Hcs 405 Simulation Review

Submitted By jcowan115
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Simulation Review
University of Phoenix

HCS 405
David Catoe
August 4th, 2014

Simulation Review My objective was to decide on the best strategy to solve a cash flow problem at EHC. I had to implement two measures to achieve a cost savings of at least $750,000 during the first quarter. I was also faced with a decision to pick the best loan option after finding a strategy to resolve the cash flow problem. Throughout this simulation, I was faced with making cost-cutting options, cost-effective equipment choices, and sourcing funds for expansion Although I work in the medical field as a firefighter paramedic, this simulation correlates to some of the decisions my fire chief makes for equipment that is needed for our annual budget.

I selected reducing agency staff because contracting out people to fill vacancies can be twice as expensive as non contract individuals. By reducing the high premium by taking these positions away, they will save money and prevent reducing the level of care. By filling the vacancies with non-contracted individuals, it can make a significant reduction in the cost for EHC. I also selected changing the skill mix. Changing the skill mix will allow the hospital to hire unlicensed personnel which can assist in aiding nursing staff. In the simulation, they stated there is a high demand for nurses. The nurses are most likely being paid a higher premium because of their education and low availability. By hiring certified nursing assistants (CNA) or licensed vocational nurses (LVN) these nurses can assist a registered nurse in some of the tasks which can cut down the cost of registered nurses (RN). A CNA usually has less than 40 hours of training, whereas, many RN's have over two years of college education. Utilizing CNA's and LVN's can dramatically cut down the cost.

I selected loan option number one to solve the current shortfall at EHC. I chose this option because in three months, EHC will receive $2,300,000.00 from Medicare and other managed care companies which will ultimately solve the cash flow problem. Although it is a slightly higher interest rate of 9.45%, there is no prepayment penalty for the loan option which can be covered from the cash flow from Medicare and other managed care companies. Since I will be able to close out the loan in three months, the interest being paid out would be $32,603.00 versus loan option two could not be paid off prior to six months. The outcome of my choice confirmed my decision. I was able to meet my objective to resolve the cash flow problem at the EHC. My goal of achieving a cost savings of $750,000.00 was surpassed by reaching a savings of $811,249 by the first quarter. Which is projected to be $61,249.00 ahead of our objective.

The cost-effective equipment selections I chose to make were to acquire a refurbished high speed CT scanner and obtaining a capital lease on the x-ray machine. A new CT scanner lasts for an estimate of ten years and costs $750,000.00. This would take a large portion of a hospitals income. By obtaining an expensive piece of equipment at a lower premium, it will allow the hospital to still provide a high quality of care. The technology itself is not expected to change much throughout the duration so it made the most sense to go with a refurbished one based upon this information. Since this technology could be outdated in five years, an operating lease was not the most ideal option because having to update equipment and paying additional fees after a few years would