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Final Project Scenarios
Bethany Place is a 40-bed independent long-term care facility in the Pacific Northwest. They have existed for over 50 years having come from a faith-based background. With good investments and sound financial management, Bethany place has grown and is executing a capital strategic plan. They are expanding their 40-bed facility to purchase a nearby resident facility and expand into rehabilitative care, adding another 30 beds. They are approximately six months away from receiving the appropriate certificates and regulatory approvals as a rehabilitative care facility for both chronic care patients and recovery of acute head injury.
The rehabilitation facility and renovations to the independent long-term care facility are scheduled to begin in the next six months and be executed over an 18-month period. Currently Bethany place has no electronic medical record. There is a third-party service that is used to scan and send automated claims to Medicare and private insurers. A local desktop IT services company was recently contracted to provide managed services to Bethany place and provides the website email and local desktop applications for staff. As part of this initiative a robust new IT network design was implemented for both Bethany place and the anticipated rehabilitation facility.
The lack of an electronic health record at Bethany place has created quality issues and risk management issues particularly related to medication reconciliation with patient transfers. The board and senior leadership have asked the Bethany place management to evaluate information technology options in the form of an electronic medical record, and patient management application(s) for both Bethany place and the rehabilitation extension facility as part of executing the strategic plan.
Critical Access Hospital Electronic Health Record
Bedford Hospital is a 25-bed hospital in rural Pennsylvania. They have recently completed the process of being designated by CMS (Centers for Medicare and Medicaid) a CAH (critical access hospital). Prior to this designation they were part of a large academic health center but have since divested from that health center. As part of that agreement their current electronic health record contract, which is with Cerner Corporation as part of that medical center’s enterprise agreement, will be expiring in 24 months. Currently all aspects of Cerner’s inpatient product are implemented including documentation, orders, decision support and electronic meds administration. Cerner’s registration admissions discharge scheduling and patient identification products are also part of this agreement as are the laboratory radiology and pharmacy systems.
While Bedford Hospital was part of the academic center the Cerner product suite was financially supported as part of the overall corporate structure. As part of the divestiture agreement, the academic center has agreed to support Bedford’s Cerner systems in total for a 24-month period, absorbing the Cerner software and enterprise hardware costs in that timeframe. Bedford Hospital is taking financial responsibility for three IT staff and day-to-day IT costs such as networks devices email and Internet costs. The CEO and CFO of Bedford Hospital have pulled together an interdisciplinary team to examine the technology options for Bedford Hospital after this 24-month period.
Telemedicine for Rural-Based Health Facility
Canon hospital is a 189-bed hospital in rural Texas. The hospital is approximately 100 miles and 150 miles away from two major medical centers of excellence in Texas. As the CIO of Canon Hospital, you are aware that there are capabilities to do telemedicine programs with tertiary care centers. Two of the senior medical staff in the critical care and neurology departments at Canon Hospital have approached you to investigate telemedicine capabilities related to the management of ICU patients and the emergency management of patients presenting with stroke symptoms.
These medical leaders would like to ideally preserve the appropriate services for ICU patients and rehabilitative services for stroke patients in the canon hospital community. They recognize that portions of these treatment plans must include certified critical care and stroke certified providers from a tertiary care center. They have ask you to examine both the business and technical aspects of establishing telemedicine programs with one or two of the tertiary care centers who have certified specialists in critical care and stroke certified physicians who can administer TPA and other urgent stroke treatments.
Currently Canon hospital is transferring over half of the ICU patients and virtually all of the patients who are presenting with stroke symptoms to these to either of these tertiary centers. There is little to no follow up on those patients with regard to treatment plans or services. In many cases, patients and caregivers are relocated for step down and rehabilitative care to facilities outside of the Canon hospital area. This creates both high level of dissatisfaction for patients and families and revenue loss for canon hospital and its associated rehabilitation facilities.
Pro Forma Explanation Material
There are two types of costs to consider planning the HIT program pro forma. These two types of costs are capital costs and operating costs. While the accounting definition of these costs varies depending upon the organization, the general definition of these costs are capital costs (being one-time expenses) and operational costs (being ongoing or reoccurring cost of the program).
The HIT Program Pro Forma Template provides the opportunity to estimate both capital and operating costs for an HIT program. The following information is a description of each line item on the HIT Program Pro Forma Template. Keep in mind that as you are working through these costs on a year-by-year basis that you are working diligently with teams of stakeholders to best estimates these costs. Therefore, your cost estimates will be generally more accurate for the first fiscal year and second fiscal year of the program and be more vague as the fiscal years of the project go out into subsequent years. For this reason, the HIT program pro forma is updated often, based on new information and changes in the program environment.
