Cost Benefit Analysis as a Decision Tool in Healthcare

Cost Benefit Analysis as a Decision Tool in Healthcare

Cost Benefit Analysis as a Decision Tool in Healthcare

Physician Extenders

Physician extenders are needed at Shasta Clinic to assist physicians with their work. One of the benefits of hiring physician extenders is that they will allow full-time physicians to handle more patients as well as take care of more urgent medical cases (Reiter & Song, 2018). Additionally, physicians earn less, which means that hiring them will bolster the hospital’s revenue. Apart from these economic and productivity gains, physician extenders spend more time with patients, leading to better care outcomes. Physician extenders describe two types of healthcare providers: physician assistants and nurse practitioners.

Description of the Clinics

According to Reiter & Song (2018), there are three clinics at the Shasta facility: outpatient, internal medicine, and eldercare clinic. The outpatient clinic currently has the highest number of average outpatient visits per clinic at 3,024, indicating that they could be overwhelmed.  However, the clinic is presently sustainable in terms of revenue vis-à-vis physician costs. On the other hand, the internal medicine clinic has an average of 2,760 annual visits per physician. Finally, the eldercare clinic has an average of 1,963 average visits per annum. Despite the relatively low average visits per physician in the eldercare clinic, the patients in the unit tend to need physician extenders’ services more.

Assumptions and Purpose of a CBA

Cost-effective analysis shows the cost and health outcomes of using different interventions. The selected project must bring more benefits than costs. Cost-benefit analysis is pegged on utilitarian and economic logic, such that those options that bring the most benefits to society are selected (Giffin & Giffin, n.d.). Besides, every project is assumed to have distinct advantages and disadvantages.

Using cost-benefit analysis in making these critical clinical decisions is important because it allows managers to delve into different perspectives. For instance, in Shasta clinic’s case, different perspectives are analyzed; replacing a physician with a physician extender, applying a collaborative approach, and adding an independent extender. CBA is also a flexible tool since it allows the managers to focus on different outcomes; process-oriented, patient-oriented, and disease-oriented.

Costs

Fixed cost = $485,000

Variable cost = $0

Total cost = $485,000

Decision

Considering the CBA outcomes for the three physical extender options for the outpatient surgery preoperative and postoperative clinic, using one extender to remove one physician is the most viable decision. The decision will lead to a slight decline in revenue by $257 799. The decision, however, will lead to a reduction in total physician costs by $194,000. Besides, the net physician extender costs will be zero. Overall, income will increase by 32.1%. Apart from the obvious economic gains the replacement brings to the hospital, the new physician will also ensure better healthcare outcomes by spending more time with patients.

Recommendations

More attention is turning to high-value care as hospitals analyze their clinical and financial decisions. Before 2010, most healthcare facilities primarily focused on patient volumes that could cater to costs and improve profits (Penner, 2016). However, these facilities now look at other factors that benefit society beyond financial and volume concerns with cost-benefit analysis. One such consideration is the intangible health outcome among patients (Penner, 2016). Another metric outside the overall patient volume that hospitals consider is the cost per episode of care. Patients are likely to pay less when they see a physician extender than when seeing the physician.

References

Giffin, R. B., & Giffin, M. F. (n.d.). Cost-benefit analysis: A primer for community health workers. Retrieved February 4, 2019, from https://azprc.arizona.edu/sites/default/files/CHWt…

Penner, S. J. (2016). Economics and financial management for nurses and nurse leaders. Springer Publishing Company.

Reiter, K. L., & Song, P. H. (2018). Gapenski’s Fundamentals of Healthcare Finance. Health             Administration Press.

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Using the case study for Shasta Outpatient Clinics, you will create a cost-benefit analysis (CBA). The Shasta Clinic leadership is trying to determine whether a staffing enhancement of a physician extender is needed in all three clinics or only one or two. By applying the concepts of CBA, you will make a recommendation and present it in a business plan that identifies your recommendation for the physician extender.

You will assess fixed costs (FC), variable costs (VC), and total costs (TC). The Assignment will give you experience creating a business case that you can use as a healthcare manager to state your case with sound financial principles.