Instructions ITC Health Delivery Initiatives in Rural Catan HCL 731 - Financial Management Instructions Please enter your name below. Name: For this assignment, assume that you are Melissa Jordan, a...

Instructions
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        Please enter your name below.
        Name:
        For this assignment, assume that you are Melissa Jordan, a financial analyst for ITC's newly-formed Rural Health department. ITC is working on the financial projections for its rural health operations. You have been brought on by Mr. Surhoff because of your expertise in full costing and background in rate structure analysis. In this assignment, you will be given a series of messages from your supervisor with related tabs to provide your responses.
        This assignment will follow the general flow given below.
1. Read itcMessage1 and read the information on the "1a.Background" and "1b.Definitions" tabs (orange tabs)
2. Read itcMessage2 and complete the "2a.CostDrivers" tab (blue tabs)
3. Read itcMessage3 and complete the "3a.Step-Down" tab (green tabs)
4. Read itcMessage4 and complete the "4a.RateStructureAnalysis" and "4b.Recommendation" tab (purple tabs)
        When you have finished reading these instructions, proceed to the "1. itcMessage1" tab.
        Where we go from here:
        Case Presenters (Melissa Jordan) and Respondents (Mr. Ripken, VP of Finance for ITC Health): After preparing your analysis of ITC's rate structure, you will record a presentation with your recommendation of rate structure, including both advantages and disadvantages.
Presenters: You are presenting your recommendation and analysis to Mr. Ripken. Record a 2-4 minute discussion of your presentation.
Respondents: You are the asking questions or seeking clarification on points discussed in Ms. Jordan's presentation. You can respond with some of your own conclusions and analysis, and you also should pose 2-3 questions in response to the presenter's analysis.
        The scenario was adapted from a case study of Access Health International. All numbers are fictitious and developed for instructional purposes only.
        Source: https://www.itcportal.com/businesses/agri-business/e-choupal.aspx
1.itcMessage1
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        1. Review the itcMessage from Mr. Surhoff below.
        2. Proceed to the "1a. Background" tab.
        itcMessage1
From: B.J. Surhoff, Director, ITC Health Delivery
Sent: Wednesday, February 20, 20X0 12:22pm
To: Melissa Jordan, Financial Analyst, ITC Health Delivery
Subject: Rural Health Pro Forma
Melissa:
It's great to have you on board! Please review the background information on our Rural Health Initiative ("1a. Background tab) and the definitions associated with the program's projected expenses and statistics ("1b. Definitions" tab). Enjoy!
I'll send some other information along shortly.
B.J.
1a.Background
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        1. Read the background information about ITC's Rural Health Initiatives below. The information below is the same as the "ITCRuralHealthCase.pdf," so you can refer to that document as well.
        2. After reviewing the background, proceed to the "1b. Definitions" sheet
        Background
        In 20X0, ITC carried out a need gap analysis in Sehore1, Madhya Pradesh (a state in central Catan) to better understand the realities of providing healthcare in rural Catan. Data were collected using a survey that covered 108 respondents and 78 rural healthcare providers in 27 choupals (villages). Analysis of the survey data reaffirmed the inadequacy of public health facilities available to the villagers; it also became clear that biggest challenge in accessing quality health care at an affordable cost was for villages farther than 11 kilometers from the town. People in these areas more often sought the services of a local private practitioner. However, of the 78 health practitioners interviewed, it was found that only 16 percent were qualified to practice medicine. Villagers expressed the need for health services with a greater focus on preventive services close to their homes.
        Based on the gaps identified in the survey and visits to existing health care providers, ITC felt that their existing e-Choupal kiosk infrastructure, which focuses on agriculture, could be modified to deliver a range of health services and products. The existing agriculture infrastructure creates a farm-to-market supply chain made up of three tiers: village, town, and city. The first tier consists of the village level e-Choupal kiosks with internet access, housed and managed by an ITC trained local farmer and within walking distance (1-5 kilometers) of each target farmer. The kiosks enable farmers to report crop weights locally, rather than hauling their harvest into the nearest town (10-30km). Then, ITC tractors drive from a nearby town to the villages and collect crop batches to bring back to the town (hub of operations). In the town, the hub is an ITC facility where the shipments are measured, stored, and shipped to cities. In the cities, ITC distributes these crops to food producers and food packaging companies. The average population of a village is 775, a town is 31,000, and a city is 1 million or more.
