Business Case for a New Economic Opportunity

Business Case for a New Economic Opportunity

OVERVIEW

Report on risk and mitigation and the costs and benefits of a proposed initiative.

As a master’s-level health care practitioner, you are expected to consider a number of factors when analyzing the feasibility of a new initiative. For example, you need to keep in mind the various types of risk (such as patient safety, physical plant, financial, or reputation), as well as the present and future value of the service line or economic opportunity into which you are investing resources. You also must balance the competing considerations of your ethical and moral responsibility to provide quality care to patients and populations, while also protecting your care setting’s assets and economic viability in the near and long terms.

Note: Complete the assessments in this course in the order in which they are presented.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

• Competency 1: Analyze the effects of financial and economic factors (such as cost-benefit, supply and demand, return on investment, and risks) in a health care system on patient care, services offered, and organizational structures and operation.
  • Analyze the opportunities and risks relevant to a proposed economic initiative.
  • Analyze the costs and benefits of a proposed economic initiative over a five-year time horizon.
• Competency 2: Develop ethical and culturally equitable solutions to economic problems within a health care organization in an effort to improve the quality of care and services offered.
  • Propose potential ways to keep costs under control while maximizing the benefits of an economic initiative and ensuring that it remains ethical and culturally equitable.
• Competency 3: Justify the qualitative and quantitative information used to guide economic decision making to stakeholders and colleagues.
  • Justify the relevance and value of the quantitative and qualitative economic, financial, and scholarly evidence used to support recommendations throughout a report.
• Competency 4: Develop ethical and culturally equitable economic strategies to address dynamic environmental forces and ensure the future security of an organization’s resources and its ability to provide quality care.
  • Propose ethical and culturally sensitive solutions to address the risks associated with an economic initiative to ensure the future security of a care setting.
• Competency 5: Apply various communication methods in order to clearly, effectively, and efficiently relate information to stakeholders and colleagues related to economic data, findings, and strategies.
  • Communicate a business case in a logically structured and concise manner, writing content clearly with correct use of grammar, punctuation, and spelling.
  • Effectively support a report with relevant economic data and scholarly sources, correctly formatting citations and references using current APA style.

Assessment Instructions:

In this assessment, you will conduct a risk and mitigation analysis and cost-benefit analysis and report on your findings.

Scenario

The senior management of your care setting has reviewed your Executive Brief: Proposal of a New Economic Opportunity and has decided that it has merit. As a result, you have been asked to take a more detailed look at the feasibility and cost-benefit considerations of implementing your proposed economic initiative over the next five years. The senior management is looking for a 3–5-page report that builds a business case for your economic initiative by analyzing ways to mitigate the risks associated with your original proposal and a completed cost-benefit analysis using the Cost-Benefit Analysis Template, linked in the Resources.

Directions

You have been asked to ensure that your report addresses the following. Note: The bullet points below correspond to grading criteria in the scoring guide. Be sure your work is, at minimum, addressing each of the bullets below. You may also want to read the scoring guide and the Guiding Questions: Business Case for a New Economic Opportunity document, linked in the Resources, to better understand the performance levels that relate to each grading criterion:

Part 1: Risk and Mitigation Analysis

Complete the following:

• Analyze the opportunities and risks relevant to your proposed economic initiative.
• Propose ethical and culturally sensitive solutions to address the risks associated with your economic initiative to ensure the future security of your care setting.

Part 2: Cost-Benefit Analysis

Complete the following:

• Analyze the costs and benefits of your proposed economic initiative over a five-year time horizon.
• Propose potential ways to keep costs under control while maximizing the benefits of your economic initiative and ensuring that it remains ethical and culturally equitable.

Address Generally Throughout Business Case

Complete the following:

• Justify the relevance and value of the quantitative and qualitative economic, financial, and scholarly evidence you used to support your recommendations throughout your report.
• Communicate your business case in a logically structured and concise manner, writing content clearly with correct use of grammar, punctuation, and spelling.
• Effectively support your report with relevant economic data and scholarly sources, correctly formatting citations and references using current APA style.

Example Assessment: You may use the assessment example, linked in the Assessment Example section of the Resources, to give you an idea of what a Proficient or higher rating on the scoring guide would look like.

Additional Requirements

Your assessment should meet the following requirements:

• Length: 3–5 double-spaced, typed pages. Your paper should be succinct yet substantive.
  • Be sure to include a title page and reference list.
  • Your completed Cost-Benefit Analysis Template should be included as an appendix within your final business case submission.
• APA format: Resources and citations are formatted according to current APA style.
• Resources: Cite 4–5 authoritative and scholarly resources. Be sure to include specific economic data and support as part of your cited resources.

Questions to Consider:

As you prepare to complete this assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as part of your assessment.

• What kinds of quantitative data can support proposals for change in a health care setting? What kinds of qualitative data can do so?
• What are the five different types of comparative economic analysis?
• What are some realistic and feasible recommended alternatives for health care issues and problems that currently impact your work? What would be the costs of pursuing those alternatives? What would be the benefits?
• When and how are the following methods for valuation best used?
  • Human capital.
  • Risk preference.
  • Contingent valuation.
  • Cost-benefit ratio.

