Penner's Financial Management Game Wiki

As I mentioned in my earlier post this morning, I've been working on games to help nurses learn more about financial management.  Over the last couple of years, I've seen more and more research regarding the value of games in learning.  The games are in a wiki I developed:

Penner's Financial Management Games

I'll be interested in any feedback.

So Much Has Been Happening!

I'm  embarrassed at how long it's been since I last posted.  The health reform debate is still not over.  The federal, state and local deficits and budget concerns are only getting worse.  Environmental disasters and lifestyle issues such as obesity pose more questions and concerns about people's health.

I'm going to try to get back and post on topics for nurse executives--and for nurses who'd like to learn about executive thinking.  I continue to teach healthcare financial management.  In addition, I'm working on games for educating nurses about financial concepts.  

Feasibility Checkpoints for Healthcare Business Plans

Thanks for asking! My advice is to follow the steps of business plan development, using each of these stages as an opportunity for checking feasibility. Here are the steps, with an example that I published in an obscure health care management newsletter a few years ago. Warning: this is a long post!

Business Plan Example: A committee of cardiologists at SouthSide Hospital (fictitious organization) prepare a business plan to propose a new Cardiac Catheterization Laboratory (CCL).

1. Problem or Need Identification: The following questions help determine the feasibility of your proposed project in meeting a problem or need:

• How well does the proposed project address the problem or need? The cardiologists must demonstrate that the CCL will improve patient outcomes, reduce liability, attract and retain specialists, and enhance profitability.
• What is the political context? The decisions and preferences of major power brokers such as the Southside Hospital CEO, Board of Directors, major funders and the client base must be considered.
• How well does the project fit with the organizational mission, values and goals? SouthSide Hospital’s 5-year strategic plan includes a goal of establishing a center of excellence for cardiac care.
• Where does this problem rank compared to other organizational priorities? Competing problems at SouthSide Hospital include a need for a cardiac rehabilitation facility, and upgrading the Surgery Department for state-of-the-art cardiac procedures.

Feasibility Checkpoint: If SouthSide’s CEO puts a “hold” on capital projects for the coming fiscal year, the CCL proposal is infeasible. The cardiologists must determine where the proposed CCL fits as a budget priority for the coming fiscal year.

2. Product Definition: Readers must understand what you expect to accomplish, what is required to accomplish your goal, and what alternative approaches are available. These questions help determine feasibility at the product definition step:

• What is required to provide this product?The cardiologists’ plan is to upgrade and relocate cardiac catheterization services at SouthSide Hospital to a CCL using space in the Surgery Department.
• What are the alternatives?As an alternative, SouthSide can maintain current cardiac catheterization services.

Feasibility Checkpoint: The business plan must show measurable advantages to creating the CCL in terms of savings, profitability, patient outcomes and physician satisfaction compared to the alternative of maintaining current operations.

3. Market Analysis: Questions such as the following help identify factors in the outside environment that affect feasibility:

• What is the market share? Approximately 40% of patients in the market area who require cardiac catheterization use SouthSide Hospital’s facility.
• Who are the clients? Patients requiring cardiac catheterization at Southside Hospital are predominantly over age 65.
• What is the payor mix? Cardiac catheterization procedures performed at SouthSide Hospital are largely covered by Medicare.
• Who are the competitors? Goodman General Hospital is SouthSide’s major competitor for cardiac catheterization, but does not have surgical back-up for emergency procedures.
• What is the demand for this product? Southside Hospital’s service area has a higher than average proportion of persons over age 60, so demand for cardiac catheterization is strong and expected to grow.

Feasibility Checkpoint: Although the client base is strong, changes in Medicare reimbursement or a decision by Goodman General to enhance its cardiac surgery capability could make the Southside CCL project infeasible at this stage of business plan development.

4. Budget Estimates: The next step is to develop budget estimates and use them as feasibility checkpoints, considering items such as:

• Capital budget. Remodeling, purchase of upgraded technology and start-up costs such as extended warrantees total approximately $2,500,000 for the proposed CCL.
• Operating expense budget. The costs for personnel, supplies, overhead and other operating expenses are approximately $575,000 for the first year of the proposed CCL.
• Revenue budget. For the start-up year, the estimated volume is 500 cardiac catheterizations, with an estimated $8,000 charges per procedure. Net revenues after deductions are estimated at $1,425,000.
• Profitability. Total expenses for the start up year, including operating expenses, depreciation, start-up costs and overhead are estimated as $1,153,000. Revenues less expenses amount to $272,000 or a 19% profit margin.

