Discussion- Cost Savings and Revenue Enhancement
This Discussion offers you the opportunity to apply return on investment (ROI) concepts in a real case scenario. As is often the case, technology offerings involve costs that must be justified by virtue of expense reductions for revenue increases in the organization. There are creative opportunities in the Discussion for leaders to facilitate the development of the revenues into the organization and operational changes that reduce expenses.
Scenario: Dynamic Health System is a 3-hospital, 500-bed system in the Midwest United States. This system employs 100 physicians, both primary care and specialists, in 12 physician practices. Dynamic also runs a center of excellence in orthopedic care for the large geriatric population in the area, including an outpatient rehabilitation facility that is currently profitable. Dynamic offers a full spectrum of medical and surgical services to their population with an emphasis on programs of excellence in orthopedic surgery, diabetes, and women's care.
Dynamic's typical patient mix is over 45% Medicare with another 35% private pay patients covered by three large insurance companies. Their Medicaid population is approximately 12%, with the reminder of patients self-pay.
Due to market forces, the three private payers have begun to implement a program of bundled payments for their members in the following areas: hip replacements, knee replacements, and lower back surgeries. In these models, Dynamic hospitals and employed physicians will be paid a fixed amount for an entire episode of care from pre- surgery evaluation, through surgery and post-surgery, physical therapy, and rehabilitation. Medicare is likewise proposing a pilot study for a population of hip replacement beneficiaries to assess the outcomes of care as opposed to procedure costs as a result of Dynamic's petition to receive increased payments for beneficiaries due to age demographics and for being the only orthopedic geriatric center in 200 miles.
As a result of these factors and the aging HIT infrastructure, the Chief Medical Officer (CMO), Chief Executive Officer (CEO), and Chief Information Officer (CIO) of Dynamic are proposing the purchase of a monolithic Electronic Health Record (EMR) solution that will provide complete online documentation, orders, pharmacy, labs, and patient portal for all hospitals and employed physician offices. Because the (1) physician offices are currently using Epic Corporation's back office billing system with an outstanding record of accurate coding and short "days in Accounts Receivable" and (2) Epic's EMR has a high ranking in industry HIT assessments, the executive team is proposing the purchase of Epic's clinical EMR (documentation, ancillaries, orders, and patient portal).
The CFO is supportive but skeptical, as the Epic bid is approximately $1.5 M to implement the clinical software with a continued $300K per year in software maintenance and support. Current clinical technologies information systems are fragmented, disjointed, and don't meet HITECH Meaningful Use requirements, and it will cost Dynamic about $200K per year to maintain the software and servers needed to run the system.
The local competitive landscape may be changing. Dynamic's CFO is hearing rumors that an established academic system which is centered 300 miles away is possibly considering buying three local stand-alone surgery centers and hiring orthopedic surgeons. This academic center has published best practices in outcomes for surgery care in a recent CMS Medicare study that implies that they are delivering high quality and cost effective orthopedic care.
To prepare:
- Carefully read the scenario and the Pro Forma Explanation Material in this week's Learning Resources.
- Develop a return on investment (ROI) strategy for the acquisition of a strategic HIT solution in which you consider 2-3 cost saving and/or revenue generating opportunities that you feel apply to Dynamic's scenario.
A strategy for how Dynamic can pay for the newly proposed Epic system. Explain how the organization will save in operational expense in order to handle the extra 100K per year needed to maintain this solution. Provide a recommendation for how the hospital can use HIT solutions to generate new revenue. Also consider that if Dynamic issues a bond to pay for the $1.5 million implementation costs, likely the local rating agencies will want to see a documented 5-10% additional reduction in "hard line" operating expenses to assure Dynamic's ability to pay off the debt. Given that over 60% of the operating budget is staff and physician salaries, explain what kinds of savings the best in class EHR offer will assure investors.
Examine your colleagues' posts regarding ideas for operating budget reductions and/or new revenues proposed as part of implementing the Epic solution. If the CFO's rumors are true and the academic center opens competitive surgery alternatives in the area, how would you recommend your colleague adjust their cost savings and revenue ideas?
Assignment 1-
Developing an Innovative IT Strategy: Data Driven Approaches to Challenges in the Health Care Continuum
Hospital Systems, Ancillary Services, and Physician Practices are often the focus of HIT initiatives. While these settings are key areas for HIT advancement and data acquisition, there are places within the continuum of care that often lack automation or comprehensive data management strategies, creating gaps in the longitudinal health record and both an individual and population level.
The Final Project allows you to develop a comprehensive IT strategy for one of these settings of care. This week you choose the Scenario for your Final Project from the following list. Descriptions of these settings can be found in your Learning Resources. Beginning this week, you will be building on the progressive HIT topics that culminate in your Final Project (due in Week 11). This week's Assignment asks you to reflect on your setting of choice as you develop a Charter for the acquisition of a strategic HIT solution.
To prepare for this Assignment:
- Review the Final Project Scenarios in your Learning Resources and select a setting of care from one of these scenarios:
- Long-Term Care
- Critical Access Hospital
- Telemedicine for Rural-Based Health Facility
Research current and specific clinical and financial management problems in these settings of care and evaluate how technology might be justified to address the most pressing challenges.
The Assignment:
Write a 3- to 4-page (excluding title and reference pages) APA style paper, addressing the following elements for the scenario that you choose. This will also be the scenario used to complete your Final Project. For this Assignment, address the elements of a project Charter used to plan the acquisition of an HIT solution for the setting of choice. The Charter should include:
- Problem statement. A specific statement of the problems that you intend to address in this scenario using technology solutions.
- Scope of the HIT solution to be acquired. This includes both the technical elements of the scope and the business and clinical functional elements of the scope.
- Stakeholders analysis including the needs of both internal and external stakeholders. This analysis includes a summary of the business and clinical system functions that the technology should address for each of the executive stakeholders.
- Risk Analysis. A specific statement of the financial, technical, legal, ethical, and operational risks involved in introducing HIT into this setting and the feasible mitigation strategies to address these risks.
Assignment 2- Return on Investment (ROI) Analysis in HIT Planning
Determining the (TCO) or total cost of ownership for a strategic information system investment is a critical part of the leaders' role in using technology in a transforming way. The Return on Investment Analysis depends upon reliable estimates of both the capital outlay and ongoing operational costs associated with the initiative over a period of time. This Assignment focuses on outlining both the capital and ongoing operational costs associated with a typical technology investment. You will outline the costs and, as importantly, the assumptions that you used in deriving these financial estimates.
To prepare:
Review the Pro Forma Explanation Material and HIT Program Pro Forma Template in the Learning Resources.
The Assignment:
Write a 2-page APA style paper, addressing the following elements for the scenario that you chose in assignment 1. This will also be the scenario used to complete your Final Project. For this Assignment, address the financial element of the project Charter used to plan the acquisition of an HIT solution for the setting of choice. The financial analysis has two parts:
- Using the HIT Pro Forma Template provided in your Learning resources, complete the anticipated capital and operating costs of the HIT solution that you are proposing in the Assignment 1.
- Justify the assumptions that you used in your proforma.
Attachment:- Assignment.rar