Running head: SIMULATION REVIEW 1 1

Simulation Review
Beverly Landrum
HCS/405
September 22, 2014
Terri Andrews
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Phase I: Simulation Review

This paper will provide information pertaining how a hospital determines
revenue and expenditures through a simulation program. The information
provided was based on the Elijah Heart Center (EHC) with results based on
careful analysis decisions regarding staffing, equipment, and capital
expansion as well as information I my provide.
Capital Shortage
The simulation activity provided two types of cost-cutting options.
Minimizing the amount of agency staff the hospital uses were the first
choice selected. The decisions made was based on the fact that contract
personal receive more money than hired staff. The reason for the higher
pay is because typically agency staff do not receive benefits. Agency
personnel are hired with the understanding that they can be laid off at any
time, or their position may be filled will a new hired personal. The hospital
should rid agency contractors and maintain their staff whereas contract
workers are not as skilled as those already working and are consistently
providing direct care.
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The cost-cutting goal options was to reach a cost savings of $750,000. The
option selected exceeded the total reaching $811,249 for the first quarter.
This option was not a cost-saving for the organization. Had the Medicare
reimbursement been considered, the option chosen may have been
different. Had options selection been correct, the organization would have
produced enough revenue in the remaining quarters due to the loan paid
off much sooner.

Phase II: Funding Options for Equipment Acquisition
While the options selected were not the best cost saving selection for the
organization, there was one good choice made. A high-speed scanner (H-
SCTS) selected option was the refurbish loan. This was selected because
of the ten-year useful life years with a new H-SCTS, and with the
refurbished loan there would be five years still remaining. This equipment is
costly but is at a medium technology level therefore the loan could be paid
for off before the H-SCTS needed to be replaced. The organization can
save anywhere between 30-50 percent of a new H-SCTS, plus less money
will be spent on training, which is a cost effective measure.
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The X-Ray machine was purchased under a new loan, because of the
useful life years are so high, while the technology degree in new
technology change level is low. Furthermore, the selection option for
purchase fits within a reasonable budget area for the investment.
The Ultrasound System was purchase using the operating lease. This
option was selected because the Ultrasound System has a short useful life
year as well as a very expense piece of equipment. Even through this
equipment's level of technology is high the technology for the Ultrasound
System is expected the change every few years, and there are only a few
years of useful life expectancy with the operating lease. Because of the
possible need to replace the equipment often, the organization needs to be
careful of large investments of money. With a lease option on the short-
lived equipment an organization should consider to replace it in time,
knowing it always will be within the scale of new technology limitations.
Even through the options chosen may not have been the best for the
equipment acquisition strategy, there were some good options selected.
The H-SCTS was purchased using the refurbished loan, which was the
best selection for the organization. This decision was a good selection
because of the useful life expectancy of tens years giving the organization
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the remaining five years as well as the necessary upgrades. Reviewing the
balance sheet displayed the X-Ray machine will provide the amount of
useful life years, but was not the best option for the organization. The X-
Ray equipment should have been purchased under a capital lease. The
reasoning may be the X-Ray equipment has a higher present of value and
payments compared to the purchase option.
Under the simulation, the Ultrasound system was purchased using the
operating lease, and appears to be the best for the organization. The
benefits for the organization were lower upfront payment and a lower
monthly payment installments. There was an upgrade option under the
operating lease providing a technology benefit to the organization. This
beneficial upgrade will maintain a degree of technology needed to stay the
leader in providing new technology to their patient's.

Funding Options for Capital Expansion

The funding selection chosen for funding of a new expansion was correct.
After doing a comparison of the three options, there were fewer years of
the loans maturity. Even though the option of interest was higher than the
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others, the maturity rate was lower. There was also a flexible refinancing
and repayment option which had no set period for using the funds.

Conclusion

The purpose of cutting costs and increasing revenue is important and
should be done with time and review of staffing and patient needs. When
considering staffing cuts, the organization should review the staff to patient
needs to ensure the patients are receiving the best quality of care as well
as maintaining adequate trained staff. Turnovers in nursing are an
organizations greatest challenge, and when the organization mentions
budget cuts usually are reflected in staffing. The organization should start
with agency cuts to keep the moral high while retaining their experienced
staff.
Technology and the constant changes that are unstoppable, Medicare
reimbursements, and the useful years when selecting equipment can be a
budget buster to the organization. To be sure the organization maintains
these options, planning and revisions are necessary for the success as well
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as ensuring the best decisions are made so the organization can make
money and provide the best equipment they money can buy.
If there was one element, I learned from the simulation that would be how
important selecting the right loan and then paying that loan off and on time.
Also making sure there are monies in the ready for these loan payments.
If there was another opportunity to retake the stimulation over again, a
better understanding of the analysis options as well as understanding this
information will need to be performed. Even through the selections of the
budget cuts and cost of equipment was in earnest, a better understanding
of the funding for expansion funding will defiantly be needed.
The simulation program was a learning experience by providing an
understanding of just how important budgeting and planning are to the
organization. In my future job advancement within the company, I work for,
selecting equipment within the budget and then analyzing the selected
offers for purchase and the differences is going benefit the company. Then
there is sitting at the budget and planning round table with the owners and
creating all budget options for the many companies my employers' own.


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Reference
Elijah Health Center Simulation. (n.d.). .Retrieved September 21, 2014,
from http://ecampus.phoenix.edu.