April 13, 2013
Maria Aurora Makalintal-Torio
University of Phoenix
The Elijah Heart Center (EHC) is a health care organization that specializes in cardiac care. The facility has equipment suitable to perform a full spectrum of cardiovascular services. EHC provides outpatient services for non-invasive procedures as well as clinical care. However, Elijah Heart Center is suffering from a severe financial deficit that may destroy the credibility of the company. As senior financial advisor strategies of specific measures will address techniques to bridge a working capital shortage, evaluate funding options for acquiring medical equipment, and evaluate funding options for capital expansion. Phase 1: Capital Shortage
The first strategy recommended to solve the cash flow problem at EHC is to “Reduce Agency Staffing.” According to the Revenue and Expenditure Projections this is a respectable cost cutting measure that illustrates how expenses will reduce drastically without a decline in revenue. Also by implementing this strategy EHC saves on expenses paid to staffing agencies and management fees by reducing the number of contract medical and outside personnel. Furthermore, the level of competence of outside agency personnel does not meet the qualifications of the hospital staff, which is constantly engaged in the quality of care. This strategy will present a significant cost in savings for EHC because the expenses of contract staff is almost double that of people who work in the hospital directly.
The second strategy recommended to solve the cash flow problem at EHC is to “Change the Skill Mix” by employing “unlicensed assistive personnel.” This strategy is a respectable long-term costs savings. According to the Revenue and Expenditure Projections this recommendation will have a cost increase in the beginning; however, in the following months the revenue will increase significantly. This increase will come from nurse aides, medical assistants, and other patient care specialists that can help handle some of the minor workflow tasks allowing the registered nurses to focus on more of the urgent tasks that affect the quality of care.
The next recommendation choice for EHC is “Loan Option 1.” By comparison this is considered the best option to solve the work capital shortage within the company. This loan will help EHC solve the cash flow problem by receiving more than $2,000,000 as payments from Medicare and other managed care companies and help EHC close out the loan in the next 180 days because there are no prepayment limits, unlike loan option 2. Nonetheless, the outcome of these measures is by the first quarter EHC will save well over its budgeted target. Phase II: Funding Options for Equipment Acquisition
The patient capacity is increasing at EHC, but the equipment is not up to standards to handle this increase in size or manage the care of the patients. As senior financial advisor the most cost-effective equipment acquisition strategy choice is to acquire an operating lease on the High Speed CT Scanner, X-Ray Machine, and the Ultrasound System. The reason for this decision was taken according to the advice of the Chief Financial Officer, Zachary Macholz. He states that acquiring an operating lease on the equipment, will help the company keep up with technology advancements, and the company will still have enough money to help with any future cash flow problems. However, this decision was not the best option for the company. The Ultrasound System should have been the only piece of equipment acquiring an operating lease because the useful life expectancy is five years, and this choice has an upgrade option that helps take care of the technological obsolescence. Also this option has lower payments and monthly installments. Buying a refurbished loan for the High Speed CT Scanner is the best option for EHC because of the useful life expectancy, the...