You need to do three parts. All these parts are suppose to be presented in separate files.
Part one has a raw data file and a template that needs to be populated.
The part two is a scenario that is not restricted.
The 8-10 pages is only for part three.
The entire work is suppose to be presented in three separate files?
Part -1:
Capital Budgeting
Confronting the limitations of a facility built many years ago, the leadership team and board at a small rural hospital must decide how and when to renovate or move into a new building. An academic medical center is considering whether to purchase an expensive piece of technology in the hope of drawing top physicians-and new patients-from throughout the nation. A small physicians' practice is weighing whether or not to invest in a new computer system.
What factors should play into these decisions? What is the best way to buy capital? How does an organization assure that it is making sound investments? This week, you explore answers to these questions as you examine capital and capital budgeting in health care organizations.
As you focus on capital this week, you analyze the time value of money and conduct a net present value (NPV) analysis. You also compare financing methods for health care equipment purchases.
Learning Objectives
Students will:
- Analyze the time value of money for a health care organization
- Apply net present value (NPV) analyses for replacing capital equipment
- Compare financing methods for health care equipment purchases
Assignment: Capital Budgeting
Note: The Instructor will post the document.
There are many options to buy capital, including cash purchases, loans, leasing, and other forms of payment. Your goal as a health care manager is to determine which method is best for your organization, given its financial and organizational structure (i.e., for-profit or not-for-profit). Time value of money and net present value are two techniques that may help you determine how and when to invest in new capital. For this Assignment, you examine these concepts as they pertain to the health care industry.
To prepare for this Assignment:
Review the Assignment document provided to you by the Instructor. Reflect on concepts of time value of money, net present value, internal rate of return, and purchasing options.
The Assignment:
Using the "Week 10 Assignment Capital Budget Excel Template" answer the questions provided in the week 10 assignment document.
1. If a physician deposits $24,000 today into a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of this investment:
a. 2 years from now
b. 4 years from now
c. 6 years from now
d. 8 years from now
2. The Chief Financial Officer of a hospital needs to determine the present value of $120,000 investment received at the end of year 5. What is the present value if the discount rate is:
a. 2%
b. 4%
c. 6%
d. 8%
3. Calexico Hospital plans to invest $1.6 million in a new MRI machine. The MRI will be depreciated its 5-year economic life to a $200,000 salvage value. Additional revenues attributed to the new MRI will be in the amount of $1.5 million per year for 5 years. Additional operating expenses, excluding depreciation expense, will amount to $1 million per year for 5 years. Over the life of the machine, net working capital will increase by $30,000 over the life of the project.
a. Assuming that the hospital is a non-profit entity, what is the project's net present value (NPV) at a discount rate of 8%, and what is the project's IRR?
b. Assuming that the hospital is a for-profit entity and the tax rate is 30%, what is the project's NPV at a cost of capital of 8%, and what is the project's IRR?
4. Marshall Healthcare System, a not-for-profit hospital, is planning on opening an imaging center including MRI, x-ray, ultrasound, and CT. The new center will generate $3 million per year in revenues for 5 years. Expected operating expenses, excluding depreciation, would increase expenses by $1.2 million per year over the life of the project. The initial capital investment outlay for the project is $5 million, which will be depreciated on a straight line basis to a savage value. The salvage value in year 5 is $800,000. The cost of capital for this project is 12%.
a. Compute the NPV in the IRR to determine the financial feasibility of the project.
5. Penn Medical Center, a for-profit hospital, is considering the purchase of a new 64-slice CT scanner. The cost of the new scanner is $5 million and will be depreciated over 10 years on a straight line basis to $0 savage value. The tax rate is 40%. The financing options include either borrowing the full cost of the scanner or leasing a scanner. The lease option is a 5-year lease with equal before-tax lease payments of $950,000 per year. The borrowing alternative is a 5-year loan covering the entire cost of the scanner at an interest rate of 5%. The after-tax cost of debt is 3%. Should Penn Medical lease the equipment or borrow the money?
Part II
Discussion: Ethics in Health Care Finance
Note: This is a Post First assignment. You are required to post your original post before the discussion board opens for your review.
As a health care administrator, you will undoubtedly be faced with the responsibility of making decisions that may be impacted by ethics. Sometimes, the best approach to a given situation is clear, whereas others require you to carefully consider laws, regulations, and the impact of potential outcomes. How do you ensure you will make the best decision for your health care organization? For this Discussion, you examine the following scenario and consider whether there is a breach of ethics.
Scenario:
An organization is developing a business plan. The intent of the organization is to provide a service for a community in need, but it appears they might have trouble obtaining financing. The board is trying to decide whether to be transparent in their financials or over-predict so they can properly finance their venture.
To prepare for this Discussion:
· Read the provided scenario.
· Given the mission of the organization in the scenario, consider whether over-predicting financials would be a breach of ethics.
Part III Attached files for this part
Project: Final Project - Business Plan
Business planning is a mapping of your vision for the future of an organization. As a health care administrator, it is important that you are able to create an effective business plan. For this Assignment, you examine the following scenario and develop a business plan for the organization.
Scenario:
A city-based community hospital is looking at adding an urgent care facility in a rural area. Urgent care is the delivery of ambulatory care in a facility dedicated to the delivery of unscheduled, walk-in care outside of a hospital emergency department. Development of the Rural Urgent Care (RUC) facility will facilitate access to care providers through extended service hours within closer geographic proximity to patients, families, and caregivers. RUC will act to alleviate demand for emergency department services by shifting lower acute patients to a less resource-intensive environment.
This project is in response to the shift from volume- to value-based health care. Payers and purchasers are interested in improving economic efficiency by shifting utilization from emergency department to lower cost settings, such as RUC. Several competing hospitals have hired emergency department physicians, as part of their integration strategy to participate in accountable care organizations (ACO) contracts. The hospital needs to respond to the competitive situation by making a sound investment in the RUC facility that addresses both financial and economic situations. The facility will be staffed with physicians and will include a radiology suite, laboratory suite, and other health-related ventures to help the hospital grow. You must help the board develop a business plan for this urgent care unit.
To prepare for this Final Project:
· Examine the provided scenario.
· Refer to the document "Executive Summary, Overview, and Financial Data for Investment in the Rural Urgent Care Center" provided here and in this week's Learning Resources. Analyze the background and financial data for the RUC facility.
Note: This Assignment will be graded using this rubric: Week 11 Project Rubric (PDF). The "Week 11 Business Plan Excel Template" will guide the financial analysis portion of this assignment.
The Final Project Assignment:
Using the "Week 11 Project Business Plan Template", create a business plan (8 pages) that includes the following:
· Executive summary
· Market analysis, including:
o Macro- and microeconomic implications of market competition
o ACO payment incentives to the organization
o How the RUC impacts economic efficiency
· Financial analysis, including:
o Capital requirements
o Reimbursement model
o Cost per patient visit
o Pro forma, including:
- Patient revenue
- Operating expense
- Income from operations
- Total expense
- Net cash flow
Attachment:- Raw Data and Template.rar