Metropolis Health System – Comprehensive Healthcare Services

Wellness-oriented services

Metropolis Health System is known for providing comprehensive healthcare services. It is one of the district hospitals, which believes in delivering value and quality services to its patients in order to avoid workplace injuries and quick rehabilitation in case of health issues. It presently caters to the population of 50000 and aims to increase revenue by introducing new services. It aims to transform the community’s institutional health care and provide quality, low cost, convenient, affordable and personal care to cater to the needs of the public (Belton). Currently, it has a host of services like those including Rehabilitation and Wellness Centre, Home Health Service, Same-Day Surgery, Skilled Nursing Facility, Community Health and Wellness, Occupational Health Services and Recovery Services.

As discussed in the previous proposal document, MHS is aiming to increase the portfolio of services being provide with those including emergency service, medical and surgical supply and IV operating rooms. Besides this, it also desires of bringing in ambulatory services, Cardiovascular Services, Oncology Services and Community Health Services. All this will help MHS in achieving its long-term strategic goal of quality, community-oriented health care (Arnott, Lizama and Song).

Besides all this, MHS also has a foundation to secure financial and non-financial support to help achieve its long term vision and serve as the philanthropic arm of MH., volunteer auxiliary having 500 volunteers who assist in system’s operation and community program, depreciation fund to replace the fixed assets (Das).

In terms of the management, MHS is having 8 local community leaders having diverse skills and responsible for MHS’s strategic direction. The full team consists of 500 members including doctors, nurses, physicians, and other staff who drive for continuous improvement in quality. The rationale behind opening up new services and increasing medical supplies and the no. of operating rooms is that MHS is only there in city to cater to 50000 people and in case of emergencies some of them might need to switch to other hospitals situated out of city and in turn paying more than required and no guarantee on the quality of services provided. If the given proposal were initiated accepted and achieved, MHS would take one-step forward in achieving its vision of comprehensive health care for community (Choy).

Looking at the perspective of the expansion in terms of services rendered to the patients and as well, as increase in the area of operation, following is the estimated increase in the budgeted revenue as well as the expenses. The below simulation of the incremental revenue and expenses shows the streams of cash inflows and outflows in case the above mentioned services are introduced. For the time being, a time horizon of 5 years has been considered for revenue and expenses simulation (Farmer).

Metropolis Health System
Statement of Revenue and Expenses
Projected for the next five years
Particulars / Years	0	1	2	3	4	5
Net patient service revenue	–	250,000	260,000	270,000	280,000	290,000
Income from Emergency service and ambulatory services	–	130,000	144,300	158,730	179,682	199,447
Total incremental revenue	–	380,000	404,300	428,730	459,682	489,447
Expenses
General services resources	100,000	8,000	8,320	8,653	8,999	9,359
Routine revenue Laboratory Radiology	120,000	9,600	9,984	10,383	10,799	11,231
Physical therapy EKG and EEG Ambulance service Oxygen	100,000	8,000	8,320	8,653	8,999	9,359
Home health and hospice Substance abuse	100,000	8,000	8,320	8,653	8,999	9,359
Emergency service Medical and surgical supply and IV Operating rooms	120,000	9,600	9,984	10,383	10,799	11,231
CT scanner OB-nursery Pharmacy	100,000	8,000	8,320	8,653	8,999	9,359
Anaesthesiology Respiratory therapy	200,000	16,000	16,640	17,306	17,998	18,718
Depreciation expenses	–	8,000	10,000	10,000	10,000	10,000
Other operating expenses	–	12,000	13,320	14,652	16,586	18,411
Total incremental expenses	840,000	87,200	93,208	97,336	102,177	107,025
Incremental income year wise	(840,000)	292,800	311,092	331,394	357,505	382,422

Proposed expansion plans

Besides the above estimation, the net present value has also been calculated taking 10% discount rate. The following is the calculation as per which the company will be NPV positive after the period of 5 years (Erik and Jan).

Computation of the Net present Value of the Company
Year	Net Cash inflow	PV factor (10%)	P.V. Amount of Flows
0	$                (840,000.00)	1	$                  (840,000.00)
1	$                  292,800.00	0.909	$                    266,155.20
2	$                  311,092.00	0.826	$                    256,961.99
3	$                  331,394.48	0.751	$                    248,877.25
4	$                  357,505.44	0.683	$                    244,176.21
5	$                  382,422.39	0.621	$                    237,484.31
Total Cash inflow			$                 1,253,654.96
Net Present Value			$                    413,654.96

For the purpose of the above enhancements and addition, there would be physical space requirements for a number of things like the extra ambulances, which the company will be investing in. The parking space would be required for that. Besides this, space in the central building as well as the administrative offices would also be required for machines like radiology and Anaesthesiology as well as those required for oncology treatment. Furthermore, extra space would be required in terms of operation theatres as the number of out patients is estimated to increase. This would also warrant an increase in the parking area as well so that the attendants can park their vehicle and get the proper stay at the hospital (Kim, Schmidgall and Damitio).

In terms of the fixed and variable expenses, MHS can expect an increase in depreciation expenses as there would be heavy investment in the surgical equipments, ambulances and machines. Amongst other fixed expenses, the staff requirement would also increase which has been mentioned above as other operating expenses. The organization can also foresee an increase in the general and insurance expenses.

