Cost-Benefit Analysis- 3 of 5

GRADING RUBRIC MUST BE FOLLOWED

Create a 5–6-page cost benefit analysis that supports a risk financing recommendation for a selected organization.

Questions to Consider:

  • What steps do you need to take in order to align a CBA with an organization’s mission and strategy?
  • If you were to offer three alternative recommendations after a CBA, what types of elements would you consider to differentiate them from one another?
  • How would you substantiate a recommendation for reducing financial risks in a health care setting when the quality of care is involved?
  • What are the three parts of a CBA?

Preparation

Scenario

Suppose an issue has emerged in your organization that presents significant risks to the stakeholders involved. Your supervisor has asked you to conduct a CBA, make a recommendation, and present it to the board of directors. You are expected to consider the numbers within the context of the organizational mission, strategic direction, patient safety, risk-management issues, regulatory requirements, patient and stakeholder satisfaction, and the dynamics within the health care industry.

Select a relevant issue within your workplace (or one from the Suggested Resources) for which a CBA may be conducted. The CBA should include one of the following course-related topics:

Instructions

Step One: Identify Costs

Apply the process from Writing a Cost-Benefit Analysis article (from the Required Resources) to identify costs:

  • Make a list of all monetary costs that will be incurred upon implementation and throughout the life of the project. These include start-up fees, licenses, production materials, payroll expenses, user acceptance processes, training, and travel expenses, among others.
  • Make a list of all non-monetary costs that are likely to be absorbed. These include time, low production of other tasks, imperfect processes, potential risks, market saturation or penetration uncertainties, and influences on one’s reputation.
  • Assign monetary values to the costs identified in steps one and two. To ensure equality across time, monetary values are stated in present value terms. If realistic cost values cannot be readily evaluated, consult with market trends and industry surveys for comparable implementation costs in similar businesses.
  • Add all anticipated costs together to get a total costs value (Plowman, 2014).
Step Two: Identify Benefits

Continuing with the CBA, proceed with the identification and quantification of benefits, per Writing a Cost-Benefit Analysis article.

  • Make a list of all monetary benefits that will be experienced upon implementation and thereafter. These benefits include direct profits from products or services, increased contributions from investors, decreased production costs due to improved and standardized processes, and increased production capabilities, among others.
  • Make a list of all non-monetary benefits that one is likely to experience. These include decreased production times, increased reliability and durability, greater customer base, greater market saturation, greater customer satisfaction, and improved company or project reputation, among others.
  • Assign monetary values to the benefits identified in steps one and two. Be sure to state these monetary values in present value terms as well.
  • Add all anticipated benefits together to get a total benefits value (Plowman, 2014).

Cost-Benefit Analysis

Enter the cost and benefit data you developed for the CBA in your preparation steps into the Cost-Benefit Analysis Template, linked in the Required Resources.

Then, write an analysis in which you do the following:

  • Describe the organizational, program, or departmental issue for which you have created the CBA.
  • Evaluate the cost versus benefit according to the general guidelines outlined by Plowman’s 2014 article, which you read in the preparation for this assessment.
  • Make a recommendation as to whether the benefits are sufficient to outweigh the costs of the proceeding.
  • Describe the systems-based context for your recommendations, integrating the CBA within the organization as a whole.
  • Describe how the issue relates to the organization’s vision, mission, and strategic direction.
  • Provide a rationale that explains how your recommendations are appropriate for your organization’s capacity and strategy.

Your analysis should use proper APA style and formatting and include the following sections. Each section, except the title page, should include the appropriate section heading.

  • Title page: Use APA formatting and include the following:
    • Assessment number (Assessment 3).
    • Your name.
    • The date.
    • The course number (MHA-FP5014).
    • Your instructor’s name.
  • Abstract: Include a one-paragraph summary of analysis content. This is not an introduction to the topic, but a summary of the entire analysis. Make sure to double-space.
  • Issue description.
  • CBA evaluation.
  • CBA recommendations.
  • Context for recommendations.
  • Relationship to vision, mission, and strategy.
  • Rationale.
  • Conclusion.
  • References.
  • Appendix: Attach your completed Cost-Benefit Analysis Template.

Additional Requirements

  • Written communication: Written communication should be free from errors that detract from the overall message.
  • Length of paper: 5–6 typed, double-spaced pages.
  • Font and font size: Arial, 10-point.
  • Appendix: Include your Cost-Benefit Analysis Template as an appendix to your analysis.
Reference

Plowman, N. (2014). Writing a cost-benefit analysis. Retrieved from

Resources:

This article discusses how to value risk reductions in the context of benefit-cost analysis.

This article discusses a cost analysis approach in medical education.