 

SAMPLE ANSWER

Business Case for a New Economic Opportunity

Introduction

Mayo Clinic is a healthcare organization in Rochester, Minnesota. The clinic is a multispecialty hospital that integrates research, education and clinical practice. Mayo clinic aims to develop an Express Care Model to provide urgent care to patients. The Express Care Model helps to provide immediate healthcare services to patients in populated regions. The shortage of healthcare practitioners often leads to long queues as the patients wait to be served (Chang, Brundage & Chokshi, 2015). The healthcare institution not only aims to offer routine screening, but also provide treatment for minor injuries, treat illnesses, refer patients and conduct flue tests. Therefore, the business case outlines an economic strategy for five years by evaluating opportunities and risks for the business case and develops ways of reducing the risks associated with the business.

Part 1: Risk and Mitigation Analysis

Opportunities Associated with the Proposed Economic Initiative

To determine the risk and opportunities of the business case, both the microenvironment and microenvironment of the express care model will be examined. There are about 3.8 million people living in Minnesota, and developing an express care strategy can ensure remarkable economic growth for Mayo clinic (US Department of Labor, 2019). Therefore, creating an emergency care facility will help reduce the burden of healthcare provision and overcrowding of patients in ER departments.

Business Case for a New Economic Opportunity

The ER department often cares for about 250 patients every day. There are also patients who leave without being cared for or leave because the bills are too expensive that they cannot afford (American College of Emergency Physicians [ACEP], n.d.). The Express Care would ensure hospital services are affordable particularly for the low- and middle-income individuals. Most patients in the ER department often do require emergency care and sometimes they are forced to leave without being cared for. The Express Care Model can be used to ensure such patients receive attention of healthcare practitioners to ensure that they are treated appropriately.

Revenues from the emergency department will be critical in providing additional revenue for the Mayo clinic. The local ER departments would be able to get more patients requiring emergency treatment because of the referrals that the facility would get. Providing treatment to the locals would also help develop trust between the clinic and the community.

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The Mayo Clinic can handle both minor and critical injuries among patients. This means that the clinic can also offer more assistance to patients to guarantee positive outcomes. Such aspects set the hospital apart from other healthcare institution that provides emergency care or similar services to patients (Gurganious & Greenfield, 2015).  Mayo Clinic will ensure that patients are provided with adequate and quality care in all their healthcare needs. Improving patients’ outcomes leads to satisfaction and loyalty, and the patients would revisit the clinic every time they have a healthcare issue and also refer the clinic to other patients.

Risks Associated with the Proposed Economic Initiative

The use of the Express care model has potential risks. There are several urgent care services provided in Minnesota, and other healthcare institutions have also employed the model in their ER departments. According to the American College of Emergency Physicians (2019), about 72% of emergency physicians care for patients that need urgent care, but sometimes there are no equipment that can ensure efficient delivery of health care services. Such issues are critical that could make patients opt for Mayo clinic that will be well equipped with facilities that could help patients to save costs while attending the emergency departments. Lack of enough healthcare facilities forces many hospitals to refer patients to other healthcare institutions increasing the cost of care for the patients as well as compromising their health due to delayed treatment. Mayo clinic needs to source finances with the help of the organization’s leadership and to involve stakeholders before the initiation of the project.  Availability of equipment and facilities at the clinic would be necessary for ensuring the project is successful.

Business Case for a New Economic Opportunity

Chances of misdiagnosis is another risk that the hospital needs to consider. Because of the high number of patients being cared for on the same day, the physicians can experience burnout which would affect their efficiency. This can lead to medical errors that may put patients’ lives at risk. Therefore, the clinic needs to develop critical interventions to reduce the problems of misdiagnosis. Employing more nurses will be valuable in improving nurse-to-patient ratio to the required level. Nurses and physicians should be enough to ensure they have enough time to care for each patient. Specialized training is also critical to ensure nurses do not cause medical errors such as misdiagnosis (Sanborn, 2018). Medical mistakes may lead to critical ethical and legal issues that may put the organization’s reputation at risk. Nurses and physicians need to be advised to take breaks in the cause of treatment, report errors, and work for few hours to ensure instances of misdiagnosis due to burnouts do not occur.

Part 2: Cost-Benefit Analysis

Costs and Benefits of the Proposed Economic Initiative

            The express care model has costs and benefits that would be critical to ensure its success. To develop the express care model, the value and advantages of the project have been calculated for the next five years using the 11% discount rate. The discount rate of the present value is determined using the estimated return on that target and the standard capital costs. The capital costs include what will be required to ensure renovation of the care facility as well as the costs for purchasing new equipment and furniture. The cost of operation will consist of employee salaries, insurance, liability, furniture costs, utility costs, and equipment costs. It is projected that the project will cost almost $380,000 and this will also include marketing as well administrative costs.

