strategy goals, community needs, and external forces. Overall, the hospital has strong leaders that collaboratively create the value pillars that drive the organization’s success. Suggestions for improvement of operations and structure are to combine specific positions while building some form of executive information management position to foster the growing need for connectivity and the weight it bears on reimbursement.