Please read all the files completely. In file Assignment 3 2020, all the questions, context and things to remember while making assignment are included so please check that.
Another two files are references for how should be assignment made and what should be its structure, please consider this too.
In file one Assignment 3 2020, question 7 is about tosummarize and present findings in relation to Questions 1- 6 to the CEOin PPT presentation which will be assessed on some points which are mention in question 7, please make a presentation not more than 5 minutes long.
1 Major Assignment – Case Study Context Setting: The ABC General Hospital A new business manager, Ms Smith, has been appointed to work with the Medical Division at the ABC General Hospital. While such appointments have occurred elsewhere, this is the first such appointment at the ABC General Hospital. While Ms Smith is a qualified accountant and has some years of experience in the preparation of budgets, this is her first appointment in the health industry. After her first week on the job, Ms Smith was talking to the Director of Finance regarding her experience in the hospital so far: I’m going to have to make some assumptions in order to create the new budget, but I don’t feel comfortable about doing so given the level of knowledge I’ve got about how hospitals run. The Director of Finance suggested that it probably would be helpful to work closely with the Clinical Director of the Medical Division in order to learn about the hospital and begin the engagement process with the clinical staff. The Director of Finance reminded Ms Smith that everyone was watching this initiative between the Finance Department and the clinicians, as the clinical staff had not been in favour of additional administrative overheads (e.g the appointment of the Business Manager) being incurred during a period of budget restraint. The hospital’s executive are hoping that the appointment of Ms Smith will demonstrate to the clinical staff the benefit of establishing a close working relationship between finance staff and clinical staff, and that as a result the clinicians will have greater trust in the budget process, and participate in the identification of savings strategies in the coming years. Failure could set relationships between the clinicians and corporate services back considerably. 2 In previous years, the divisional budgets had been set by the Finance Department without significant involvement of the clinical directors. Additionally, the budgets had only shown the costs of providing services and not the income that the hospital received for providing the services. Ms Smith’s Approach After the weekend and having had a chance to reflect on the Director of Finance’s words, Ms Smith decided to create a sample budget as a means of helping to show the potential of what the Finance Department could help the clinicians achieve – namely a better understanding of the budget and how they might control it. To create an entire budget would require a significant investment of time and so Ms Smith decided to attempt to create a budget based solely on types of inpatient activity work undertaken in the Division. Ms Smith had discovered that the following DRGs were common: 3 Ms Smith has sensed that the hospital is keen to avoid congestion and overspending, as well as dealing with additional funding constraints (cuts), has determined that some marginal savings in the average length of patient stay would be useful targets for the coming year. She has also determined that patient activity should be rounded (always) to the nearest 50 patients (e.g., 501 patients would become 500 patients and 545 patients would become 550 patients for the purposes of budgeting). She had also read in the local newspaper (an interesting source of evidence!) that there had been more cases of chest pain in this hospital than elsewhere, so she is suggesting a cut in activity for the coming year. DRG Description Average Length of Stay (Days) Last Year Number of Patients Last Year Expected Average Length of Stay (Days) Expected Number of Patients Inlier Weight F74Z Chest Pain 1 1850 1 1650 0.265199 E65B Chronic Obstructive Airways Disease W/O Catastrophic CC 4 760 3 750 1.13937 F73B Syncope and Collapse W/O Catastrophic or Severe CC 2 470 2 450 0.392604 F76B Arrhythmia, Cardiac Arrest and Conduction Disorders W/O Cat or Sev CC 2 470 2 450 0.404471 E62B Respiratory Infections/Inflammations W Severe or Moderate CC 5 460 4 450 1.40111 F62B Heart Failure and Shock W/O Catastrophic CC 3 450 3 450 1.26491 L63B Kidney and Urinary Tract Infections W/O Catastrophic or Severe CC 3 380 3 400 0.612745 F42B Circulatory Disorder W/O AMI W Invasive Cardiac Inves Proc W/O Cat or Sev CC 3 330 3 350 0.940617 E62A Respiratory Infections/Inflammations W Catastrophic CC 10 335 9 350 2.41597 E62C Respiratory Infections/Inflammations W/O CC 3 320 2 300 0.721117 4 She has found out that that the following services were used for each DRG with a particular frequency: Ms Smith has applied her costing assumptions and determined that it is appropriate to use