Business Case for a New Economic Opportunity

According to Gurganious and Greenfield (2015), the care setting dealing with emergency services should have both part-time and full-time physicians and a part-time physician assistant (PA) or nurse practitioner and a medical assistant (MA). Therefore, Mayo clinic will operate every year based on the community needs and upon review on its performance, employees would be added if the revenue and influx of patients increase. Based on the US Department of Labor (2019), the operation costs in the first year will be $30,000 for a medical assistant, $112,000 for a PA or NP, $230,000 for a physician, and $25,000 for a secretary or patient representative. The Economic Policy Institute (2018) considers that the growth of salaries in the healthcare sector is estimated to be about 2%. Mayo clinic will base its employees’ wages by reviewing the estimated amount of salary growth every year. More funds may be needed in the future in case the organization employs more employees to care for the increased influx of patients.

The utility cost is projected to increase every year, mainly due to the increase in patients coming to hospital for services as well as the increased number of physicians and supporting staff. The present value of the hospital for the five years will, therefore, be approximately $4,649,282.47, as observed in Appendix 1. The net revenue is calculated using the charge or bill of each client. According to Qin, Prybutok, Prybutok, and Wang (2015), the average number of patients who visit the hospital for urgent care is about 60 to 80 patients. Mayo clinic estimates a total of 70 patients being served every day resulting in a cost of $135 per visit. The operation cost for the first year will be about $3,439,800 and it is estimated to increase for the next five years at a rate of 5% p.a. The 11% discount rate in the five year time is expected to be $11,150,769.42. Final calculations indicate that the net benefits for Mayo clinic will be about $6,501,486.95 indicating that the project will make an economic sense and increase revenue for the organization.

Business Case for a New Economic Opportunity

Ways to Keep Costs under Control While Maximizing the Benefits

The hospital operations need to be economically viable based on the projected net revenue after five years in order for the project to be successful. Regulatory costs control will be maintained through the managing the number of employee as well as cost of care delivery. Overhead costs that are not directly linked to the delivery of care but affects the total cost of service delivery will also be monitored. Other significant expenses that needs to be monitored include essential utilities, insurance, supplies, equipment replacement and repairs, and building maintenance.

Tracking the maintenance records and logs will allow Mayo clinic to reduce sudden breakdown of equipment. Equipment that need attention should be repaired before they completely breakdown. The utilities will be reviewed by the management team every year to ensure the clinic is running efficiently and excessive spending is control. Besides, managing the insurance, internet and phone costs throughout the five years will be critical. Costs will also reduce through monitoring daily operations regularly. Donated supplies will be accepted and reusing office supplies will be considered.  Thus, the project will ensure the facility has best equipment and facilities, and the environment is conducive for proper delivery of health care.

Business Case for a New Economic Opportunity

Conclusion

In conclusion, the development of an Express Care Model by Mayo Clinic will help the provision of urgent care to patients. The model will be imperative to provide immediate healthcare services to patients in populated regions with few healthcare practitioners. The Mayo Clinic will provide patients with regular screening and treatment to patient who needs emergency care to help reduce the burden of healthcare provision and overcrowding of patients in ER departments. In order to be successful, the model would require careful implementation and monitoring for next five years. The discount rate, capital costs, cost of operation, utility cost, regulatory control costs, overhead costs, would be critical control of excessive spending. The main risk of the project includes lack of healthcare facilities to ensure the provision of quality care. Having enough equipment and facilities to improve patient health would be necessary to ensure the project is successful.

 

References

American College of Emergency Physicians [ACEP] (n.d.) Urgent Care. Retrieved from http://newsroom.acep.org/2009-01-04-urgent-care-fact-sheet

Chang, J. E., Brundage, S. C., & Chokshi, D. A. (2015). Convenient ambulatory care —

Promise, pitfalls, and policy. The New England Journal of Medicine, 373(4), 382–388. Doi: 10.1056/NEJMhpr1503336

The Economic Policy Institute. (2018). Nominal wage tracker. Retrieved from https://epi.org/nominal-wage-tracker/

Gurganious, V., & Greenfield, D. (2015). Starting an urgent care center five essentials for success. Medical Economics, 92(11), 47–48. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/26298963

Qin, H., Prybutok, G. L., Prybutok, V. R., & Wang, B. (2015). Quantitative comparisons of urgent care service providers. International Journal of Health Care Quality Assurance, 28(6), 574–594. Doi: 10.1108/IJHCQA-01-2014-0009

Sanborn, B (2018). Urgent care centers grow in number, reach thanks to comprehensive capabilities, convenience, and demand. Business intelligence Journal. Retrieved from https://www.healthcarefinancenews.com/news/urgent-care-centers-grow-number-reach-thanks-comprehensive-capabilities-convenience-millennial

US Department of Labor (2019). Occupational Employment Statistics. Retrieved from https://www.bls.gov/oes/oes_emp.htm

 

 

Appendix: Cost–Benefit Analysis over a 5-Year Period

 

 

 

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