This assignment continues from the previous submitted. It relates to payment of services for the hospital SMH.(.HMO,PPO,and capitation).It requires a 4 Page word document. I am submitting the assignment instructions, with the last 2 assigned prepared by your expert, along with the SMH hospital files. It requires APA format and references. Thanks
Assignment 2: Course Project Task 3—Payment for Services When hospitals are paid for services, it is through payment structures. Payment structures include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and capitation rates. In this assignment, you will use the information from M2: Assignment 3 and M3: Assignment 1 to develop a strategic plan for the hospital to begin managed care contract negotiations. You can use the SMH data file, which you had downloaded from the Doc Sharing area, to create your plan. Based on your understanding of the costs, you will develop a plan for contract negotiations with a managed care provider. Include in the plan: · A strategy for contract negotiation · Details on each facility’s costs and expected margins · Comparisons between the three organizations, indicating which is in a stronger or weaker financial position Using the SMH data file, you will do the following: · Calculate inpatient gross profit for the major payers at the hospital. · Calculate GP and GP percentage by payer. · Comment on the results of your GP calculations. · In this example, we assumed that patients from each payer incurred costs at the same rate. Is this assumption correct? What level of detail in cost identification should the hospital attempt to obtain? Provide your comments. · Based on your understanding of your costs, you will develop a plan for contract negotiations with a managed care provider. In your plan, outline a strategy for contract negotiation. · Based on your comparative analysis of the SMH, FP, and NFP facilities, is SMH in a better or worse position when it comes to contract negotiations? Provide your comments. · Payers always want to move procedures from an inpatient setting to an outpatient setting. Why might this not be the best strategy for your financial situation? Provide your comments. Write a 3- to 5-page paper in Microsoft Word format. All written assignments and responses should follow APA rules for attributing sources. Use the following file naming convention: LastnameFirstInitial_M3_A2.doc. By Tuesday, September 17, 2013, submit your assignment to the M3: Assignment 2 Dropbox. Voluntary Discussion You have the option of discussing your work with your classmates. To use this option, you need to submit your assignment to the Discussion Area below. Through the week, you can share your thoughts about your project and offer your review and comments to others who are also seeking input on their work. Assignment 2 Grading Criteria Maximum Points Created plan for SMH contract negotiations with a managed care provider and demonstrated an understanding of payment structures, payer mix, services, and managed care contracting. 16 Compared financial position of SMH with the FP and NFP facilities, demonstrating in-depth analysis of data. 12 Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources, displayed accurate spelling, grammar, and punctuation. 4 Total: 32 Use the Respond link to post responses and materials that pertain to this assignment. Use the Respond link beneath any existing postings to respond to them. Select a topic from the menu below and click Go to begin. Course Project Task 3—Payment for Services Case Study Analysis-SMH Revenue and Income Variables SMH – Revenue and Income Cycle Joi Farlough-Matthews Argosy University Running Head: SMH – REVENUE AND INCOME CYCLE 1 SMH – Revenue and Income Cycle Introduction Sakasegawa Memorial Hospital (SMH) is a not for profit organization in a major city. There are different services through which the company is able to generate revenue in which managed care is considered to be a significant part of its revenue stream. The hospital being a not for profit organization currently operates from contributions and insurance contracted or negotiated payments to meet the healthcare needs of its target population. Analysis of Revenue and Expenses The hospital earns revenue from inpatient as well as outpatient. The inpatient revenue is calculated on the basis of patient days. The patient days distribution is for different services that are provided by the company that includes cardiology, orthopedic, medicine and other services. For all these services, the hospital offers Medicare, Medicaid, managed care and private pay services that are the main source of revenue of the company. The hospital is able to generate about 55% revenue from managed care, 37% revenue from Medicare and 6% and 2% revenue from Medicaid and private pay respectively. Distribution of patient days Medicare Medicaid Manage Private pay Total Cardiology 3658 6.04% 457 4.29% 4481 4.94% 549 18.04% 9145 Orthopedic 5905 9.76% 160 1.50% 9097 10.02% 798 26.24% 15959 Medicine 41736 68.96% 9540 89.55% 66778 73.58% 1192 39.21% 119246 Other services 9223 15.24% 496 4.66% 10401 11.46% 502 16.51% 20622 60522 10653 90756 3041 164972 % Distribution 37% 6% 55% 2% 100% If we consider the revenue-generated department wide for the services provided we can see that the company generated major revenue