an average cost of service. She is aware that in some cases, the average is only appropriate within the DRG and not across all DRGs. Hence, she has determined from looking at the budgets for Imaging, Pathology and Pharmacy that the average cost for any patient for each DRG is: Now while the Division has more patients than covered by these DRGs, Ms Smith has determined that the above is sufficient to build a budget, so she can commence the engagement process with the Director of the Division. Looking at the Division’s costs for the current year, Ms Smith believes that the fixed costs for next year can be apportioned across the Division’s activities. She estimates that the fixed costs relating to the above work should be in the order of $2,900,000. Ms Smith understands that the national efficient price is $5,800 and that the inlier weight is used to determine how much of this price the hospital will get for DRG Description Days of Stay No. of X/Rays No. of Path tests No. of Scripts F74Z Chest Pain 1 3 9 4 E65B Chronic Obstructive Airways Disease W/O Catastrophic CC 4 4 9 6 F73B Syncope and Collapse W/O Catastrophic or Severe CC 2 4 3 4 F76B Arrhythmia, Cardiac Arrest and Conduction Disorders W/O Cat or Sev CC 2 1 4 5 E62B Respiratory Infections/Inflammations W Severe or Moderate CC 5 2 5 4 F62B Heart Failure and Shock W/O Catastrophic CC 3 4 5 2 L63B Kidney and Urinary Tract Infections W/O Catastrophic or Severe CC 3 3 5 4 F42B Circulatory Disorder W/O AMI W Invasive Cardiac Inves Proc W/O Cat or Sev CC 3 1 6 3 E62A Respiratory Infections/Inflammations W Catastrophic CC 10 4 6 5 E62C Respiratory Infections/Inflammations W/O CC 3 2 3 5 DRG Description Daily Cost of Stay (Excluding X/Ray, Path, and Drugs) Cost of each X/Ray Cost of each Path test Cost of each Script F74Z Chest Pain 880 230 95 80 E65B Chronic Obstructive Airways Disease W/O Catastrophic CC 880 160 100 140 F73B Syncope and Collapse W/O Catastrophic or Severe CC 880 100 90 75 F76B Arrhythmia, Cardiac Arrest and Conduction Disorders W/O Cat or Sev CC 880 120 100 75 E62B Respiratory Infections/Inflammations W Severe or Moderate CC 880 140 100 150 F62B Heart Failure and Shock W/O Catastrophic CC 880 100 90 80 L63B Kidney and Urinary Tract Infections W/O Catastrophic or Severe CC 880 100 100 95 F42B Circulatory Disorder W/O AMI W Invasive Cardiac Inves Proc W/O Cat or Sev CC 880 1500 200 80 E62A Respiratory Infections/Inflammations W Catastrophic CC 880 150 120 90 E62C Respiratory Infections/Inflammations W/O CC 880 100 90 80 5 any patient for a given DRG. Ms Smith has been assured that at the ABC General Hospital all patients stay within the inlier patient range. Ms Smith is going to prepare a budget and believes that the director of the Division will see the value in extending the work to cover all the activity undertaken by the Division. Your Tasks 1. Prepare a budget for the Division of Medicine based on the material that Ms Smith has available to her. a. The budget does not need to be cashed flowed across the year, but it should be presented in a manner that the Director of Medicine will find easy to understand and useful. b. It should be prepared in Excel and use appropriate formulae wherever possible. (Note: you can insert tables or graphs into a Word document as you might do for presentation purposes, but still submit the Excel spreadsheet.) 2. When Ms Smith met the Clinical Director of the Division to discuss the sample budget, the Clinical Director’s only concern related to the reductions in the patient number activity that had been applied by Ms Smith. Based on the actual patient number activity levels over the last 3 years, the clinical director believes that a 4% increase in patients (i.e., the number of patients will increase by 4%) is likely to occur during the next year. a. Update the budget to reflect this change in patient activity b. How does the increased activity affect the bottom line of the Division’s budget? c. Based on the changes recommended by the Clinical Director, what does this suggest about budgets created without involvement of the operational team? 3. The Central Health Department that funds all of the general hospitals has determined that in order to meet the budget cutbacks being enforced by the government the easiest option is to apply either a 5 or 10% reduction to the National Efficient Price (NEP) for the forthcoming year. The hospitals will only be told what level of cut will be enforced closer to the financial year. The Finance Director has asked Ms Smith to examine the effects of both levels of funding cuts. Prepare budgets that show the consequences of such price reductions based on the activity levels used in question 2. (Hint: if you set up your spreadsheet well you should be able to handle any level of price change by only changing a single spreadsheet cell) a. Report the consequences of the possible changes on the Division of Medicine’s bottom line in a summary table. Use the activity levels suggested by the Clinical Director of the Division. (Hint: the level of detail you show in the table should be useful for part b of this