Capital costs generally consist of the following categories: consultative services, implementation salaries, database software, hardware costs, network costs, and other licensed software costs. The following is a description of the meaning of each of these line item categories on the HIT Program Pro Forma Template. Keep in mind that if your organization organizes capital costs in a different way or asks you to capitalize costs under your program that fall outside of these categories you can add additional rows to your program pro forma file.
Consulting services vendor or third-party: Often the help of external consultants from either the HIT vendor or another third-party are used in order to implement systems.
Often, these costs are significant at the early stages of a project and are capitalized by an organization. It is possible, as the program progresses, that the chief financial officer of the organization may ask that these costs be moved into operating expenses. A solid understanding of the scope of the project and the project plan enables organizations to have an idea of how to estimate consulting costs. Most accounting rules do not allow organizations to capitalize travel associated with consultants. Thus, these costs will typically only involve the hourly rate paid to the consulting company for the consultants.
Implementation salaries: Often, chief financial officers of an organization will allow or prefer that internal staff salaries that are associated with implementing the program to be capitalized with the program. This is an internal decision; it is permitted by General Accounting Principles. If the organization prefers that this be the case, planners work with leaders in the organization to estimate a blended rate for different kinds of staff who are working on the implementation and estimate their hours to come up with the implementation salaries cost estimate.
Database software: Often organizations purchase software from vendors and have to pay separate software licenses for the database product that runs the vendor applications. For example, if a site purchases an electronic health record from Cerner Corporation they may need to buy associated Oracle licenses for its use. These details need to be clarified with the vendor and HIT staff. If this is the case, this line item is included to record the usually significant licensing costs associated with licensing a database.
If this database cost is estimated at the “per user” rate then the program planner must provide an estimate of the number of users who will be on the system every year and multiply by that per user cost to get this line item estimate.
Hardware costs, servers, and devices: There are many types of devices required to implement different kinds of solutions in the healthcare environment. If any of these devices are purchased by the organization as a depreciable asset then these costs should be noted as capital costs. This may include, but would not be limited to, desktops, laptops, printers, scanners, thumbprint login devices, and other peripherals.
Network costs: Senior network engineering staff work with project and program planners to determine what kind of network requirements are necessary to run planned solutions in the healthcare environment. Network assessment should be conducted to ensure that the expected service that is assumed as part of the program is aligned with current network capabilities. Additional network hardware and or bandwidth may need to be purchased in order to execute the program. These costs should be estimated as closely as possible for the entire program and updated as information progresses.
Licensed software-vendor and third-party software: Often HIT program solutions in healthcare involve significant capital purchases from vendor suppliers. Depending upon the terms of the contract with these vendors these costs may be loaded into early years of the project or they may be paid out in increments over the life of the program and associated with milestones. The planner who is executing the pro forma must include the cost of all licensed software including any kinds of software products that are needed to run other software products or desktops and servers.
Operational costs generally consist of the following categories: Software maintenance and support, hardware maintenance and support, physician salary support, postproduction support salaries, travel training, and other. The following is a description of each of these operational cost items. Keep in mind that these operational costs may reside in different organizational budget throughout the organization. Having said that, often senior leaders want to see all of the capital and operational costs associated with an HIT program in one place in order to manage these significant investments.
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Software maintenance support: The software that is being licensed in the capital area will need to be supported on an ongoing basis. Often those support costs “kick in” after a license is paid and the software has been installed for a year. Solutions vary in how they are priced and sold to organizations. It is important for the organizational planner to understand when those software maintenance and support fees “kick in” in the lifecycle of a program.
Hardware maintenance and support: Similar to software, when hardware is purchased whether it be servers running in a data center or desktop computers or printers, there are often support fees associated with keeping those hardware products up and running and supported on an ongoing basis. Sometimes organizations don’t even purchase hardware. They may “lease” hardware products such as desktops. If this were the case, then the estimated leasing fees for those desktops per year would be inserted in this part of the program pro forma.
Physician salary support: Sometimes, but not always, organizations make a financial commitment to cover internal salary costs of physicians when they are working on significant program efforts. Organizations do this because they want to have the ability to pull those physicians out of clinical service for a period of time and have them focus on an HIT program. If this is the case, this is the place where those salary estimates would be inserted. Keep in mind that any time you are estimating salaries in a pro forma, whether it be capital or operating, you most likely will work with leadership to determine a “blended” salary rate for an average personnel cost and use that rate in your pro forma. Also, keep in mind that a typical salary year is budgeted at 2,080 hours per year per full-time individual.