        For the rural health care delivery model, ITC could use its agriculture infrastructure in the villages and towns as the foundation for its operations. At the village level, preventive and primary level curative services could be delivered by a trained healthcare worker (called a village health champion). These services could be supplemented by basic diagnostics support, good quality medicines and a higher level of care by a medical professional at the hub level. For more advanced needs, ITC would establish a referral network via a telemedicine center at the hub that would connect to external healthcare providers. Health care delivery would be facilitated by leveraging the existing hub infrastructure with internet and video conferencing (for telemedicine), partnering with providers in cities for specialist care, and introducing health insurance. The three-tiered model would be supported by a robust supply chain for pharmaceuticals, supplies, and educational materials.
        The first tier at the village level would be managed by a village health champion (VHC), who usually would be a female. The primary focus here would be on wellness and disease prevention. The VHC would be the first point of contact between the patient and the e-Choupal kiosk or other health care delivery infrastructure. The VHC would help with kiosk functions for villagers with literacy issues because basic health information and awareness would be dispersed through the e-Choupal kiosk. Also, each VHC would conduct a door-to-door health survey to enable the creation of a village health profile database, eventually enabling customization of services. Along with the two VHC functions, the kiosk also could carry health and well-being content and allow for relevant frequently asked questions to be monitored and responded to remotely by a doctor. Regular health camps conducted by visiting doctors would further enhance access to basic services such immunizations, preventive care, and early detection of curable diseases.
        The second tier would consist of a health center (hub clinic) located in a town surrounded by e-Choupal villages. The health center would be comprised of a primary health clinic, a pathology lab, and a pharmacy. A general practitioner, a pathologist, and a licensed pharmacist would staff the center. In addition, the hub providers of ITC would assist in various activities at the village level by providing educational reference materials at the e-Choupal kiosks. The hub clinic would also have a telemedicine center for tele-consultation with specialists located in hospitals in nearby cities, as well as online training and learning modules for the hub administrative and clinical staff.
        The third tier would consist of network partners including specialist doctors, diagnostic centers, tertiary care hospitals, and insurance companies. Telemedicine consultation would be used for specialty consultation on an as-needed basis. ITC will work to set up partnerships with secondary hospitals in the immediate vicinity of the hub for services such as maternity, basic surgical requirements and diagnostics not available at the clinic including hospitalization. Partnerships with health insurance companies would address the reimbursement of healthcare delivery. ITC would work as a facilitator involved in the execution of extended coverage programs.
        For the model to take off, ITC required leverage of the established community network and its own physical infrastructure. The onus of providing high quality health care and training the required personnel would be paramount. Because financial sustainability of the initiative is critical, the clinic would need to determine the reasonable rate structure for services provided. Between 20X5 and 20X9 two pilots were conducted in the states of Madhya Pradesh and Maharashtra2.
        1 Sehore is a district in Madhya Pradesh, central Catan and Sehore town being the headquarters of the district. The survey was conducted in the villages of Sehore.
        2 State in the western part of Catan
1b.Definitions
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        1. Review the definitions of the expenses and statistics below. Feel free to refer back to this sheet during later steps in this exercise. You are NOT responsible for memorizing these definitions. They are for reference in this activity.
        2. After reviewing these definitions, proceed to the "2. itcMessage2" tab.
        Expenses and Statistics - Definitions
        Expenses    Definitions
        Rent and Utilities    Expenses associated with renting and maintaining the physical space occupied kiosks and clinics
        Administration    Salaries of corporate-level executives and staff that do not work at the clinics or the villages
        Information Technology (IT)    Expenses linked to maintaining internet connection to villages and carrying out telemedicine programs that allow for information transfer between kiosks and clinics
        Training and Education (T&E)    Salaries for trainers of new clinical and administrative staff and development of continuing education materials
        Village Kiosk Access    Expenses associated with the e-Choupal kiosks and salaries of VHCs
        General Medicine    Salary for 0.5 FTE of a general practitioner at the hub clinic and supplies associated with general medicine visits (Roughly half of the general practitioner's visits deal with adults)
        Pediatrics    Salary for 0.5 FTE of a general practitioner at the hub clinic and supplies associated with pediatric visits (The other half of the GP's visits are with children)
        Laboratory    Salary for 1 FTE of a licensed pathologist at the hub clinic and supplies associated with testing and diagnostics
        Pharmacy    Salary for 1 FTE of a licensed pharmacist at the hub clinic and pharmaceutical products for adults or children
        Statistics    Definitions
        Salary Expenses    Compensation for clinical and administrative staff members, like general practitioners, VHCs, executive director, and IT managers
        Other Expenses    Expenses associated with property, facility rent, equipment, and supplies
        Total Expenses    Sum of Salary and Other Expenses
        Square Footage    Total square footage covered by each department's facilities, offices, or kiosks
        FTEs    Full-time equivalent staff members associated with a department
        Visits    Total visits to a department or patient log-ins at a kiosk
        IT Maint Hours    Hours of IT maintenance required to build or repair infrastructure and programs for a department
        T&E Hours    Hours spent by T&E staff on orienting new employees and teaching continuing education modules for existing employees of a department
        Kiosk Hours    Hours spent by villagers at a kiosk researching information on general medicine, pediatrics, pathology, or pharmacy
2.itcMessage2
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        1. Review the itcMessage from Mr. Surhoff below.
