Your business operations skill is important for being able to identify risks associated with various financing options and projects for capital projects that fund growth, purchase equipment and inventory, hire additional staff, and build new facilities.
Scenario
You have been promoted to CFO at your hospital. The hospital’s CEO has requested that you present an evaluation of budgetary options for future purchases based on industry competition to the board of directors. In the presentation, focus on budgetary financing strategies and solutions in the operations of the hospital.
Preparation
If you address nursing shortage, supply-chain disruption, or outsourcing in your assessment deliverable presentation, review and consider using the following articles from the “Summative Assessment: Business Operations Presentation” section in the Week 5 University Library as the primary resources for your presentation.
Nursing shortage topic resource: “As COVID-19 Worsens Nursing Shortage, Madison Hospitals, Schools Step Up”
Supply-chain disruption topic resource: “Inflation Rattles Hospital Supply Chain and Labor Pool With no End in Sight”
Outsourcing topic resource: “Research and Markets Adds Report: Medical Billing Outsourcing Market” and “The Good, the Bad and the Outsourced"
Assessment Deliverable
Create a 12- to 15-slide Microsoft PowerPoint® presentation in which you:
Evaluate effective financial options for outsourcing operations of key departments, such as information systems, medical billing, and human resources (HR).
Evaluate how you would implement just-in-time inventory management (e.g., in the OR, central sterile supply, or pharmacy departments) to optimize inventory management.
Analyze the advantages and disadvantages of using a flexible budget to meet the organization’s staffing needs.
Describe the decision-making factors when determining whether to lease or buy equipment (e.g., Should I buy or lease an MRI or CT scan?).
Describe the effect of financing strategies on the cost of capital.
Identify and describe the benefits and risks of debt financing (e.g., how to manage working capital through accounts payable).
Full Answer Section
- Discuss considerations: contract negotiation, service level agreements (SLAs), data security, potential loss of control.
- Address the “Good, the Bad, and the Outsourced” considerations to ensure proper evaluation.
Slide 4: Just-in-Time (JIT) Inventory Management
- Explain the concept of JIT inventory management: receiving inventory only when needed, minimizing storage costs and waste.
- Focus on implementation in key departments:
- Operating Room (OR): Surgical supplies and implants.
- Central Sterile Supply: Sterile instruments and equipment.
- Pharmacy: Medications and pharmaceuticals.
- Describe the benefits: reduced inventory holding costs, minimized obsolescence, improved cash flow.
- Discuss the risks: reliance on reliable suppliers, potential stockouts in case of supply chain disruptions (Evans, 2022), need for robust communication and coordination.
Slide 5: Flexible Budgeting for Staffing Needs
- Define flexible budgeting: adjusting budget based on actual activity levels (e.g., patient volume).
- Analyze advantages: better cost control, improved performance evaluation, adaptability to changing staffing needs, especially important given the ongoing nursing shortage (Morse, 2022).
- Discuss disadvantages: complexity in implementation, requires accurate forecasting of activity levels.
- Explain how it can address nursing shortages and fluctuating patient census.
Slide 6: Lease vs. Buy Equipment (MRI/CT Scan Example)
- Outline decision-making factors:
- Cost: Upfront purchase cost vs. lease payments.
- Technological Obsolescence: Risk of equipment becoming outdated quickly.
- Maintenance and Repair: Responsibility for maintenance and repair costs.
- Cash Flow: Impact on cash flow depending on financing option.
- Tax Implications: Depreciation deductions for purchased equipment vs. lease expense deductions.
- Provide a comparative analysis of leasing vs. buying an MRI or CT scan, considering these factors.
Slide 7: Effect of Financing Strategies on Cost of Capital
- Define cost of capital: the rate of return a company must earn to satisfy its investors.
- Explain how different financing strategies affect the cost of capital:
- Debt Financing: Lower cost due to tax deductibility of interest payments, but increases financial risk.
- Equity Financing: Higher cost than debt, but does not increase financial risk.
- Leasing: Can be more expensive than buying in the long run, but can improve cash flow in the short term.
Slide 8: Benefits and Risks of Debt Financing
- Describe benefits of debt financing:
- Lower cost of capital (due to tax shield).
- Maintains ownership and control.
- Discuss risks of debt financing:
- Increased financial risk due to fixed debt payments.
- Potential for default if unable to meet debt obligations.
- Explain how to manage working capital through accounts payable: extending payment terms to suppliers can improve cash flow, but maintaining good supplier relationships is crucial.
Slide 9: Managing Working Capital Through Accounts Payable
- Detail strategies for optimizing accounts payable:
- Negotiating favorable payment terms with suppliers.
- Taking advantage of early payment discounts when available.
- Using electronic payment methods to improve efficiency.
- Maintaining strong relationships with suppliers to ensure reliable supply.
Slide 10: Addressing the Nursing Shortage (if applicable)
- Summarize the impact of the nursing shortage on hospital operations.
- Connect this to budget considerations: higher salaries to attract nurses, investment in training programs, use of travel nurses (Morse, 2022).
- Discuss strategies for recruitment and retention.
Slide 11: Mitigating Supply Chain Disruptions (if applicable)
- Summarize the impacts of supply chain disruptions on hospital finances.
- Discuss strategies for mitigating disruptions: diversifying suppliers, building strategic reserves of key supplies, improving forecasting and inventory management (Evans, 2022).
- Connect this to budget considerations: increased inventory holding costs, potential price increases.
Slide 12: Conclusion
- Summarize the key budgetary financing strategies presented.
- Reiterate the importance of strategic financial planning for the hospital's future success.
- Emphasize the need for ongoing monitoring and evaluation of financial performance.
Slide 13: Q&A
- Open the floor for questions from the board of directors.
References (on final slide or separate handout)
- Evans, M. (2022, June 1). Inflation rattles hospital supply chain and labor pool with no end in sight. Modern Healthcare.
- Morse, S. (2022, January 26). As COVID-19 worsens nursing shortage, Madison hospitals, schools step up. Wisconsin State Journal.
- Research and Markets. (n.d.). Medical billing outsourcing market.
Key Considerations:
- Use visuals (charts, graphs) to enhance understanding.
- Keep the language clear and concise.
- Be prepared to answer questions from the board.
- Tailor the presentation to the specific needs and priorities of the hospital.
This detailed outline provides a strong framework for your presentation. Remember to use specific data and examples relevant to your hypothetical hospital to make the presentation more impactful.