Simulation Review

Topics: Bond, Health care, Decision making Pages: 7 (1436 words) Published: January 21, 2015

Simulation Review
Angel Falcione
Mark Williams
January 19, 2015

Simulation Review

In this paper I will discuss the financial accounting decisions made while participating in the simulation review at The Elijah Heart Center Hospital. According to financial indicators of the simulation, the best choices need to be made in the areas of capital shortage, purchasing new medical equipment, and funding options for capital expansion. I will also include a summary and conclusion that discusses what the simulation has taught me, if I made the best decisions, and how to apply the teachings learned to a future career.

Elijah Heart Center Simulation
According to the simulation, Elijah Heart Center is facing the financial dilemma common in specialized health care organizations. The hospital has a few areas that need to be addressed, such as, reduced income, the need for new medical equipment, and wanting to expand the hospital. Without the needed technology and expansion, there is very little the hospital can do to improve the income situation. The financial situation requires a combination of strategy, forecasting, and a plan on how to reduce costs, while making the best decisions in regards to obtaining expansion and needed technology.

Phase I: Capital Shortage
Elijah Heart Center is experiencing a cash flow problem, to help improve this dilemma, the goal is to save the Hospital $900,000 in the first year. The simulation provided five options for cost cutting at the hospital with only two of the options available to select from, in hopes of the best result. The five options for cost cutting are reducing agency staff, downsizing staff, reducing benefits, changing the skill mix, and reducing length of stay for the patients. The best two options for the hospital to reach their goal in my opinion are, reducing the agency staff and changing the skill mix. Reducing agency staff is a smart choice because it can eliminate contracted salaries which cost a lot more than the salaries of the hospital’s staff. Reducing agency staff also significantly reduces unneeded expenses and does not have any effect on revenue. Most importantly, reducing agency staff does not in any way effect the patient’s care at the hospital. Then with my decision to change the skill mix, unlicensed assistive staff can do the basic tasks and licensed staff can focus on the tasks that are needed for making choices for patient care.

In addition to selecting cost-cutting options, a loan option was also needed for selection that would be best for good cash flow for Elijah Heart Center. With this decision, the best loan option was the first one. Although the interest rates were a little higher, going with a loan with no prepayment limitation was the better option. The second loan option had lower interest rates but the loan could not be paid off within six months because of a prepayment limitation. The hospital saved a total of $811,249 just in the first quarter, meaning the $900,000 savings goal for the first year was not only achieved, it was done with integrity with the hospital keeping their own staff and providing the best outcome for quality care.

Phase II: Funding Options for Equipment Acquisition
Elijah Heart Center needs to purchase new health care equipment for the quality care of the patients and to save money while doing so. Three machines are needed to be purchased, which include, CT scanner, x-ray machine, and an ultrasound machine. When making the decision to purchase the medical equipment needed, there were many different buying options to choose from. The different options were, purchasing a refurbished machine, buying a new one, or having an operation or capital lease.” Forecasts of revenue will cover varying time periods. Longer-range multi-year forecasts are useful for executive decision making regarding the future of the organization” (Baker, 2011). Strategy and forecasting came into play when...
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