Research Paper: Consultant of Healthcare Industry

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Consultant Evaluation/Healthcare Industry

You are in the role of a consultant with ten years experience in the health care insurance industry. A group of 20 doctors are considering forming a new medical group and have asked you to prepare a report on whether they should build a facility in an area within 30 miles of the downtown center of your 500,000 population city for $100 million dollars. Prepare a report for the management team of the doctor's group on your proposed $100 million expenditure plan reflecting on the key course objectives including the financial, legal, alternative health care models, reinforced by your knowledge of strategic planning and capital budgeting.

The benefits of this proposal are truly overwhelming. One of the most major benefits of the proposal are the humanitarian efforts. There is also, as this paper will demonstrate a true potential to develop a new payment model, rather than the standard fee-based on service method that is so overwhelming in the U.S. However, as this paper will reflect, certain legal issues do need to be tended to. Though the paper will close by exploring all possible alternative health and service models.

Humanitarian Effort

The plans to build this facility truly are exciting and absolutely do offer a great deal of potential to the entire inhabitants of this community. One of the most striking aspects is that the facility can provide potential inhabitants with a true wealth of services that are currently unavailable in the town. Since only $100 million is being invested, this indicates that the money is being spent to create a niche center, such as one which fulfills the health needs of certain groups, such as women care, natal care, teen care, mental health care, or services just for veterans. $100 million simply doesn't have enough capabilities to create a truly formidable and state of the art facility, but it can specialize in serving the needs of a particular group of individuals, most certainly. For example, just last year private organizations were raising money to create a more thorough and evidence-based practice facility for soldiers at Fort Bragg (Ramsey, 2012). "A private foundation is raising $100 million to build clinics at Fort Bragg and other installations to help the military treat and research the psychological wounds of war. The Intrepid Fallen Heroes Fund's planned clinic would be the latest in a flurry of local projects that leaders in the Army and the Department of Veterans Affairs hope will make it easier to meet the growing demand for mental health care" (Ramsey, 2012). As the recent news reflects, more and more buildings are cropping up all over the nation to better help the growing number of soldiers from Iraq and Afghanistan who bear serious physical and mental wounds upon their return to this country (Ramsey, 2012). This is clinic is a shining example of how smaller investments in healthcare facilities can truly do a wealth of good for specific niche populations.

Healthcare Financing

"According to recent World Health Organization estimates, every year 25 million households (more than 100 million people) are forced into poverty by illness and the struggle to pay for healthcare.1 This coupled with the lack of basic health infrastructure in rural and remote areas aggravate the health conditions of the poor, leaving them in a perpetual state of poverty" (Ofori-Adjei, 2007). This is true in third world countries as in America. Paying for health care is a definitive struggle for so many people around the world, and the clinic proposed absolutely seeks to level the playing field so that more people with specific health needs are able to get those needs taken care of. Furthermore, in this case study, the investment proposed truly is an investment that will no doubt benefit all members of the city. When people have access to health services and health protection, it's obvious these things are a key component in not only fighting poverty but in furthering economic development. Helping to increase the economic development of any city, be it in America or abroad, truly relies upon a strong health care facet, with strong pillars of public health.

Thus, there's a truly intense burden to insure that the health care facility where all this money is being invested is in according with the proper financing model. The proper financing model is essential in ensuring that the money is not only well-spent but that the facility is empowered to the extent that it is able to stay afloat. "The viability of any hospital initiative depends on its financial performance. Financial modeling is therefore the foundation for determining feasibility, whether for a new hospital program, a joint venture or a new business" (dgapartners.com) However, the healthcare arena more often than not creates a truly intricate and confusing means of financial modeling which often co-exists with large degrees of uncertainties, particularly in regard to doctor buy-in, competitive response, and reimbursement. More than anything, the key revolves around how exactly the financial model is being used.

One of the first pillars upon which the success of this endeavor depends is insuring that the right stakeholders are made members of the planning team (dgapartners.com). While some people think that it's just important to get the right people on-board at some point, truly it's absolutely vital to get the right people involved from the beginning. "It allows everyone to work out agreement on the scope of the analysis, the constraints and the parts of the model that can be based on simple assumptions rather than in-depth analysis. Having the right team working together can uncover unexpected information that is critical to all further analysis of a venture" (dgapartners.com). Members of this planning include clinical, financial and operational stakeholder along with all appropriate doctors (dgapartners.com). Thus, in the case study presented, the doctors who are making this investment are important, as are all relevant physicians to the overall goals of the facility.

When it comes to drafting the actual model, it helps for one to go one or two levels up from what the group thinks they will need at the moment (dgapartners.com). "Fight the pressure for a quick answer; the figures will hold up better, you'll be more comfortable and so will your stakeholders" (dgapartners.com). Since the Bismarck model for health care was such a failure and because the out-of-pocket model has meant that so many people can't afford health care, this particular project needs a health care model which will actually support the investment being made and which will ensure it is sustainable.

One successful model which would be wise to mimic would be the National Health Insurance model, most famous for being used in Canada and other countries who have health care systems which work. "This system has elements of both Beveridge and Bismarck. It uses private-sector providers, but payment comes from a government-run insurance program that every citizen pays into. Since there's no need for marketing, no financial motive to deny claims and no profit, these universal insurance programs tend to be cheaper and much simpler administratively than American-style for-profit insurance" (pbs.org, 2009). One of the overwhelming benefits of such a plan for the user is that the consumer has a great deal of power to negotiate lower prices; moreover such plans able to better control costs by narrowing the overall medical services they're willing to pay for, by making patients wait to be treated (pbs.org, 2009).

Another truly crucial aspect of proper financial modeling for this proposal is to engage in accurate volume projections. The key factor in creating solid projections is the tendency for triangulation. "Use multiple approaches to projection that provide checks on each other. Consider historical volumes where relevant (both yours and the market's). Check that your volume results in an achievable market share.Use the best available utilization benchmarks and population data" (dgapartners.com). The right financial model won't come without a certain amount of research done, also in conjunction with research about relevant technology and current growth.

A crucial aspect of going forward with the financial model means ensuring that everyone who plans on participating will buy off on all relevant assumptions. All the variables truly need to be addressed including things like the volume and growth curve, the payment rate, the payer mix, the size of the facility, the cost per square foot, the levels of staffing and the hours of operation (dgapartners.com). Moreover, the model needs to be robust and trustworthy, so that as the planning goes ahead and becomes fluid, the financial model needs to reflect that (dgapartners.com). By saying that the financial model needs to be trustworthy, one wants to double check to see that the over-arching philosophy and values of the model are indeed accurate, ensuring that no errors in logic have occurred. For instance, " if you take the volume to zero and you still have variable costs, something is wrong. If you change the volume growth rate, the model should show a proportional increase in gross revenue. Fixed costs should never vary.Have someone… [END OF PREVIEW]

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