Simulation Review Paper

Shunna Billops

HCS/457

Marjorie Romano

July 25, 2011

The simulation review paper will address the summary of my findings of the financial accounting of the Elijah Heart Center Hospital, according to the financial indicators in the simulation: Capital shortage, Funding options for equipment, Funding options for capital expansion, summary and the conclusion.

Capital Shortage

The cost cutting options I selected was reducing agency staff and changing the skill mix for Elijah Heart Center. The reason why I chose this option is because we can reduce some cost by not hiring so many contracting nurses to save on payroll and increase the unlicensed staff to be used in some areas more than others to save some revenue and not jeopardize the quality of care for the patients first. I picked loan option 1, which the loan is 1.5 million at 9.45% interest rate, monthly installments of 131,490 for 12 months and no prepayment limitation, so we put nothing up front initially (University of Phoenix, 2011). My outcome was making a smaller loan at a higher rate to defray cost while reducing contracting nurses and utilize the unlicensed staff to be diverse in multiple skills in the hospital and not cut quality of the patient’s care at this health facility.

Funding Options for Equipment

You do not have to buy a new CT scanner because this machine is the least expensive in the hospitals and it can be upgraded if need be for the life of this machinery (University of Phoenix, 2011), so I chose buying a refurbished scanner, plus you can upgrade when needed, and do not have to pay the fee that goes with it, which saves the hospital in the long run.

Capital lease option for the x-ray machine I picked. Lease term is greater than 75% of the property's estimated economic life, the lease contains an option to purchase the property for less than fair market value and ownership of the property is transferred to the lessee at the end of the lease term ( Investor Words, 2011). After the lease period is up the hospital can decide whether to upgrade, lease or sell it out to a third party, because they can call the shots as owners of this x-ray machine for profit making.

Operating lease was the option I thought was the best selection for the ultrasound system since no upfront payment cost and allowing the use of this equipment at low monthly cost, which helps defray expenses of buying a machine versus leasing one.

Funding Options for Capital Expansion

The source I chose for capital expansion is HUD 242 loan insurance program. First I chose the private bank funding, but then I looked at the chart in the prepayment column they are charged foreclosure fees and the HUD loan program does not charge, so this is another fee not paid by the hospital. The Tax exempt revenue bonds you also pay back interest in ten years instead of eight years with HUD loan program. The column “Period for Using Funds” shows internal revenue has rules and requirements for tax exempt bonds but HUD and private bank funding does not have these restrictions. This is another reason for the HUD 242 loan choice. HUD 242 loan program the interest is paid off in 8years versus 10 years for tax exempt revenue bond and no foreclosure fees (University of Phoenix, 2011).

Summary and Conclusion

In summary and conclusion, what I have learned from this simulation that being CEO, Vice president, Chief Financial Officer and Radiologist of this health facility has a huge responsibility of implementing financial strategies for this facility to prosper. Decisions need to be made for the shortfalls like huge discounts to managed care companies, higher wages to contract nurses, lower Medicare reimbursements, and unused equipment which is not being billed. These are just some factors that contribute to this issue. This simulation has open my eyes to different financial indicators to help with management of cash flow tactics, loan process and equipment purchases to continue improving this area for health care facilities. If I did the simulation again I would want to be familiar with the loan programs that were available and know the pros and cons of which loans would benefit the hospital long term, so we will know what loans are a better choice for the facility, so for someone to help with this major decision is serious, because it is not just the executive management involved but the health care facility as a whole who could be affected by this verdict, which also includes but not limited to the employees. This seems like a very tedious and detailed process to me and I know this comes through experience in this area of expertise. I would apply these skills and knowledge on my future job as a Health Care Manager really thorough, keep the patient quality firs,t and make sure all options have been exhausted. My managerial ability would be sharp and focus, so I can perform my job in excellence and not mediocre. For any organization to be profitable the financial accounting department definitely needs to be knowledgeable with experience to be aware of the rules, regulations and requirements for the business affairs of that organization. This will determine if the organization will be profitable or result in financial loss. In the health care field it definitely has more parts of accounting because of Medicare, Medicaid and private insurance, also if accounts receivable is not paid by the patients then this is another issue to consider and the executive management will need to decide what avenue to take if this is over a period of time. In health care organizations patient care is number one, so when making financial decisions this needs to be considered first. When financial problems force your organization to make a decision, then you as the executive management need to make some immediate changes and consider all options, whether cutting staff, re-evaluate equipment expenses, or other funding or loan programs to accommodate this request. You need to choose the strategy that fits and benefits your company long term. In order for this company to sustain it must continually execute the program in place for successful longevity.

References

Investor Words. (2011). What is Capital Lease? Retrieved from http://www.investorwords.com/722/capital_lease.html
University of Phoenix. (2011). Analyzing Financial indicators for Decisions Making [Computer Software]. Retrieved from University of Phoenix, Simulation, Health Care Financial Accounting website.