from medicine department. The medicine department is able to generate about 72.28% revenue whereas other services are able to generate about 12.50% of the total revenue followed by orthopedic which is 9.67% of the total revenue and cardiology ranks about 5.54% of the total revenue. Considering the inpatient and outpatient, we can see that the major revenues are generated through inpatient. Inpatient revenue accounts for about 84% of the total revenue generated by the hospital whereas outpatient accounts for 16% of the total revenue generated Inpatient Revenue Distribution Cardiology Orthopedic Medicine Other Totals Inpatient Revenue $39,612,365.72 $41,460,795.08 $284,847,513.80 $41,988,667.80 $407,909,342.40 Distribution 9.71% 10.16% 69.83% 10.29% 100.00% Even in the outpatient we can see the same trend as in the inpatient distribution that medicine department generates the highest revenue followed by other services, then orthopedic and lastly cardiology. Apart from the primary services offered, the hospital generates income through other sources as well. Revenue Amount Net Patient revenue non-Medicare $260,183,000.00 51.01% Capitation Revenue $36,829,320.00 7.22% Patient Revenue - Medicare Medicaid $188,408,800.00 36.94% Unrelated business revenue Capitation Rev Other rev - sale of asset $5,492,700.00 1.08% Rent revenue $450,000.00 0.09% dividends $3,800,000.00 0.74% Investment Income $1,892,925.00 0.37% Other rev - other $5,290,000.00 1.04% Contributions $7,722,580.00 1.51% Net assets released from restrictions Ttl Unrestricted Rev $510,069,325.00 The main source of revenue is through net patient revenue non Medicare which accounts for 51% of the total revenue. From patient revenue – Medicare and Medicaid the hospital generates about 36.94% of total revenue. There is different unrelated business revenue that accounts about 4.83% of the total revenue generated by the company. Contributions play most important part of unrelated business revenue. The total revenue generated by the hospital is $510069325. Costs and Expenses The hospital incurs different expenses for the successful operation of the business. The hospital uses activity based costing system, which is based on the allocation basis on which the hospital distributes its total expenses. (Finkler, Ward & Calabrese, 2011) There are different allocation basis on which the expenses are divided. The officer services, other clinical expenses, physician fees, other supplies in the personnel and other expenses are allocated based on patient days. The clinical salaries and fringe benefits are allocated based on hours of service whereas depreciation and utilities are allocated based on square feet. The direct patient care expenses, inpatient care expenses and malpractice fees are also allocated based on patient days or on the basis of the particular department like cardiology, orthopedic and medicine. The expenses incurred by the company are divided into clinical services, management and general salaries and fundraising expenses. The major expenses of the hospital are of salaries and benefits which accounts for 45.79% of the total expenses out of which 88.32% are the salaries and expenses of clinical services, 11.05% of the management and general salaries and remaining salaries are for fund raising. The salaries of the officer’s accounts for 2.12%, other salaries account for 74.61% of the total salary, 7.58% salaries account for pensions, 10.05% for pensions. The average rate for clinical salaries is 41.68. There are other salaries as well which includes fundraising fees, accounting fees, legal fees, supplies and other, telephone, postage and shipping, occupancy, equipment rental and maintenance, printing and publications, conference conventions and meetings, interest expenses, depreciation, bad debts and other expenses Expenses Total Clinical Management Fundraising Salaries Salaries Officers 0.97% 0.11% 12.82% 21.39% Other Salaries 34.16% 32.90% 51.96% 56.76% Pension 3.47% 3.34% 5.28% 5.77% Fringe Benefits 4.60% 4.43% 7.00% 7.59% Payroll Taxes 2.58% 2.49% 3.92% 4.37% Total Salaries & Benefits 45.79% 43.27% 80.98% 95.89% 0.00% 0.00% 0.00% 0.00% Fundraising fees 0.00% 0.00% 0.00% 0.00% Accounting Fees 0.07% 0.00% 1.06% 0.00% Legal fees 0.26% 0.25% 0.42% 0.00% Supplies & Other 43.76% 46.73% 1.55% 0.35% Telephone 0.20% 0.20% 0.31% 0.34% Postage and shipping 0.07% 0.06% 0.10% 0.11% Occupancy 0.00% 0.00% 0.00% 0.00% Equipment rental and maintenance 1.74% 1.67% 2.78% 0.00% Printing and publications 0.03% 0.03% 0.05% 0.06% Conference conventions and meetings 0.02% 0.01% 0.02% 0.03% Interest exp (net) 1.86% 1.77% 3.10% 3.22% Depreciation 6.02% 5.79% 9.63% 0.00% Provision for Bad debt 0.19% 0.21% 0.00% 0.00% Other expenses 0.00% 0.00% 0.00% 0.00% Ttl exp 100.00% 100.00% 100.00% 100.00% The total expenses borne by the company is $482823937, $32267478, 1554516 for clinical services, management and general and fundraising respectively. The two major expenses borne by the company are salaries and supplies, which account for 45.79% and 43.76% respectively. Gross Profit Gross profit is the measure to analyze the direct expenses that the company incurs for its sales or services. For the inpatient the company is able to generate 78.08% of gross margin whereas for outpatient the gross profit margin is 71.16%. Inpatient Outpatient