Simulation Review Paper By Johnna HCS/405 Health Care Financial Accounting Instructor: Donna Pearson “Concern about the growth of healthcare a cost is widespread and continuing increases in hospital cost per day are a significant component of this concern” (2009). In this paper it shows an example of how healthcare cost is constantly increasing and what the hospitals have to do to keep up with the increase of costs. This paper is a simulation paper that analyzes financial indicators for decision making.
In this simulation the financial accounting from a Cardiac Care Hospital’s Perspective had to bridge a working capital shortage, evaluate funding options for acquiring medical equipment, and evaluate funding options for capital expansions. Health Care Financial Accounting Essay Paper
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In phase one simulation, I was to decide on what cost-cutting option to choose from that would solve the cash flow at Elijah Heart Center (EHC). In addition to choosing a loan option that will cover any capital shortfall that would occur. Once these choices were made, I then had to explain why I chose the options and what were there outcome.
The choices that I decided to go within cost-cutting were Reducing Proportion of Agency Contracted Staff and Changing the Skill Mix. I chose these two because in the Revenue and Expenditure Projections it showed that the costs would go down without acquiring significant changes in the revenue. Also Saika Takeuchi recommendation that choosing these two choices would cut cost in a major way and it would also make the revenue increase if the EHC change the percentages. Health Care Financial Accounting Essay Paper
The other choice that I had to choose from was which loan option was a better fit for EHC.I chose option one with a three months loan repays because the loan will help EHC for the three months that the facility is short on funds. In three months Medicare and other managed care companies will pay the facility $2, 300,000 for their services, which will solve the current cash flow problems. The simulations outcome for Capital Shortage showed that it was in good health that the choices that I made for the hospital were good for facility. In phase two, I was to decide the best strategy to acquire new equipment for the hospital.The new equipment that needed to be purchased was a High Speed CT Scanner, X-Ray machine, and an Ultrasound system. I had to decide if the facility needed to apply for a loan to buy new equipment or refurbished equipment.
If the new equipment or refurbished equipment was not feasible for EHC, then I had to decide if an Operating lease or a Capital lease was better. The choices that I decided were to Buy Refurbished Equipment for High-Speed CT Scanner, Equipment Capital Lease for X-Ray Machine and Equipment Operating Lease for Ultrasound System.The reason I chose these options was because buying the Refurbished Equipment was a better choice for the facility. A CT scanner becomes obsolescent in five years or less and their life span is 10 years so it would be better to buy a refurbished CT scanner and use that one until it is at its life span, and then upgrade. I chose a Capital lease for the X-Ray machine because “buying the equipment at a bargain price will be a good option because the equipment will last for a very long time” (University of Phoenix. (n. d). Health Care Financial Accounting Essay Paper
This was a good deal because an X-Ray machine lifespan is only 15 years. I chose Operating lease because there was a lower upfront payment and a lower monthly payment. Also an Ultrasound system has a lifespan of five years, so with the operating lease there is an upgrade option that can take care of any technological obsolescence, so the facility will have the latest technology. The stimulation outcome for the Funding Options for Equipment Acquisition showed that my choice was a healthy choice that it was the best equipment acquisition strategy for EHC.In phase three, my job was to decide on what was the best funding option to expand a total heart care center at the EHC. To choose the best option I had to carefully “analyze the cost of funding, the net present value, collateral requirements, prepayment limitation and deadline for using the funds” (University of Phoenix. (n.