Describe the role of financial analysis in health care financial decisions.
Describe the role of financial analysis in health care financial decisions.
HS440 | Finance for Health Care1Unit 9 Assignment:Capital BudgetingUnit outcomes addressed in this Assignment:? Describe the role of financial analysis in health care financial decisions.? Discuss the key elements in breakeven analysis.? Explain how opportunity relates to cost principles.Course outcome addressed in this Assignment:HS440-4: Utilize financial analysis to inform management decisions.GEL-2.3: Solve real-world problems using mathematical skills.InstructionsFor this Assignment you will complete a cash flow analysis for a new MRI service for thephysicians network. Based upon your analysis you will recommend whether the new MRIservice is a sound financial decision for the physicians network.Consider the following information:The estimated average is $1000 per scan. 25% of this average is expected to be lost ondiscounts to payers charity care and losses.Each scan will cost the physicians network $40 to in suppliesThe MRI service is expected to operate 50 weeks per year. 1.5 full-time employees will berequired with an annual labor cost of $70000 including benefits.There are no increased overhead costs associated with the opening as the physicians networkhas an existing building that is currently vacant.Annually the MRI machine requires $125000 in maintenance costs.The long-term plan is to utilize this MRI system for five years. At this end of this period thephysicians network will sell the MRI for salvage for $750000 (deducting any removal costs).The inflation rate is averaged at 5% for the period. This inflation rate is expected to affect allrevenues and costs equally.The profitability measures are: Net Present Value = $83478 with an internal rate of return equalto $11.1%.HS440 | Finance for Health Care2Complete a cash flow analysis utilizing the information above and below to create your CashFlow Chart.Assume the following in your analysis:A MRI System will cost: $2.5 millionDelivery Installation and site preparation will cost: $500000Payer # of scansper weekCharge perscanTotalChargesBasis ofPaymentNetPaymentper ScanTotalPaymentsMedicare 10 $1000 $10000 Fixed fee $740 $7400Medicaid 5 $1000 $5000 Fixed fee $700 $350PrivateInsurance5 $1000 $5000 Full charge $1000 $5000Blue Cross 2 $1000 $2000 Percentageof Charge$840 $1680ManagedCare4 $1000 $4000 Percentageof Charge$750 $2000Self-Pay 1 1000 $1000 Full Charge $110 $110Total 27 $27000 $19690Average $1000 $750To present your analysis the physicians network has asked you to prepare a report. This reportwill be in two parts. The first section will be a written report (in essay format) that includes anintroduction of what will be included in the report a detailed summary of the cash flow analysisand a determination by you as to whether you recommend that the new MRI services to be asound financial decision. The second portion of the report will be your cash flow analysis in theform of a spreadsheet.For the report to be effective it should be no less than five pages total including references.Please be sure to download the file Writing Center Resources from Doc Sharing to assist youwith meeting APA expectations for written assignments.Submitting Your WorkHS440 | Finance for Health Care3For directions on how to submit your work and review your graded assignments refer to theDropbox Guide found on the Academic Tools tab. Make sure that you save a copy of yoursubmitted work.Unit 9 Assignment Grading Rubric = 325 pointsAssignment Requirements PointspossiblePointsearned bystudentReport includes an introduction 0-25Report includes a detailed summary of the cash flow analysis 0-75Report includes a decision summary (recommendation ordeclination) based off of the cash flow analysis0-75Report includes a conclusion paragraph summarizing the writtenportion0-50Report includes a spreadsheet cash flow analysis 0-100Total (Sum of all points)Points deducted for spelling grammar and/or APA errors.(See Writing Deductions Rubric in Doc Sharing)Adjusted total points
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