This article describes the cost-benefit methodology in terms of criminal justice policy.

Additional Resources for Further Exploration

You may use the following optional resources to further explore topics related to competencies.

Risk-Management Textbooks
  • Kavaler, F., & Alexander, R. S. (2014). Risk management in health care institutions: Limiting liability and enhancing care (3rd ed). Burlington, MA: Jones and Bartlett. Available from the bookstore.
  • Youngberg, B. J. (2011). Principles of risk management and patient safety. Sudbury, MA: Jones and Bartlett. Available from the bookstore.
Risk-Management Professional Organizations

Expert Solution Preview

Introduction:

As a medical professor responsible for creating college assignments and evaluating student performance, it is crucial to incorporate real-world scenarios that prepare students for their future careers. One such scenario is designing and conducting a cost-benefit analysis (CBA) for an issue that presents significant risks to stakeholders involved in a select organization. This response will answer specific questions related to the process of aligning a CBA with an organization’s mission and strategy, providing alternative recommendations, reducing financial risks in a healthcare setting, and identifying the three parts of a CBA.

Question 1: What steps do you need to take to align a CBA with an organization’s mission and strategy?

To align a CBA with an organization’s mission and strategy, there are several steps that one can take. The first step is to understand the organization’s goals and objectives, mission, vision, and strategic direction. This step will help decide which issue to select for the CBA, and how it aligns with the organization’s purpose.

The second step is to gather data and conduct research on the selected issue to identify costs and benefits accurately. The data gathered must align with the organization’s goals and objectives and support the CBA’s alignment with the organization’s mission and strategy.

The third step is to analyze the data and determine the impact the issue has on the organization’s stakeholders. The analysis should be conducted based on the organization’s vision, goals, and objectives to determine if the issue aligns with the organization’s mission.

The fourth and final step is to use the data analyzed to develop recommendations that align with the organization’s mission, vision, and strategic direction.

Question 2: If you were to offer three alternative recommendations after a CBA, what types of elements would you consider to differentiate them from one another?

The three alternative recommendations after a CBA will be developed based on the data analyzed in the CBA process. To differentiate the recommendations from one another, the following elements should be considered:

1. Impact on Stakeholders: Each recommendation should focus on reducing the issue’s negative impact on the organization’s stakeholders, whether patients, employees, or investors.

2. Feasibility and Practicality: Each recommendation must identify how feasible and practical it is to implement within the organization. Feasibility and practicality take into account organizational capacity, budget, and any regulatory requirements.

3. Cost Implications: Each recommendation must identify the cost implications associated with its implementation. Recommendations should be financially sustainable and align with the organization’s strategic goals.

Question 3: How would you substantiate a recommendation for reducing financial risks in a health care setting when the quality of care is involved?

A recommendation to reduce financial risks in a healthcare setting requires a thorough analysis of the costs and benefits. The following steps will substantiate such a recommendation:

1. Identify the costs of poor quality: The financial risks associated with the quality of care can be identified by analyzing the costs of poor quality such as readmissions, medical errors, and patient dissatisfaction.

2. Determine the benefits of improving quality of care: The benefits of reducing financial risks in a healthcare setting can be achieved by improving the quality of care provided. Examples of benefits include improved outcomes, reduced readmissions, and improved patient satisfaction.

3. Analyze cost-benefit ratio: The cost-benefit ratio can be evaluated using the data collected in steps one and two. If the benefits outweigh the costs, a recommendation to reduce financial risks in a healthcare setting by improving the quality of care can be substantiated.

Question 4: What are the three parts of a CBA?

The three parts of a Cost-Benefit Analysis (CBA) are:

1. Identify Costs: The first part of a CBA is identifying the costs associated with the issue being analyzed. All monetary and non-monetary costs of implementation and throughout the life of the project should be considered and assigned monetary values stated in present value terms.

2. Identify Benefits: The second part of a CBA is identifying the benefits associated with the issue being analyzed. All monetary and non-monetary benefits of implementation and thereafter should be considered and assigned monetary values stated in present value terms.

3. Cost-Benefit Analysis: The third part of a CBA is the cost-benefit analysis, where the cost and benefit data developed in the preceding steps is entered into the CBA template. The analysis will evaluate the data to determine if the benefits are sufficient to outweigh the costs of the issue being analyzed.

Conclusion:

In conclusion, conducting a CBA for an organization’s issue that presents significant risks involves several steps such as aligning the CBA with an organization’s mission and strategy, developing recommendations based on data analyzed, and identifying costs and benefits. By following the general guidelines outlined by Plowman’s 2014 article, a thorough analysis of the issue can provide insight into whether the benefits outweigh the costs and validate recommendations made to the board of directors.

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