NURS 6211:Week 4: Understanding Revenue and Cost Classifications

Preparing the budget for the coming quarter, what types of factors do you need to consider? You need to ensure that you have enough money to keep the facility operational. You have to consider how you will be reimbursed for services provided. Will you be paid per student or per individual service performed? Consider the daily costs of operating the clinic. How much will you need to pay nurses and receptionists? How much will you need to cover the purchase of medical supplies? What if there was a flu epidemic on campus? How would that affect your costs?

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As a nurse manager, you need to understand how cash flows in or out of your organization or department, and the importance of tracking cash flow to keep operations running smoothly. This week, you consider the different reimbursement approaches used by health care organizations and how fixed and variable costs impact cash flow and net revenue.

Learning Objectives

Students will:

  • Distinguish between fee-for-service and case-based service
  • Evaluate reimbursement approaches used by health care organizations
  • Calculate fixed, variable, and semi-variable costs

 

Learning Resources

Note: To access this Week’s required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

Required Readings

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and Bartlett Learning.

  • Chapter 7, “Cost Classifications” (pp. 55-61)In this chapter, you focus on the difference between direct and indirect costs and why it is crucial for financial managers to understand the difference.
  • Chapter 8, “Cost Behavior and Break-Even Analysis” (pp. 65-78)This chapter continues the discussion on costs. It describes the differences between fixed, variable, and semivariable costs. It demonstrates how to compute the cost-volume-profit (CVP) ratio and the profit-volume (PV) ratio.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

    • Chapter 3, “Principles and Practices of Health Care Accounting” (pp. 87–120)Review: This chapter explores the accounting practices and principles of health care. The authors detail the rules for recording transactions and the process of recording and developing financial statements.
    • Chapter 4, “Financial Statement Analysis” (pp. 121–186)Review: This chapter goes into detail about the three types of analysis used in financial statements of health care organizations: horizontal analysis, vertical (common-size) analysis, and ratio analysis. This chapter also explains the categories of ratios and how to apply them.

 

    • Chapter 9, “Using Cost Information to Make Special Decisions” (pp. 372–422)This chapter specifies methods of computing price, fixed cost, and variable cost per unit and details the process of understanding and creating break-even charts. The chapter also discusses the decision making process involved in making special decisions such as make versus buyadd versus drop a program, and expansion versus reduction of a program.
  • Chapter 13, “Provider Payment Systems” (pp. 528–568)This chapter explains the background, concept, and traits of the major types of payment systems in use today. The chapter also details the methods of financial risk reduction used by those that must cover the costs of health care.

Nurse to patient ratios impact burnout worldwide. (2012). Australian Nursing Journal19(10), 19.

This article reports on research that highlights the relationship between adequate nurse to patient ratios and a decrease in burnout rates in nurses. The authors explain the impact of nurse to patient ratios on mortality rates and patient satisfaction.

Gillen, S. (2012). Most nurses are struggling with inadequate staffing, survey shows. Nursing Standard, 26(34), 9.

This article examines the impact of nurse-to-patient ratios. The author details government resistance to changes that may alleviate the negative effects of current nurse-to-patient ratios.

Moore, A., & Waters, A. (2012). Getting ratios right, for the patients’ sake. Nursing Standard, 26(31), 16–19.

This article challenges nurses to consider the quality of care they are able to give based on their patient load. The authors emphasize the priority of staffing with respect to the Nursing Standard’s Care campaign.

Center for Healthcare Quality and Payment Reform. (n.d.). Which health care payment system is best? Retrieved from  http://www.chqpr.org/downloads/WhichPaymentSystemisBest.pdf

This report discusses the two major types of alternative payment systems in use today. The report also examines the applicability of each type of payment to a given situation. It highlights the differing cost versus quality issues to be resolved within each payment system.

Week 5 Application Assignment Template

Required Media

Laureate Education (Producer). (2015). Week 5 Application Assignment Tutorial: Cash Flow Scenario. Baltimore, MD: Author.

Laureate Education (Producer). (2015). Week 5 Application Assignment Tutorial: Fixed Variable Scenario. Baltimore, MD: Author.

Laureate Education (Producer). (2015). Week 5 Application Assignment Tutorial: Net Revenue Scenario. Baltimore, MD: Author.

Laureate Education (Producer). (2015). Week 5 Application Assignment Tutorial: Staffing and Supply Budget Scenario. Baltimore, MD: Author.

Laureate Education (Producer). (2015). Week 5 Application Assignment Tutorial: Volume Budget Scenario. Baltimore, MD: Author.

Optional Resources

Hurlock J. (2012). Get to know Excel 2010: Create your first spreadsheet. Retrieved from http://office.microsoft.com/en-us/excel-help/get-to-know-excel-2010-create-your-first-spreadsheet-RZ101773335.aspx

Goodwill Community Foundation, Inc. (n.d.). Excel 2010. Retrieved from http://www.gcflearnfree.org/excel2010

There are a number of different options for determining how to charge for services provided at a health care organization. In the case-based service approach, one set fee covers an entire procedure. For example, if you needed knee replacement surgery, the fee would include preliminary visits, the surgery, and follow-up visits. However, in a fee-for-service approach, every different step would incur a separate cost. The reimbursement approach taken has significant ramifications for how care is provided.

To prepare:

  • Review the information in this week’s Learning Resources focusing on reimbursement for services. How are these approaches the same or different in your own setting?
  • Identify an example of a fee-for-service approach and a case-based service approach.
  • Reflect on the benefits and limitations of each approach.
  • Review the article, “Which Health care Payment System is Best?” and examine the additional reimbursement strategies described. Consider the viability of these alternative strategies within your own organization (or one with which you are familiar).
  • Examine how the nurse-to-patient ratio is affected by the payment approach used and consider how this can impact quality of service.

By Day 3

Post an example that illustrates the difference between a fee-for-service payment and a case-based service payment. Explain the benefits and limitations of each approach. Assess the viability of utilizing, within your own organization (or one with which you are familiar), the two alternative reimbursement strategies described in “Which Health care Payment System is Best?” Analyze how the nurse-to-patient ratio is affected by the payment approach selected and how these impact quality of service.

Read a selection of your colleagues’ responses.

By Day 6

Respond to at least two of your colleagues on two different days. Expand on a colleague’s posting concerning the viabilities of the different reimbursement strategies. Suggest an alternative that might work within their organization and provide the reasoning behind your choice. Highlight any personal experiences with alternate strategies and how the strategy used impacted service.

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