Assignment 2: Cost-Benefit Analysis
Read the following article which describes some of the current conflicts that grew out of recent efforts by HCOs to increase quality and decrease cost.
Nolan, T., & Bisognano, M. (2006, April). Finding the balance between quality and cost. Healthcare Financial Management, 60(4), 67–72. (AN 20440639)
The authors describe the conflict between caregivers, who see themselves as protectors of quality and patients, and finance professionals, who see themselves as protectors of the organization’s resources and bottom line. However, working together, finance professionals and caregivers can design improvement activities that both increase quality and reduce costs.
In this assignment you will apply the formula presented in the article and then analyze improvement activities that could occur in a fictitious hospital. The minimum and maximum values are provided for each component of the formula. You will create a spreadsheet that calculates the minimum and maximum value for the formula given the range of inputs.
Use the following information for a fictitious hospital:
Average wage/hour $19.50 $21.45
Worked hours/patient day 4.2 5.04
Patient days/admission 3.5 4.55
Using a spreadsheet:
Calculate the lowest and highest total wages/admission.
Vary the value of each component within its range to calculate possible values for total wages/admission. Select at least two values within the allowable range for each of the three components.
Determine which of the three components has the greatest impact on the total wages/admission as the component ranges from its minimum to maximum value.
Based on the calculations, answer the following questions in a 2-page Word document:
As a nonclinical administrator, which of the three components would you focus your efforts on in order to reduce costs? Why?
For each of the three components, describe how actions taken by the HCO can reduce cost and also improve quality.
Prepare a report with both the spreadsheet and the Word documents. (You may embed the spreadsheet in the Word document.) Apply APA style to format your documents.
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