Support and postproduction salaries: Similarly, this line item is used to record any and all other salaries needed to support the program on an ongoing basis. This line item requires significant work in that one has to understand all of the different individuals, skill sets, and compensation levels of those individuals that go into supporting the technology that is being implemented.
Sometimes individual efforts are budgeted at a full-time effort for an entire year; other times portions of people’s time is budgeted on these programs from a support perspective.
Travel training: Accounting rules prevent two items—travel and training costs—from being recorded as capital expenses. Salaries associated with training people on new HIT systems and any travel associated with training or implementation staffs must be recorded as operating costs. Training may include training of IT staff as well as training of end-users.
Other: Many other types of costs may come into play when planning a program. For example, there may be outside legal costs incurred, or there may be marketing costs involved if a program includes patient facing applications that promo total.
require a marketing campaign. Any other capital or operating costs should be included in the pro forma and aggregated for each year to understand a total
Cost Savings and Revenue Enhancement
Note: For this discussion you are required to complete your initial post before you will be able to view and respond to your colleague’s postings. Begin by clicking on the “Post to Discussion Question” link and then select “Create Thread” to complete your initial post. Remember, once you click submit, you cannot delete or edit your own posts, and cannot post anonymously. Please check your post carefully before clicking Submit!
This Discussion offers you the opportunity to apply return on investment (ROI) concepts in a real case scenario. As is often the case, technology offerings involve costs that must be justified by virtue of expense reductions for revenue increases in the organization. There are creative opportunities in the Discussion for leaders to facilitate the development of the revenues into the organization and operational changes that reduce expenses.
Scenario: Dynamic Health System is a 3-hospital, 500-bed system in the Midwest United States. This system employs 100 physicians, both primary care and specialists, in 12 physician practices. Dynamic also runs a center of excellence in orthopedic care for the large geriatric population in the area, including an outpatient rehabilitation facility that is currently profitable. Dynamic offers a full spectrum of medical and surgical services to their population with an emphasis on programs of excellence in orthopedic surgery, diabetes, and women’s care.
Dynamic’s typical patient mix is over 45% Medicare with another 35% private pay patients covered by three large insurance companies. Their Medicaid population is approximately 12%, with the reminder of patients self-pay.
Due to market forces, the three private payers have begun to implement a program of bundled payments for their members in the following areas: hip replacements, knee replacements, and lower back surgeries. In these models, Dynamic hospitals and employed physicians will be paid a fixed amount for an entire episode of care from pre- surgery evaluation, through surgery and post-surgery, physical therapy, and rehabilitation. Medicare is likewise proposing a pilot study for a population of hip replacement beneficiaries to assess the outcomes of care as opposed to procedure costs as a result of Dynamic’s petition to receive increased payments for beneficiaries due to age demographics and for being the only orthopedic geriatric center in 200 miles.
As a result of these factors and the aging HIT infrastructure, the Chief Medical Officer (CMO), Chief Executive Officer (CEO), and Chief Information Officer (CIO) of Dynamic are proposing the purchase of a monolithic Electronic Health Record (EMR) solution that will provide complete online documentation, orders, pharmacy, labs, and patient portal for all hospitals and employed physician offices. Because the (1) physician offices are currently using Epic Corporation’s back office billing system with an outstanding record of accurate coding and short “days in Accounts Receivable” and (2) Epic’s EMR has a high ranking in industry HIT assessments, the executive team is proposing the purchase of Epic’s clinical EMR (documentation, ancillaries, orders, and patient portal).
The CFO is supportive but skeptical, as the Epic bid is approximately $1.5 M to implement the clinical software with a continued $300K per year in software maintenance and support. Current clinical technologies information systems are fragmented, disjointed, and don’t meet HITECH Meaningful Use requirements, and it will cost Dynamic about $200K per year to maintain the software and servers needed to run the system.
The local competitive landscape may be changing. Dynamic’s CFO is hearing rumors that an established academic system which is centered 300 miles away is possibly considering buying three local stand-alone surgery centers and hiring orthopedic surgeons. This academic center has published best practices in outcomes for surgery care in a recent CMS Medicare study that implies that they are delivering high quality and cost effective orthopedic care.
• Carefully read the scenario and the Pro Forma Explanation Material in this week’s Learning Resources.
• Develop a return on investment (ROI) strategy for the acquisition of a strategic HIT solution in which you consider 2–3 cost saving and/or revenue generating opportunities that you feel apply to Dynamic’s scenario.
