Health Service Systems Week 6

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This paper analyzes the strategies and recommendations to improve the financial performance of Middlefield Hospital. The problem started when the chief financial officer (CFO) indicated that the financial performance of the hospital has been deteriorating over the last 6 months. Hospitals throughout the world are operating on tight budgets. Therefore operational managers must find ways to reduce cost and “manage productivity across all areas and job categories” (Langabeer, 2008, p. 129). There are many factors contributing to this problem: The hospital is exceeding its budget, the new facility across town has continued to cut into Middlefield’s market share by admitting more patients, and the number of admissions to the hospital is declining each month, while more uninsured patients are seeking services at the facility. The hospital has to change its strategies in order to improve its overall financial performance. These strategies include: spending on accounting systems to cut costs, increasing the accounts receivable collections, or increasing legitimacy with stakeholders and donors; improving efficiency through professional administration; spending on advertising to increase revenues through increased market share and premium prices; and offsetting patient care losses with substantial net income from sources not directly connected to patient care. After convening with the Middlefield Hospital management team, we were able to identify the core facts that my recommendations were built on. Medicare is responsible for 37 percent of all community hospital revenues, and reimbursement for capital expenses constitutes only about 7 percent of this revenue. In addition, the patient population of Middlefield Hospital is comprised of more and more Medicare, Medicaid, and uninsured patients and fewer patients have commercial insurance. In order to increase the net income the hospital should invest in advertising. Furthermore, advertising is likely to yield significant...
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