Cost-Benefit Analysis 1 a

Cost-Benefit Analysis

Read the following article which describes some of the current conflicts that grew out of recent efforts by HCOs to increase quality and decrease cost.

Nolan, T., & Bisognano, M. (2006, April). Finding the balance between quality and cost. Healthcare Financial Management, 60(4), 67–72. (AN 20440639)

The authors describe the conflict between caregivers, who see themselves as protectors of quality and patients, and finance professionals, who see themselves as protectors of the organization’s resources and bottom line. However, working together, finance professionals and caregivers can design improvement activities that both increase quality and reduce costs.

In this assignment you will apply the formula presented in the article and then analyze improvement activities that could occur in a fictitious hospital. The minimum and maximum values are provided for each component of the formula. You will create a spreadsheet that calculates the minimum and maximum value for the formula given the range of inputs.

Use the following information for a fictitious hospital:
Minimum Maximum
Average wage/hour $19.50 $21.45
Worked hours/patient day 4.2 5.04
Patient days/admission 3.5 4.55

Using a spreadsheet:

Calculate the lowest and highest total wages/admission.
Vary the value of each component within its range to calculate possible values for total wages/admission. Select at least two values within the allowable range for each of the three components.
Determine which of the three components has the greatest impact on the total wages/admission as the component ranges from its minimum to maximum value.

Based on the calculations, answer the following questions in a 2-page Word document:

As a nonclinical administrator, which of the three components would you focus your efforts on in order to reduce costs? Why?
For each of the three components, describe how actions taken by the HCO can reduce cost and also improve quality.

Prepare a report with both the spreadsheet and the Word documents. (You may embed the spreadsheet in the Word document.) Apply APA style to format your documents.

Grading Criteria Maximum Points
Created a spreadsheet with formulas to calculate total wages/admission. 8
Calculated total wages/admission for the lowest, highest, and two other values for each component. 8
Analyzed calculations to identify the impact of components on total wages/admission. 8
Selected one component as important to reducing costs, and gave reasons. 12
Recommended actions to reduce cost and improve quality for each component. 12
Applied APA standards for writing style, spelling, grammar, and citation of sources. 4
Total 52

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