Financial Issues

however, the focus of this units discussion is not on the late payments from third party payers AND premature readmission of Medicare beneficiaries within 30 days of discharge. For this discussion assignment, the emphasis will be on the decreasing demand for obstetric services AND voluntary personnel turnover, both of which are believed to be adversely impacting the financial position of the Bright Road Health Care System. 

Below is a brief recap of the scenario:

Bright Road Health Care System is experiencing financial problems, for example insurers with late payments, Medicare patients with high readmission rates within 30 days (lost Medicare reimbursement), high staff turnover increasing costs, and low admissions to its obstetrics service. The Chief Administrative Officer, Mr. Baxter, is very concerned as he knows this reflects poorly on him and may erode the Boards confidence in his judgment and competence.

This scenario provides a realistic illustration of the issues healthcare delivery systems face across the U.S. and globally. Its extremely important that operations professionals have an above average comfortable level when it comes to establishing grounded assumptions and conducting and interpreting financial and operational forecasts. In its simplest form, forecasting is a process that represents an educated guess. In business, we use time series methods, the indicator approach, or regression analyses to forecast the nature of a situation or future values. The data we observe when forecasting fall into one of four types: trended patterns, seasonal patterns, cyclical patterns, or irregular patterns (Kros & Brown, 2013). Forecasting models are used to predict consumer demand, which, in turn, aids management in forecasting staffing requirements. In addition, to demand forecasts, management routinely engages in financial forecasting, which includes, but is not limited to: sales growth, economic predictions, and forecast future cash flows. In order to perform forecasts, its important that the management team signoff on the underlying assumptions used to complete these analyses, such as population growth and technology development. The following represents the typical steps one undertakes when preparing for and conducting a forecast (Investopedia, n.d.):

A problem or data point is chosen. This can be something like “will people buy a high-end coffee maker?” or “what will our sales be in March next year?”
Theoretical variables and an ideal data set are chosen. This is where the forecaster identifies the relevant variables that need to be considered and decides how to collect the data.
Assumption time. To cut down the time and data needed to make a forecast, the forecaster makes some explicit assumptions to simplify the process.
A model is chosen. The forecaster picks the model that fits the data set, selected variables and assumptions.
Analysis. Using the model, the data is analyzed and a forecast made from the analysis.
Verification. The forecaster compares the forecast to what actually happens to tweak the process, identify problems or in the rare case of an absolutely accurate forecast, pat himself on the back.
Source: http://www.investopedia.com/articles/financial-theory/11/basics-business-forcasting.asp

Based on the information provided in the scenario and on an outside review of the relevant literature, the students will assume the role of a member of a two person financial consultant team hired by Bright Road Health Care System to objectively investigate four areas that the Chief Administrative Officer, Mr. Baxter, believes are adversely impacting the financial performance of the company: a) late payments from third party payers; b) readmissions within 30 days of discharge (impacts Medicare reimbursement), c) decreased admissions to the obstetrics department, and d) voluntary employee turnover. While your partner is conducting interviews with key stakeholders, you are expected to focus your efforts on the latter two issues: decreasing demand for obstetrical services AND the voluntary turnover of personnel. These issues can have a detrimental effect on the revenue generating capabilities of the system and definitely warrants investigation.

In order to gain a deeper understanding of the factors contributing to the decrease in client volumes, (demand) in obstetrics, and the voluntary turnover of personnel, your team will require more than a week to complete the project. Since this will be the case, you have requested a meeting with Mr. Baxter to not only plea your case for more time, but also to lay out a data collection and analysis plan. He has scheduled the meeting, so in preparation, you will prepare, on behalf of the team, an action plan that will specify data requirements and describe the forecasting models and corresponding assumptions that will be used to analyze the data. In addition, you will share how the information obtained from the forecasts can be effectively used to guide managements operational and financial decision-making as it pertains to lowering personnel turnover and potentially increasing demand for obstetric services.  Keep in mind that Mr. Baxter may have limited technical understanding of forecasting methodologies, so include in your plan a clear explanation for why certain data will be required and why the forecasting methods and their corresponding assumptions were chosen to analyze the data given the nature of the issues being examined. The action plan should be logically presented, well-supported, and thoroughly vetted.

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