8 pages
Established in 1977, Krona Community Hospital is a 60-bed, acute care hospital located in the heart of Banconota County. With a staff of nearly 100 physicians and specialists, 400 employees, and 75 volunteers, they offer a full range of health care services. They are accredited by The Joint Commission.
Nouveau Health, a private, not-for-profit health care chain, took over the management of Krona Hospital. Last year, state officials began to discuss Nouveau’s proposal to build a new, replacement hospital in Banconota County. The new facility would have 74 acute care beds, four observation rooms, four surgical operating rooms, one c-section room, a 24-hour emergency department, a maternity center, an intensive care unit, and extensive support services, including physical therapy and cardiac rehabilitation. All patient rooms would be private.
You are a staff member in the finance department at Nouveau Health, whose sole responsibility is to advance the success of the organization through assisting in planning, forecasting, and finance management.
Your Key Assignment Draft is designed to help you prepare for the presentation in Phase 5. The chief executive officer (CEO) of Krona has asked that you complete the following:
- Prepare next year’s financial plan and operational budget.
- Note: Keep in mind that the budget you created for your Phase 2 Individual Project did not take into account the growth of the new facility. The CEO has asked that you expand that budget and provide a finalized budget that will take into account the new services offered. The CEO has stated that there is $3 million that you can incorporate into the budget for additional staffing, services, maintenance, and so forth.
- Make sure the budget reflects the following:
- Increase in revenue reimbursement
- Allocation for the proposed improvements
- Increase in salaries
Be sure to discuss the following areas:
- Funding sources
- Your methodology in revenue forecasting
- How the new services will impact revenue
- Fixed and variable costs
- Project inpatient and outpatient visits based on current trends
Expert Solution Preview
Introduction:
In response to the CEO’s request, I have created the financial plan and operational budget for Krona Hospital for the next year. The budget takes into account the expansion of the new facility and includes $3 million for additional staffing, services, maintenance, and other related costs. The budget reflects an increase in revenue reimbursement, allocation for proposed improvements, and an increase in salaries. The following areas have been discussed in detail: funding sources, revenue forecasting methodology, impact of new services on revenue, fixed and variable costs, and projected inpatient and outpatient visits based on current trends.
Funding Sources:
The funding sources for the new facility and operational budget of Krona Hospital include government grants, private donations, investments, and fundraising events. The hospital will also receive reimbursements from insurance companies, Medicare, and Medicaid for the services provided to patients.
Revenue Forecasting Methodology:
To forecast revenue, we have considered historical data on patient volumes, services provided, and reimbursement rates. We have also analyzed trends in the healthcare industry, changes in regulations, and competition in the local market. We have used statistical models and forecasting tools to estimate the number of patients and the revenue generated by new services that will be offered by the hospital.
Impact of New Services on Revenue:
The addition of new services such as the maternity center, intensive care unit, and physical therapy and cardiac rehabilitation centers will increase the hospital’s revenue by attracting more patients and offering a wider range of services. The expansion will also increase the hospital’s reputation and brand in the local market, leading to more referrals and higher patient satisfaction rates.
Fixed and Variable Costs:
Fixed costs include expenses that are constant such as rent, insurance, salaries, and depreciation of equipment. Variable costs, on the other hand, depend on the level of activity or the number of patients served such as medical supplies, laboratory tests, and medications. The hospital’s fixed costs will remain the same, but variable costs will increase with the addition of new services and staff.
Projected Inpatient and Outpatient Visits Based on Current Trends:
Based on current trends, we have forecasted an increase in both inpatient and outpatient visits in the next year. The expansion of the hospital and the addition of new services will attract more patients, leading to an increase in revenue and profits. To manage the increased volume of patients, we will hire more staff, invest in new equipment and technology, and improve the quality of care.
Conclusion:
The financial plan and operational budget for Krona Hospital take into account the expansion of the new facility and include $3 million for additional staffing, services, maintenance, and other related costs. The budget reflects an increase in revenue reimbursement, allocation for proposed improvements, and an increase in salaries. We have discussed the funding sources, revenue forecasting methodology, impact of new services on revenue, fixed and variable costs, and projected inpatient and outpatient visits based on current trends. The budget will ensure that Krona Hospital continues to provide high-quality healthcare services to the local community and remains financially sustainable in the long run.
