Reference no: EM132340060 , Length: word count : 2000

Financial Management and Economics in Health Care

Learning Outcomes

1. Apply basic spreadsheet skills to undertake financial analysis and budgeting tasks.

2. Appreciate the distinctive features of health in economic terms.

3. Discuss how accounting functions as a tool in the decision making, planning and control process.

4. Outline the purpose and function of the three main financial reports, namely the Balance Sheet, the Income Statement and the Cash Flow Statement.

5. Apply commonly used techniques to analyse an organisation's financial statements.

6. Explain the nature of the relationship between volume of activity, costs and profit and how knowledge of this relationship can be used to make decisions and assess risk.

7. Describe the budgeting and planning process.

8. Identify the methods commonly applied in making capital investment decisions.

9. Appreciate the role of health financing in the broader context, including different approaches to health funding.

Case Study

You are the new Finance Manager. The Chief Financial Officer (CFO) has asked you to prepare the General Medicine Division’s budget for the
next financial year using a blended approach of Activity Based Funding (ABF) and historical block funding. To do this effectively, you must
engage with the Division’s clinical managers and seek their advice. This is the first time ABF has been used in the hospital.

Requirements

1. Produce an ABF budget using the:

a. benchmark ALOS

b. expected number of patients next year

c. NWAU (inlier)

d. National Efficient Price.

2. To educate the clinical staff on how ABF works you must prepare a one-page flyer on:

a. what is ABF

b. why is ABF used as a funding model

c. how the ABF budget (in Question 1) was calculated

Your flyer should be visually-engaging and simple enough for a non-finance audience to understand. You may consider using tables, graphs or infographics.

3. Produce a block-funded budget using the:

a. current ALOS

b. expected number of patients next year

c. daily cost of stay (ex. X-ray, Path., Scripts)

d. total cost of each service type (i.e. expected number of patients next year, average number of services, average cost of services).

What is the effect if the benchmark ALOS was used to calculate the block-funded budget?

4. The General Medicine Division’s clinical managers advise you that the expected number of patients next year should be 4% higher, for the following DRGs: F74A, F76B, E61B, E62B. Calculate:

a. the change to these DRGs under the ABF budget (calculated in Question 1)

b. the effect to the overall ABF budget, as a result of the change.

5. The CFO has asked to prepare scenarios where there is a 5% and 10% reduction to the National Efficient Price. Using the expected number of patients next year, as advised by the clinical managers (i.e. with the 4% increase applied to the relevant DRGs), calculate:

a. the impact to the ABF budget for both scenarios (5% and 10% reduction to the National Efficient Price).

6. The CFO has asked that you prepare scenarios for the block-funded budget (calculated in Question 3) that shows a 1% to 10% (i.e. 1%, 2%, 3%... 10%) reduction in the daily cost of stay. This must be prepared using:

a. the benchmark ALOS

b. the expected number of patients next year, as advised by the clinical managers (i.e. with the 4% increase applied to the relevant DRGs)
Present the overall budget outcome for each scenario (i.e. 1% to 10% reduction in the daily cost of stay) on a single graph.

7. You have been requested by the Board to prepare a paper on ABF, which includes:

a. the advantages and disadvantages of ABF

b. the risks of preparing an ABF budget

c. potential strategies to mitigate the risks of an ABF budget

d. what might be the opportunities to engage clinical managers across the hospital to participate in the ABF budget preparation process and ongoing ABF governance throughout the financial year.

8. Prepare a short commentary piece (no longer that one page) on what insights you have gained from the Major Assignment and the Financial Management and Economics in Health Care topic overall.

Your reflection should consider what new skills and knowledge you may have acquired; or alternatively, what existing skills and knowledge you may have extended. It would be interesting to understand what some opportunities at your workplace might be where you can apply your skills and knowledge.

Remember – these are your views and there should not be any need to reference textbooks or articles.

Some tools to guide you in this reflective learning exercise are listed in the Resources section below; particularly, the ‘4Rs of Reflective Thinking’ model.

Critical Success Factors

The following points are intended to provide you with some further considerations that may be useful to strengthen your response to the Major Assignment.

• List any assumptions that you make when preparing your budget and calculations.

• Please use a single Excel spreadsheet.

• Read the requirements and plan your spreadsheet before calculating any findings – you are likely to ‘build’ on findings; therefore, look at where your spreadsheet may have a common framework.

• Please ensure you show a breakdown for each DRG and the overall total in your calculations (i.e. likely displayed in an itemised table in your spreadsheet).

• Use your discretion when copying and pasting findings from your spreadsheet into your report (i.e. word document). A graph may be a nice ‘fit’; however, a long table may be too much information for the report. In the latter’s instance, you are encouraged to write a
very short ‘interpretive’ commentary (where appropriate) and refer to the relevant section of the spreadsheet. For example:

The results indicate a 20% increase of the overall budget as a result of the changes to the relevant DRGs. The calculations and formulas used in relation to these findings are shown in the ‘Calculations – DRGs’ sheet of the accompanying spreadsheet.

• The word limit excludes references, title pages, table of contents, and the reflective commentary (Question 8). Please avoid ‘filler’ words to ‘pad out’ an answer.
• Make sure to label any tables, diagrams, or graphs. Use this label carefully to ensure it focuses on what the key message is. If appropriate, you can highlight sections with colours, text or arrows to help convey your message.

Please use references to the peer-reviewed and grey literature, as required. It is expected that references will particularly apply to Question

7. You are expected to support any statements made with citation to the appropriate literature.

• Try to minimise direct quotes from the literature; instead, focus on how the literature applies and adds value to your findings.

• Avoid simply listing any stakeholders – take the time to explain who they are and how they may be impacted (if at all – some may just need to stay informed).

• The report structure should be consistent with a business report. Please use academic writing and language appropriate for a professional setting.

• Please note, the number and costs of tests, length of stay and other variables outlined above for each DRG are fictitious and are for illustrative purposes only. However, the DRG code, name and NWAU (inlier) weight are direct from the 19-20 IHPA data.

Attachment:- Assignment - Financial Management.rar