        2. Proceed to the "2a. Cost Drivers" tab.
        itcMessage2
From: B.J. Surhoff, Director, ITC Health Delivery
Sent: Wednesday, February 20, 20X0 12:26pm
To: Melissa Jordan, Financial Analyst, ITC Health Delivery
Subject: Re: Rural Health Pro Forma
Melissa,
Sorry, it's taken me so long to get back to you. We'd like you to come on board helping us set rates for our Rural Health program. The first thing we need to do is our step-down allocation, but, to do that, we need input from you regarding appropriate cost drivers to allocate our support centers.
We've done some work on this and I've the attached "2a. Cost Drivers" document so that you can provide your responses.
Just to orient you, we're looking at nine different responsibility centers. For now, we're considering the following four as our support centers: Rent and Utilities, Administration, Information Technology, and Training and Education. Our mission centers are Village Kiosk Access, General Medicine, Pediatrics, Laboratory, and Pharmacy. We're not exactly sure about classifying Village Kiosk Access as a mission center though. We'd love your input!
We're looking to move quickly on this project, so a prompt response would be appreciated. Thanks for your help!
B.J.
2a.CostDrivers
        ITC Health Delivery Initiatives in Rural Catan
        HCL 731 - Financial Management
        Instructions
        1. In Section A, review the expenses and statistics below. Take note of which cost centers have high and low amounts in each column as those amounts will be important in the step-down allocation.
        2. In Section B, fill in the YELLOW cells. Most yellow cells have a drop-down list that appears when you click in the cell and on the arrow to the right of the cell. Choose the best response for each yellow cell.
        3. Proceed to the "3. itcMessage3" sheet. Read the instructions and complete the step-down.
        Section A - Expenses and Statistics
        Expenses and Statistics - Projections based on data collected from other health facilities (All expenses are in Catan $)
        Department    Salary Expenses    Other Expenses    Total Expenses    Total Rent    FTEs    Visits    IT Maint Hours    T&E Hours    Kiosk Hours
        Rent and Utilities    $ - 0    $ 60,000    $ 60,000    - 0    - 0    - 0    - 0    - 0    - 0
        Administration    $ 80,000    $ 5,000    $ 85,000    $ 7,000    8    - 0    1,000    500    - 0
        Information Technology    $ 22,500    $ 20,000    $ 42,500    $ 4,500    3    - 0    - 0    - 0    - 0
        Training and Education    $ 15,000    $ 5,000    $ 20,000    $ 4,000    3    - 0    500    500    - 0
        Village Kiosk Access    $ 4,000    $ 1,000    $ 5,000    $ 4,000    40    10,000    4,000    3,000    - 0
        General Medicine    $ 20,000    $ 20,000    $ 40,000    $ 6,000    1    1,200    1,500    2,000    700
        Pediatrics    $ 20,000    $ 15,000    $ 35,000    $ 5,000    1    800    1,000    1,000    500
        Laboratory    $ 30,000    $ 20,000    $ 50,000    $ 4,000    2    1,200    1,000    1,500    400
        Pharmacy    $ 35,000    $ 25,000    $ 60,000    $ 5,500    2    1,500    1,000    1,500    400
        Total    $ 226,500    $ 171,000    $ 397,500    $ 40,000    60    14,700    10,000    10,000    2,000
        Section B - Cost Driver Questions
        1. Based on the above expenses and statistics, which measure do you think is the most appropriate for allocating each of the following support center expenses, respectively? Why? Choose your answer from the drop-down list.
Note: Each of these answers requires judgment on your part and we're interested in your reasoning, not your choice. If you feel it necessary, you can provide your own cost driver and reasoning.
        Support center    Cost driver and why?
