Definition of Revenue and Healthcare Expenditure

In the present report an effort is being made to describe the proposal of opening a new department that is concerned with the treatment of obesity. Local health district must ensure that requisite financial and advisory support is provided to the hospital in this regard (Murray et al., 2017).

In the recent times it is observed that the number of obese patients have increased dramatically. The doctors are seeing obese patients by scores in the hospital. Even children are coming up with chronic or acute obese conditions. For the purpose of addressing the issue of ever increasing obesity in the patients, it is necessary that a dedicated and specialised approach is being taken towards it. In pursuance of it the hospital is contemplating to open up a department that will solely treat the patients suffering from obesity. This would require the hiring of the services of specialists of the field and it will ensure that the patients receive timely and most appropriate care as is expected by them from the hospital (Schäferhoff et al., 2015). For the purpose of smooth functioning and commissioning of the new department the hospital will have to incur some expenditure in this respect. The expenditure of the company will included the services of the hired nurses, the fees that is paid to the dieticians the various sorts of consumables like glucometer strips etc. but the same will be recovered in a short period of time due to the fact that number of patients that are coming in the hospital with the complaint of diabetes are increasing rapidly (Wright et al., 2017).

In the present case a proposal is being made in respect of opening a new obesity department within the hospital. For the purpose of successful integration of the same it is required that in respect of the costs that are being incurred in respect of its initiation must be recovered from corresponding revenue from the patients of the hospital (Cashin et al., 2017). . 

The main aim of the proposal is to ensure that the services that are provided to the patients suffering from obesity becomes specialised and it is ensured that a particular department of the hospital is engaged in the provisions of these services (Fan & Savedoff. 2014). The aim is to provide specialised services at cheaper prices. This will ensure that the hospital is able to break-even in a very short period of time. The rolling out of a completely new department solely addressing the issue of obesity will ensure that the efficiency of the entity in managing the services that is provided to the patients in relation to obesity (Evans & Pablos-Méndez, 2016).

Activity-Based Funding in Healthcare

The hospital will also be able to increase the revenue that is generated by it from the fees collected from the patients. This will be achieved by providing quality services and products to the patients at a price that is reasonable and affordable (Lu et al., 2016).

• Efficiency gains

The most important efficiency gains that are achieved by the entity through the implementation of this proposal are that the quality of the service that is provided to the patients will improve many times. The hospital will be able to manage its resources better in terms of utilising the benefits of the human resource that is available with it (Liaropoulos & Goranitis, 2015). The doctors who are specialised in the treatment of obesity will be transferred to the right department and the associated and corresponding costs to be incurred in respect of the treatment could be better allocated to the department concerned (Kutzin & Sparkes, 2016).

This means if the hospital choses to allocate the overhead incurred by it for a specified period of time depending on the type of the treatment that has been provided to the customers and the equipment and consumables used for it, then in case of the allocation of the overhead incurred in respect of the treatment of the obese patients, the efficiency associated with it will improve.

• Potential savings/increased costs

In the absence of dedicated obese treatment facility within the hospital, it was losing patients who found the service provided by the hospital unsatisfactory. Though in the starting phase the hospital will have to incur high capital expenditure for the acquisition of the requisite equipment for conducting tests and expenditure related to the acquisition of right human resource i.e. doctors specialised in obese treatment, the entity will be able to recover the costs in a very short period of time (Kastor & Mohanty, 2018). The reason for this is that the number of customers that are going to be treated by the hospital on a daily basis will increase significantly.

The increased costs that are going to be incurred by the entity will comprise of consumables like increased requirement for sanitising and disinfecting products, glucometer strips, increased purchase of medical supplies and the increased requirement of disposable gloves (Mulenga & Ataguba, 2017). In addition to that the entity will have to incur additional costs in respect of various amenities like electricity charge, insurance charge, legal and professional services and expenditure in the respect of the rent that has to be paid for the building acquired for the department. Furthermore the entity will have to bear the depreciation amount that is going to be charged on the equipment and the building acquired for the opening of the department in the hospital solely concerned with the treatment of the obese patients. 

• What are the expected benefits of this proposal?

