Healthcare Accounting
1) Laying the Groundwork Scenario: Initially, the established leadership at the hospital was skeptical. Now they are at least willing to listen. So you decide its time to introduce a procedure that you think will improve the financial performance: the gastric sleeve procedure. Based on knowledge that you have gained in this courses textbook: · Explain the different sources from which you may obtain the funds needed to introduce this procedure. · Assuming you have the resources to cover this new procedure, explain the implications of this new service to the revenue cycle of the hospital. 2) Crunching the Numbers Scenario: Youve got the numbers and the CFO wants you to explain how this investment will be worth it. You will have to spend up front $2,000,000 to build a new OR and obtain equipment just to handle the procedure and then pay another $200,000 per year to a physician who will perform the procedure. You expect that it will take a while before the general public becomes aware of the availability of the procedure, so it will take $40,000 the first year, and $10,000 each year after that. For the sake of simplicity, assume that you will receive $1,000 from insurance for each procedure. The first year you will have 400 procedures and it will grow by 200 procedures each year. Use Excel to compute the following: · Using the payback method, how long will it take to recover the initial investment? · If the hurdle rate is 10%: o What is the future value of the initial investment? o Assume the future value is the cost of everything you will pay out over the five years, except for the initial investment. What is the present value? · What is the IRR? · Should you invest? Why or why not?