Feasibility Checkpoint: The plan for the CCL appears feasible given its profitability, although SouthSide Hospital leadership must approve the capital budget and start-up expenditures.

5. Financial Analysis: Approaches to financial analysis include break-even analysis, cost benefit analysis or cost effectiveness analysis. At this checkpoint, the analysis should show that the CCL’s revenues will cover or exceed expenses, that the benefits (savings) generated by the CCL will meet or exceed its costs, or that the CCL is the least costly alternative to meet SouthSide Hospital’s needs.

Feasibility Checkpoint: The cardiologists did a very simple analysis comparing the average profitability for the start-up and following 3 years of operations between the proposed CCL and the alternative of maintaining current operations. The CCL meets profitability targets, reinforcing its financial feasibility.

6. Feasibility Statement: Business plans conclude with a statement addressing the overall feasibility of the proposed project. There is an inherent bias to overlook checkpoints indicating unprofitability and infeasibility. In the long run, it’s better for the organization to recommend dropping a proposed project, if the checkpoints throughout the preparation of the business plan indicate the project is infeasible.

Feasibility Checkpoint: Assuming political support from SouthSide Hospital leadership and sufficient Medicare reimbursements for cardiac catheterization procedures into the foreseeable future, this project appears to be feasible.

Note that I haven’t tried to update this example, published in 2004. Recent advances in interventional radiology (IR) and other technologies might alter some of these assumptions and affect the current feasibility of this project. The point is, you need to think about where and when to stop or proceed in the business plan process.

Penner, S.J. (Spring 2004). Business plan feasibility checkpoints. Society for Professionals in Healthcare Newsletter 9(2): 1-2, 5.

Cracks in the Plan?

Many of us in the San Francisco Bay Area are following the news of the unexpected crack found in the Bay Bridge. We fear the need for additional repair may delay our commutes tomorrow morning, and we've already been without the Bridge all weekend.


Business plans and grant proposals can also suffer fatal flaws, which can cause serious problems. I typically discuss these problems in terms of project feasibility.

Sometimes business plans with major cracks in them take on a life of their own. It can save the institution money, and save you a lot of wasted effort, if you can identify feasibility issues as early in the plan development as possible. You can then stop or modify an unworkable project idea into something that benefits your institution and your patients.

I have some suggestions for ensuring feasibility as you develop your business plan. Is there any interest out there in discussing this topic further?

Chargemasters

Masters of nursing students in my current financial management class are now working on one of their most frustrating assignments: reviewing California hospital chargemasters, and trying to figure out why the prices are so disparate between institutions. I use this assignment as a way to get students started reviewing financial documents, and to see how so much information is still hidden, even when these documents are made public. Later in the semester I'll lecture about concepts hospital administrators use when they set prices (cost-shifting, for example).

Do you have access to your hospital's chargemaster? Is this a resource for you when developing business plans?

Many countries that provide universal health coverage standardize and regulate hospital pricing. This is one area that I have not seen discussed in our current health reform debates. What are your thoughts about the implications of making all US hospital chargemasters public, and requiring greater regulation and standardization of hospital prices?

Jobs!

After teaching the first sessions of my two fall classes, I can share a major concern of entry-level masters of nursing students: jobs.

At least in the San Francisco Bay Area, hospital-based new graduate orientation programs largely ended with the economic downturn beginning the last quarter of 2008. Although the professional nurse population in America is aging, the recession caused many nurses to postpone or come out of retirement, at a time when hospitals may have to cut back related to dwindling profits, or limited public funds.

With Baby Boomers turning 65 beginning in 2011, including a lot of our current nursing workforce, I wonder about ideas for grant proposals or business plans that might help increase employment opportunities for new graduate nurses. Are nurse managers and health care administrators waiting for health reform to kick in?

Palliative care

I'm well aware there's been some unfortunate press about "death panels" related to health reform proposals. Sigh. One of the most timely business plans my students submitted this summer was to train hospital staff nurses on principles of palliative care, to improve their assessment and care planning skills in this important area. With Baby Boomers starting to turn 65 in 2011, isn't it time we started thinking about financial and quality of care implications of end-of-life conditions?

I would welcome thoughts about this issue.