Healthcare Accounting

1)    Laying the Groundwork Scenario: Initially, the established leadership at the hospital was skeptical.  Now they are at least willing to listen.  So you decide it’s time to introduce a procedure that you think will improve the financial performance:  the gastric sleeve procedure.   Based on knowledge that you have gained in this course’s textbook: ·         Explain the different sources from which you may obtain the funds needed to introduce this procedure. ·         Assuming you have the resources to cover this new procedure, explain the implications of this new service to the revenue cycle of the hospital.     2)    Crunching the Numbers Scenario: You’ve got the numbers and the CFO wants you to explain how this investment will be worth it.  You will have to spend up front $2,000,000 to build a new OR and obtain equipment just to handle the procedure and then pay another $200,000 per year to a physician who will perform the procedure.  You expect that it will take a while before the general public becomes aware of the availability of the procedure, so it will take $40,000 the first year, and $10,000 each year after that.  For the sake of simplicity, assume that you will receive $1,000 from insurance for each procedure.  The first year you will have 400 procedures and it will grow by 200 procedures each year.    Use Excel to compute the following:  ·         Using the payback method, how long will it take to recover the initial investment? ·         If the hurdle rate is 10%: o   What is the future value of the initial investment? o   Assume the future value is the cost of everything you will pay out over the five years, except for the initial investment.  What is the present value? ·         What is the IRR? ·         Should you invest?  Why or why not?

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