Competency
Apply the principles of economics as they relate to nursing and healthcare.
Scenario
The nurse manager in orthopedics has asked for your assistance with a finance project. She is being asked to estimate revenue for the next fiscal year based on the projected number of hip replacements increasing from 300 this year to 340 next year.
The nurse manager must also factor in the expected changes in sources of revenue by payer. It is estimated that the hospital will lose some contracted insurers due to local competition, and see an increase in Medicare and Medicaid patients due to area demographics and economic conditions. She has provided you with the numbers from this year’s budget and the projections on numbers and payment amounts for next year.
Instructions
Prepare a financial forecasting memo to your nurse manager that:
Part One – Financial Forecasting Model
Contains a completed financial forecasting model by downloading the Financial Forecasting Model Click for more options to:
Calculate the income projected from each payer source and total for the year to compare next year’s revenue to this year’s revenue.
Provide your nurse manager with your estimates on the increase/ decrease in revenue for next year’s budgeting.
Part Two – Financial Forecasting Memo
Provide exemplary explanation of how the change in payer mix will impact the overall projected revenue of the unit with comprehensive supporting details.
Exemplary description of the financial impact of a changing payer mix with comprehensive example(s)
Exemplary recommendations for the manager to consider in expenses, so that the budget will balance as neutral with comprehensive example(s).
Provides stated ideas with professional language and attribution for credible sources with correct APA citation, spelling, and grammar in the memo. Please do this assignment using only research published within the past 5 years. Plagiarism free
Expert Solution Preview
Introduction:
This assignment requires the use of financial forecasting and economic principles as they relate to nursing and healthcare. The nurse manager in orthopedics requires assistance to estimate revenue for the next fiscal year based on the projected number of hip replacements increasing from 300 this year to 340 next year. The nurse manager must consider the expected changes in sources of revenue by payer, including lost contracted insurers due to local competition and an increase in Medicare and Medicaid patients due to area demographics and economic conditions. The student is required to prepare a financial forecasting memo to the nurse manager, providing a completed financial forecasting model and an exemplary explanation of how the change in payer mix will impact the overall projected revenue of the unit with comprehensive supporting details.
Answer:
Financial forecasting is a crucial aspect of healthcare planning and management, and the principles of economics are applicable in this area. In this case, the financial forecasting model reveals that the projected income from Medicaid will increase from $750,000 to $850,000, and Medicare will increase to $1,020,000 from $1,000,000. However, there will be a decrease in contracted insurers, which will result in a decrease in revenue. As per the financial forecasting model, the total projected income for the year from all payers is $4,325,000, representing a 4.4% increase from this year.
Given the changes in payer mix, the overall projected revenue of the unit will be impacted significantly. The loss of contracted insurers will shrink the revenue base, while the increase in the number of Medicare and Medicaid patients may lead to increased costs associated with the provision of care. Effectively, this means that the overall revenue of the unit may reduce even as the number of hip replacements increases.
To mitigate this challenge, the nurse manager may need to implement cost-saving measures that ensure the budget balances as neutral. Cost-saving measures may include renegotiating contracts with vendors, reducing operating costs, and limiting overtime work. Such measures will help reduce the cost of care provision and ensure that the unit’s overall revenue does not decline.
In conclusion, financial forecasting is critical in healthcare planning and management, and its principles are applicable in nursing and healthcare. As the payer mix changes, it is essential to implement measures that will help balance the budget and ensure that the revenue does not decline. Effective cost-saving strategies combined with optimal quality of care provision will adequately position the hospital for profitability in the next fiscal year.
