Factors to Consider in Renovation Bond Decision
Case Scenario
You have recently been appointed to the board of a Hospital System. Assuming you have served the hospital as a labor law attorney for nearly 10 years, you are now in a position to help evaluate a significant financial decision. The board is considering whether to issue a bond to fund a major hospital renovation project. Answer the following questions to advice the board:
- Identify the most critical factors that should be evaluated when deciding on the renovation bond.
- Provide a summary of your recommendation or decision.
- Explain the key information and data that informed your decision.
Factors to Consider in Renovation Bond Decision
More hospitals are increasingly seeking cost-effective ways of service delivery to provide high-quality services to customers at affordable costs. The issue of cost containment over the past years as a replacement cost model cannot be understated. Thus, the board should ensure the profitability of the hospital as well as the satisfaction of the customers. There must also be a push to reduce the hospital's reliance on outpatient care and instead shift the focus to better resource utilization and the application of revenue measures. This can be attained by accepting the bond to finance the renovation and implement other changes. This paper investigates factors to consider in the renovation bond decision.
Besides, trends in the cost changes observed during health care delivery should be identified by looking at the reports generated by the accounting systems. This will help to determine the role of the total costs of inpatient and outpatient health services. Cost finding approaches should be used to analyze the patterns of cost allocation. Such will establish any areas that are using too many resources without creating matching revenue for the hospital.
Key Information and Data That Informed the Conclusion
Various cost models can be used to measure multiple performance indicators of the hospital, including the retention rates and re-admission rates. The average cost per discharge is an imperative metric that can be used to track and monitor the average costs of health care before a patient is discharged (Agarwal & Liest, 2017). The outcomes of the metric can assist the managers in understanding the departments that are overspending. The parameter can also show the profitable areas and the alignment of the costs with better outcomes for the patients. The metric has the advantage of allowing the hospital to adjust its case mix with other population demographics for the patient.
Moreover, the average cost discharge is a useful metric that can be used to project the long term expenditures of the hospitals in terms of therapy and adjust care provisions. Research shows that high costs of care, coupled with low profits, can have a negative impact on the performance of the hospitals and its provision of services (Agarwal & Liest 2017). Besides, a lack of profits can reduce the services offered at the hospital and reduce the number of physicians available to serve patients. The operating margin of the hospitals is obtained by subtracting the costs of operations from revenue. The operational costs include the wages, assets, rent as well as supplies.
In addition, to sustain operations, the hospital should be able to pay for its fixed costs without selling its assets (Kludacz-Alessandri, 2016). It is challenging to control the expenses since external factors fix and affect most of them. Kludacz-Alessandri (2016) suggests the adjustments in the payment method for the inpatient and outpatient services will reduce the costs of operations. The new system should ask for payments based on market prices. The hospital care costs system should be used to calculate the time needed for the development of a costing system. The system can be used for many years by the hospital for cost analysis. The index is recommendable because it allows the analysts to estimate the current costs if all the costs of service were measured based on the costs of a particular year.
Conclusion
Overall, the hospital should adopt an elaborate system for cost accounting. The system must track the costs of health care services in a structured and organized way. Also, the hospital should use a system that calculates the cost of each service rendered to the customer. A record of these costs should appear as well as calculation of the unique care costs for each patient.
References
Agarwal, V., & Liest, G. (2017). Implementing Quality Healthcare Strategies for Improving Service Delivery at Private Hospitals in India. Journal of Health Management, 19(1), 159-169. https://www.doi.org/10.1177/0972063416682638
Kludacz-Alessandri, M. (2016). Non-financial dimensions of measurement and assessment in the performance model for hospitals. Managerial Economics, 17(1), 93. https://www.doi.org/10.7494/manage.2016.17.1.93