In terms of variable expenses, the company will see an increase in the expenses like Physical therapy EKG and EEG Ambulance service Oxygen, Anaesthesiology Respiratory therapy, CT scan expenses, general expenses and emergency services expenses (Goldmann).

For the purpose of the simulation on the expansion strategy and the proposed programmatic enhancement, a realistic period of 5 years has been assumed where the strategy implementation and investment in the various machines will start in the month of January 2019, the renovation required in the building for space and then the parking lot is expected start in April and to be completed by September and then finally all the new announcements and inauguration of the new services can be done in January 2020. For the purpose of monitoring the project timelines, a fixed term employee would be hired for a period of 1 year in 2019 so that the regular project updates can be shared with the management and the trustees on regular basis (Jefferson). One of the leaders or management trustee will also be entrusted with the responsibility of handling the budgets and approving the same as the official treasurer of the project.

Budget projection

The detailed revenue and the expenses streams has been discussed and shown above. Due to the introduction of the new services in MHS, it would be able to able to earn incremental revenue in the form of net patient services revenue and specifically from the emergency and ambulatory services. The net patient revenue will primarily include revenue on account of routine check-ups, laboratory services, pharmacy, radiology and CT scan tests, emergency services and surgical and medical supplies, operating rooms income and Anaesthesiology, physical therapy and oxygen supply services, Home health and hospice and physiotherapy services to the patients (Sithole, Chandler and Abeysekera).

On the other hands, the expenses would majorly include that of capital investment in the form of purchasing new ambulances, surgical supplies and the medical equipment’s and machines that would be required for operation. Furthermore, there will also be an increase in the general expenses, as there would be a requirement of the additional staff services, dietary, maintenance and laundry expenses. Amongst the support services, the insurance expenses is likely to increase along with the employee welfare expenses considering the increase in the number of patients as well as the employees. The routine medical expenses as well as the ICU and the operating rooms expenses would also be increased which has been shown as part of Routine revenue Laboratory Radiology expenses in the table (Werner).

A simulation of the net present value to assess whether the given proposal would be beneficial or would result in loss has also been done above using a discounting factor of 10% as per the industry rate. A time horizon of 5 years has been considered as it is a good enough time to assess whether the investment will yield profit or go into losses from the hospitality industry point of view. It can be seen that the net income deducing the operating expenses year on year when discounted at 10% rate, yields an income of $ 1253654 over 5 years and when the initial outflow of $ 840000 is adjusted against the same, the net present value comes out to $ 413654, which shows that the project is cash positive as well as profitable (Trieu).

Conclusion

From the above discussion and analysis. it can be seen that the organization would be working towards bringing in programmatic enhancement in the form of giving utmost priority to the ambulatory as well as emergency services. This will help the public at large, as the people who are not being able to reach; the hospital in time would be able to get the proper treatment on time and the means to reach the hospital on time. People need not migrate to the other cities in search of good patient services and the treatment would be cost effective, affordable and quality thereby helping MHS in its way of achieving its vision of comprehensive health care system. This will also be helping the critical patients to get the quick service and they just need to book the immediately or regular service appointment based on the need through the helpline number. The hospitals will also be advised to set up an ambulatory service with a team of special doctors who can treat and address the emergency case on high priority and thereby diagnosing, assessing and treating them at the hospital and trying to release them on the same day. This will also helping in reducing the average length of patient stay in hospital from 4.1 days to at least 2.5 – 3 days. It will also be beneficial to the hospital in terms of revenue, growth and survival as the project has been assessed to be profitable in terms of NPV over the 5 years horizon, which has been discussed in detail above.

References

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Belton, P. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd, 2017.

Choy, Y. K. “Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis.” Ecological Economics (2018): 145. <https://doi.org/10.1016/j.ecolecon.2017.08.005>.

Das, P.K. “Financing Pattern and Utilization of Fixed Assets – A Study.” Asian Journal of Social Science Studies 2.2 (2017): 10-17.

Erik, H and B Jan. “Supply chain management and activity-based costing: Current status and directions for the future.” International Journal of Physical Distribution & Logistics Management 47.8 (2017): 712-735.

Farmer, Y. “Ethical Decision Making and Reputation Management in Public Relations.” Journal of Media Ethics (2018): 1-12.

Goldmann, K. “Financial Liquidity and Profitability Management in Practice of Polish Business.” Financial Environment and Business Development 4 (2016): 103-112.

Jefferson, M. “Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland .” Technological Forecasting and Social Change (2017): 353-354.

Kim, M., R.S. Schmidgall and J.W. Damitio. “Key Managerial Accounting Skills for Lodging Industry Managers: The Third Phase of a Repeated Cross-Sectional Study.” International Journal of Hospitality & Tourism Administration, 18.1 (2017): 23-40.

Sithole, S., et al. “Benefits of guided self-management of attention on learning accounting.” Journal of Educational Psychology 109.2 (2017): 220. <https://psycnet.apa.org/buy/2016-21263-001>.

Trieu, V. “Getting value from Business Intelligence systems: A review and research agenda.” Decision Support Systems 93 (2017): 111-124.

Werner, M. “Financial process mining – Accounting data structure dependent control flow inference.” International Journal of Accounting Information Systems 25 (2017): 57-80.