        Rent and Utilities    Total Rent, based on the assumption that the amount paid for the space occupied by a department is closely tied to the amount of rent and utilities expenses accumulated
        Administration    FTEs, based on the assumption that the administration expenses are more directly related to the number of employees in a department, rather than the total salaries
        Information Technology    IT Maint Hours, based on the assumption that the time spent by IT service maintenance in a department most closely models how IT expenses are incurred
        Training and Education    T&E Hours, based on the assumption that a department's T&E expenses will increase or decrease depending on the total number of T&E hours spent educating the department's staff
        Additional Reasoning (Optional):    The support center cost should be allocated based on respective cost driver.
        2. Do you think that the e-Choupal kiosk (Village Kiosk Access) should be a mission center or a support center? Make the argument for both classifications.
        Classification    Argument
        Mission center    B. Since all services are provided at the kiosk, it must be considered key part of ITC's mission with this initiative
        Support center    D. All of the above
        Answer Choices
        Predictions
        1. Based on the above expenses and statistics, which measure do you think is the most appropriate measure for allocating each of the following support center expenses, respectively? Choose the most appropriate allocation basis and the best justification.
        Support center    Allocation basis
        Rent and Utilities    Total Expenses, based on the assumption that a department's rent and utilities expenses are directly related to its overall resource consumption (supplies, employee salaries, etc.)
    x    Rent and Utilities    Total Rent, based on the assumption that the amount paid for the space occupied by a department is closely tied to the amount of rent and utilities expenses accumulated
        Rent and Utilities    FTEs, based on the assumption that the number of full-time equivalent employees relates to the amount of resources consumed and FTEs are more precisely and accurately measured than other statistics
    x    Administration    Salary Expenses, based on the assumption that administrators spend more resources on departments with higher salary expense and fewer resources on those with lower salaries
    x    Administration    FTEs, based on the assumption that the administration expenses are more directly related to the number of employees in a department, rather than the total salaries
        Administration    Other Expenses, based on the assumption that administrators use relatively few resources on staff issues and incur more expenses on physical resource planning (e.g. equipment and supplies)
    x    Information Technology    Kiosk Hours, based on the assumption that the IT maintenance expenses are dependent on the hours of usage at each kiosk, since more frequently used kiosk services have more complex maintenance issues
    x    Information Technology    IT Maint Hours, based on the assumption that the time spent by IT service maintenance in a department most closely models how IT expenses are incurred
        Information Technology    FTEs, based on the assumption that the number of full-time equivalent employees relates to the amount of resources consumed and FTEs are more precisely and accurately measured than other statistics
        Training and Education    Visits, based on the assumption that the number of patients seen by a provider is the best indicator of the amount of T&E resources consumed by that provider
    x    Training and Education    FTEs, based on the assumption that the number of full-time equivalent employees is directly related to the amount of training used by each department
    x    Training and Education    T&E Hours, based on the assumption that a department's T&E expenses will increase or decrease depending on the total number of T&E hours spent educating the department's staff
        2. Do you think that the e-Choupal kiosk should be a mission center or a support center? Make the argument for both classifications.
        Classification    Argument
        Mission center    A. The e-Choupal kiosk is a crucial component in facilitating rural health care services at the clinic
        Mission center    B. Since all services are provided at the kiosk, it must be considered key part of ITC's mission with this initiative
        Mission center    C. The e-Choupal kiosk services are separate from the services provided at the hub clinic and they should be charged separately
        Mission center    D. Both A and C
        Support center    A. The kiosks function mostly as an extension of the hub clinic, so the kiosk expenses should be rolled into the clinic services
        Support center    B. The e-Choupal kiosks allow ITC to educate community members and recognize need for services in rural areas
        Support center    C. Kiosks will improve literacy in the village through VHC help with kiosk usage, health education materials, and answers to frequently asked questions
        Support center    D. All of the above
        Follow-Up
        1. What would you expect to happen to the total cost allocated to General Medicine if the Rent and Utilities allocation basis was changed from total rent to total expenses?
        The cost allocated to General Medicine will increase because the department's total expenses are much greater than its total rent
        The cost allocated to General Medicine will not change because General Medicine is allocated rent expenses at the same rate
        The cost allocated to General Medicine will decrease because General Medicine's higher total cost are multiplied by a lower unit rate which gives a lower total allocated cost
        2. What do you predict will happen to the cost allocated to the Information Technology department if the allocation basis for administration was changed from salary expenses to number of FTEs?                                             ERROR:#REF!
        The cost allocated to IT will increase because IT employees have a lower average salary than other departments, so there will be more FTEs to allocate costs                                            ERROR:#REF!
        The cost...