Note: This Discussion will be graded using this rubric: Discussion Rubric (Word document)
Post by Day 3
A strategy for how Dynamic can pay for the newly proposed Epic system. Explain how the organization will save in operational expense in order to handle the extra 100K per year needed to maintain this solution. Provide a recommendation for how the hospital can use HIT solutions to generate new revenue. Also consider that if Dynamic issues a bond to pay for the $1.5 million implementation costs, likely the local rating agencies will want to see a documented 5–10% additional reduction in “hard line” operating expenses to assure Dynamic’s ability to pay off the debt. Given that over 60% of the operating budget is staff and physician salaries, explain what kinds of savings the best in class EHR offer will assure investors.
Respond by Day 5 and continue the Discussion through Day 7
Examine your colleagues’ posts regarding ideas for operating budget reductions and/or new revenues proposed as part of implementing the Epic solution. If the CFO’s rumors are true and the academic center opens competitive surgery alternatives in the area, how would you recommend your colleague adjust their cost savings and revenue ideas?
Week 3 Assignment CONT WITH WEEK 4 ASSGN
Developing an Innovative IT Strategy: Data Driven Approaches to Challenges in the Health Care Continuum Hospital Systems, Ancillary Services, and Physician Practices are often the focus of HIT initiatives. While these settings are key areas for HIT advancement and data acquisition, there are places within the continuum of care that often lack automation or comprehensive data management strategies, creating gaps in the longitudinal health record and both an individual and population level.
The Final Project allows you to develop a comprehensive IT strategy for one of these settings of care. This week you choose the Scenario for your Final Project from the following list. Descriptions of these settings can be found in your Learning Resources. Beginning this week, you will be building on the progressive HIT topics that culminate in your Final Project (due in Week 11). This week’s Assignment asks you to reflect on your setting of choice as you develop a Charter for the acquisition of a strategic HIT solution.
To prepare for this Assignment
• Review the Final Project Scenarios in your Learning Resources and select a setting of care from one of these scenarios:
o Long-Term Care
o Critical Access Hospital
o Telemedicine for Rural-Based Health Facility
Research current and specific clinical and financial management problems in these settings of care and evaluate how technology might be justified to address the most pressing challenges.
Write a 3- to 4-page (excluding title and reference pages) APA style paper, addressing the following elements for the scenario that you choose. This will also be the scenario used to complete your Final Project. For this Assignment, address the elements of a project Charter used to plan the acquisition of an HIT solution for the setting of choice. The Charter should include
• Problem statement. A specific statement of the problems that you intend to address in this scenario using technology solutions.
• Scope of the HIT solution to be acquired. This includes both the technical elements of the scope and the business and clinical functional elements of the scope.
• Stakeholders analysis including the needs of both internal and external stakeholders. This analysis includes a summary of the business and clinical system functions that the technology should address for each of the executive stakeholders.
• Risk Analysis. A specific statement of the financial, technical, legal, ethical, and operational risks involved in introducing HIT into this setting and the feasible mitigation strategies to address these risks.
You will continue the Charter in Week 4 and submit the full Charter on Day 7 of Week 4.
Note: The paper should be 3–4 pages, not including the title and reference pages. Your Assignment must be written in standard edited English. Be sure to support your work with 4–6 specific citations from this week’s Learning Resources and additional scholarly sources as appropriate. Refer to the Essential Guide to APA Style for Walden Students to ensure that your in-text citations and reference list are correct. Your Assignment should show effective application of triangulation of content and resources to show your conclusion and recommendations. See the Week 4 Assignment Rubric for additional requirements related to research and scholarly writing.
Please proceed to Week 4.
Week 4 Assignment
Return on Investment (ROI) Analysis in HIT Planning
Determining the (TCO) or total cost of ownership for a strategic information system investment is a critical part of the leaders’ role in using technology in a transforming way. The Return on Investment Analysis depends upon reliable estimates of both the capital outlay and ongoing operational costs associated with the initiative over a period of time. This Assignment focuses on outlining both the capital and ongoing operational costs associated with a typical technology investment. You will outline the costs and, as importantly, the assumptions that you used in deriving these financial estimates.
Review the Pro Forma Explanation Material and HIT Program Pro Forma Template in the Learning Resources.
Write a 2-page APA style paper, addressing the following elements for the scenario that you chose in Week 3. This will also be the scenario used to complete your Final Project. For this Assignment, address the financial element of the project Charter used to plan the acquisition of an HIT solution for the setting of choice. The financial analysis has two parts
• Using the HIT Pro Forma Template provided in your Learning resources, complete the anticipated capital and operating costs of the HIT solution that you are proposing in the Week 3 Assignment.
• Justify the assumptions that you used in your proforma.
Submit the entire project Charter inclusive of Week 3’s materials and Week 4’s HIT Pro Forma Template and assumptions paper.
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