Factor	Benefits
Patients	The patients are the prime stakeholders of the hospital who are going to be benefitted the most. The reason for this is that, often it is seen that the condition of the patient is serious and he requires the attention of a specialist like a dietician. Due to the unavailability of the adequate and proper human resource with the hospital the patient is not able to get the attention that he expects from the doctors and the hospital as a whole. Hence, the increased availability of specialised doctors will ensure that the service and the care that the patients are receiving from the hospital are improved and this ultimately results in the increased satisfaction of the patients of the hospital.
Facility	With the introduction of a completely new department in the hospital, the facilities that are being provided by the company will improve significantly. The reason for this is that for the provision of the better quality of service the hospital is ensuring that the requisite number of specialised practitioners and the requisite amount of capital expenditure is done in respect of the acquisition of the capital assets required by the entity for the provision of the service and the care that is expected by the entity.
Clinicians	The benefit in respect of the clinicians would be that the application of the knowledge possessed by them will find better application. The reason for this is that all the patients that are presently treated by the doctors come with various diseases and the medication and treatment regarding the same differs widely. Due to this the clinician’s efficiency reduces as the procedures, steps, methods and the medication that is given to the patients vary very significantly. In case a separate department is opened up that will be addressing the issues or diseases related to obese patients only, the efficiency with which the treatment and the service provided to the patients by the clinicians will improve significantly. As the methods, steps and the medication used for the treatment of the patients become more standardised the skill and the efficiency of the clinicians addressing the same issue will improve significantly. This will also result in the saving of the losses that are caused due to the mistakes and the inefficiency shown by the clinicians.
Other	One of the other benefits that are received by the hospital with the commencement of the proposed separate department for the obese patient is that the reputation of the hospital will significantly improve in the present market. This would result in the increase in the market share of the hospital and increase the number of the patients that are being treated by it every day. With the increase in the number of patients the hospital will be able to recover the increased costs that it has incurred in respect of the acquisition of the capital assets and the adequate human resource required for the provision of the services that is expected by the patients from the hospital. This will help management of the hospital to feel the encouragement of the introducing new departments within the hospital and increase the number of patients and the corresponding revenue earned by it further.

Ministry Budget Allocation and Fund Requirements

Risks 

Risk Issue	Severity	Impact	Mitigation Plan	Notes
Financial risk	The financial risk that is involved with the proposed opening of the new department solely concerned with the treatment of obese patients is very high. The reason for the same is that huge amount will have to be spent by the hospital in respect of ensuring that the requisite service and the care expected by the patients of the hospital are provided to them.	The direct implication will be that the expansion and addition of the new department will add to the financial burden that the hospital will have to bear. The interest and other liabilities will crop up in respect of the amount that will be arranged by the hospital from loans and borrowings. Furthermore the expense of the hospital will increase significantly given the increase in the demand of the consumables of the company.	The hospital will have to ensure that the service that is provided to the customer is very good and is capable to meet their expectation. The reason for this is that only by doing this the company will be able to increase the number of patients that are treated by it. This will ultimately result in the increase in the revenue that is earned by the entity with the increase in the revenue the company will be equipped to pay off the expense of the interest and other expenses on a timely and regular basis.	The company will have to manage the risk associated with the project and the possible revenue that can be generated by it. With the effective management the hospital will be able to garner the best benefits possible for itself.
Patients	The risk that is involved is regarding the adequate number of patients. The risk is moderate.	The number of patients will directly influence the revenue that is earned by the hospital.	The hospital must ensure that the service provided to them is of good quality	For the success fo the proposal the increase in the number of patients is crucial.
Insurances	The company will have to incur huge insurance expenditure in respect of the building acquired on rent and the equipment acquired by it.	The increase in the amount of insurance will be a burden on the amount payable by the hospital by its operations.	The company must pay the insurance regularly and avoid any sort of penalty or fines.	Insurance is very important especially in case of a hospital. The reason being that the cost involved is very high.

• Action (insert as a flow chart  as attachment 1)

For the purpose of ascertaining the members to be nominated for the particular proposal and effort will be made to ensure that the qualification report of all of the doctors and the other available human resource with the company is objectively analysed. Only the doctors and the practitioners specialising in the obesity will be appointed for the proposal. for the implementation of the proposal an effort will be made to at first list out the cost that are to be incurred and then fix the sources from where the requisite funds will be arranged (Kroneman et al., 2016).

For the management of the programme the financial advisor of the hospital and the departmental heads comprised of specialised doctors and practitioners would form a committee that will ensure the success of the proposal and the monitoring of its implementation (Reich et al., 2016).

The additional requirement of the resources can be enlisted as follows:

1. Dietitian:

Specialists of the field will be required for the purpose of ensuring the delivery of quality care and service to the patients of the hospital.

1. Registered nurse:

The requirement of the registered nurse will increase as the medication and the treatment prescribed by the doctor will have to be carried out by them.

1. Sanitising and disinfecting products:

As the new department will have loads of patients and staff the requirement of the sanitising and disinfecting products will also be increase.

1. Electricity, water and waste disposal:

For the purpose of running the new department these are the basic requirements.

For the purpose of monitoring of the costs that are being incurred in respect of the proposal a committee comprised of cost professionals will be hired. It will be their responsibility to ensure that the details regarding the savings, outcomes and any decrease in the costs of the entity is being duly reported to the management of the hospital (James et al., 2018).

The reports will be presented to the management of the hospital on weekly basis. 

Some of the line items that are being utilised for the purpose of preparation of the budgets from a zero base are as follows:

1. Dietitian
2. Registered nurse.
3. Receptionist
4. Oncost
5. Expenditure in respect of sanitising and disinfecting products.
6. Expenditure for the purchase of glucometer strips.
7. The various medical supplies bought
8. Acquisition of disposable gloves.
9. Advertisement expenditure
10. Insurance
11. Legal and professional services

For the purpose of implementation of a contingency plan an effort has been made to prepare a revised break even analysis. In this the expenditure of the proposed department has been reduced to $74609.60 (Kutalek et al., 2015). This reduction was achieved by reducing expense like reducing the rent amount by selecting a cheaper place, choosing a cheaper insurance plan, and cutting the hours spent by the staff. Accumulation of all this reduction resulted in the savings of 10%.

Casemix in Healthcare

For the purpose of calculation of the break-even analysis due consideration was given for considering the various cost requirements and the utilities of the new department. The total overall cost of the obesity care is estimated to be $740747.20 (Grigorakis et al., 2018). The total income that is earned by the proposed department is $741000. Thus for the profit calculation the total income must be subtracted by the total expense that is being incurred by the entity. It is seen that the profit earned by the entity amounted to $252.80. Hence the department has just broke even.

References

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Fan, V. Y., & Savedoff, W. D. (2014). The health financing transition: a conceptual framework and empirical evidence. Social science & medicine, 105, 112-121.

Grigorakis, N., Floros, C., Tsangari, H., & Tsoukatos, E. (2018). Macroeconomic and financing determinants of out of pocket payments in health care: evidence from selected OECD countries. Journal of Policy Modeling.

James, C., Gmeinder, M., Rivadeneira, A. M. R., & Vammalle, C. (2018). Health financing and budgeting practices for health in South Africa. OECD Journal on Budgeting, 17(3), 1-33.

Kastor, A., & Mohanty, S. K. (2018). Disease-specific out-of-pocket and catastrophic health expenditure on hospitalization in India: Do Indian households face distress health financing?. PloS one, 13(5), e0196106.

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Kutalek, R., Wang, S., Fallah, M., Sanford Wesseh, C., & Gilbert, J. (2015). Ebola Interventions.

Kutzin, J., & Sparkes, S. P. (2016). Health systems strengthening, universal health coverage, health security and resilience. Bulletin of the World Health Organization, 94(1), 2.

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Lu, C., Mejía-Guevara, I., Hill, K., Farmer, P., Subramanian, S. V., & Binagwaho, A. (2016). Community-based health financing and child stunting in rural Rwanda. American journal of public health, 106(1), 49-55.

Mulenga, A., & Ataguba, J. E. O. (2017). Assessing income redistributive effect of health financing in Zambia. Social Science & Medicine, 189, 1-10.

Murray, C. J., Lim, S. S., & Dieleman, J. L. (2017). Expanding GBD collaboration—call for experts in health financing and health systems. The Lancet, 389(10064), 18-19.

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Schäferhoff, M., Fewer, S., Kraus, J., Richter, E., Summers, L. H., Sundewall, J., … & Jamison, D. T. (2015). How much donor financing for health is channelled to global versus country-specific aid functions?. The Lancet, 386(10011), 2436-2441.

Wright, J., Bhuwanee, K., Patel, F., Holtz, J., van Bastelaer, T., & Eichler, R. (2017). Financing of universal health coverage and family planning: a multi-regional landscape study and analysis of select West African countries: Guinea.