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Cost-Benefit Analysis (CBA)

Cost-Benefit Analysis (CBA)

Prevention of Medication Errors and Related Costs in Parkwest Medical Center

Medication errors (MEs) are serious preventable failures in the medication process that threaten the safety of patients (Tariq et al., 2018). Medication errors have been identified to be high in the nursing profession due to the practice orientation of nursing (Alqenae et al., 2020). Nurses are central to in-patient medication management (Stolic et al., 2022). Most medication errors in care facilities have been linked to student nurses due to limited skills and experience, lack of supervision, and underdeveloped clinical knowledge (Stolic et al., 2022). Research has noted that 38-48% of student nurses in clinical placement are more likely to be involved in medication errors (Dehvan et al., 2021). Elliott et al. (2021) noted that 34% of clinically significant medication errors had the potential to result in ADEs and significant economic outcomes.

Medication errors have been a problem affecting the operations of Parkwest Medical Center. An analysis of the reported errors in Parkwest Medical Center linked the MEs to student nurses who carried out medication reconciliation for patients discharged from the facility. The student nurses were mostly unsupervised in all ME cases. Parkwest Medical Center has ensured patient safety and the delivery of the highest quality of care by using monitoring technology, use of decision support systems such as EHR systems, and ensuring all medical procedures align with regulatory requirements. The hospital has opportunities to improve the efficiency of the workforce, reduce and prevent the occurrence of MEs, and ensure patient safety within and beyond the hospital’s care. The hospital intends to implement a staff training program and recruit additional staff to the post-charge department to reduce and prevent medication errors. It also intends to add an insurance policy cover for the department to finance medication-related risks.

Focus and Stakeholders for a Cost-Benefit Analysis

A CBA is a strategic planning tool that compares the benefits and costs of a decision (Bush, 2020). It includes quantifying and comparing costs and benefits associated with a decision from a business perspective. A stakeholder-focused CBA identifies the role of the main stakeholders and the environment in the success of a project. Based on research, the benefit of implemented programs is a concern for stakeholders (Hong et al., 2018). Although the related costs and benefits determine the feasibility and sustainability of the programs, stakeholders are directly tied to the costs and the benefits of implementing the programs. The management team needs to understand the attitudes of the stakeholders towards the programs and their willingness to support the changes. Understanding stakeholder needs in project design has been identified as one way of achieving positive stakeholder engagement and commitment (Boaz et al., 2018). It also improves the speed of program implementation. The student nurses, the healthcare staff working in the post-discharge department, and the patients under the post-discharge follow-up program will be focused on as stakeholders of interest during a CBA. This will help determine the weight of the costs and benefits related to each stakeholder.

CBA Evaluation for Medication Errors Prevention Programs

Before adopting the recommendations, a cost-benefit analysis (CBA) (see Appendix A) was conducted to evaluate the value of the recommendations. The CBA shows the total costs related to adopting the recommendations over a five-year period. The results of the CBA are presented below.

The student nurse training in a five-year plan will cost the organization a total of $7,450.00, while the training of the clinical staff throughout the same period will cost a total of $5,100.00. The cost of employing two additional nursing specialists to improve the efficiency of the post-discharge department and help reduce and prevent MEs in the five-year plan will cost the organization a total of $1,051,596.00. Adopting an insurance policy for the MEs that may occur in the organization with a focus on the post-discharge department will cost the organization $1,000,000.00 a year with a total of $5,000,000.00 in five years.

CBA Recommendations to Proceed with Adoption

The CBA recommendations noted that it would cost the organization a total of $6,064,146.00 in the five-year implementation plan. Based on the results of the CBA, the organizational benefits related to the implementation of the recommendations resulted in a total of $1,393,794.70 of benefits due to reduction of costs related to medication errors and $11,049,350.50 gains from increased net revenue in five years. By implementing the ME reduction and prevention programs and insuring against ME risks, Parkwest Medical Centre will have $6,069,759.04 in net benefits. This means that the implementation of the recommendations is financially feasible.

Value Proposition for Change Management in Healthcare

Parkwest Medical Center is focused on serving the community by improving the quality of life through better quality and safe health services. Implementing the recommendations will help reduce and prevent MEs, improving the safety of the medication and patient care. The recommendations also improve the organization’s financial performance, increasing it. In addition, integrating CBA throughout the entire organization will assist the management in identifying various risks and costs, service improvement options, testing the benefits of the options, and implementing them. Implementing such recommendations throughout Parkwest will positively impact the hospital’s strategies and operating capacity. The improvement of the operating strategy and capacity efficiency significantly impacts Parkwest’s overall social and financial performance in the long term.

Relationship to Vision, Mission, and Strategy

The mission and vision of Parkwest Medical Center are to improve the quality of life for the community through quality healthcare and to become a model of excellence. The hospital is guided by the values of integrity, quality, service, caring, developing people, and using resources wisely. The occurrence of MEs has financial and ethical implications. Medication errors mean Parkwest is not meeting its values and can, consequently, not achieve its mission and vision. Therefore, implementing the recommendations will reduce and prevent medication errors and enable the organization to operate as per its values and achieve its mission and vision.

Relevant Internal and External Benchmarks

Benchmarking involves comparing Parkwest’s results against those of others in the healthcare industry across Tennessee. This will enable Parkwest to get a clear picture of the strengths and weaknesses of its internal processes and performance. Benchmarking can be carried out internally or externally. The internal benchmarking will assess the effectiveness of the training program against the medication error rates per nurse in the post-discharge program and the level of patient satisfaction with services during discharge. Parkwest Medical will competitively benchmark its performance against other competitors by focusing on the percentage of the market share it commands and any related changes, the efficiency of its services based on customer reviews, and ratings against other players in Knoxville and the entire Tennessee.


Medication errors can occur at any point in the medication process. As nurses are critical components in patient care, most errors are linked to their practice. The occurrence of MEs, regardless of who causes them has negative ethical and financial impacts on the organization. Without resolving MEs, the organization risks reputational damage and serious financial losses related to compensations, litigations, and loss of business. Therefore, developing and implementing various options to prevent and reduce MEs can benefit the organization. A CBA can help determine the benefits of the recommendations to the organization’s mission, vision, strategies, and operating capacity. Conclusively, the recommendations from the risk management analysis have proved beneficial to the organization based on the results of a five-year CBA of the recommendations.

Appendix A

Costs Current Year (CY) CY +1 CY +2 CY +3 CY +4 CY +5 Total Costs
Student Nurse Training  $            300.00  $                2,500.00  $              1,500.00  $          1,250.00  $         1,000.00  $           900.00  $              7,450.00
Clinical staff training  $            500.00  $                1,500.00  $                 700.00  $              700.00  $         1,000.00  $           700.00  $              5,100.00
Additional Staffing  $       65,000.00  $             195,000.00  $           196,505.00  $        197,897.00  $     198,345.00  $     198,849.00  $       1,051,596.00
Insurance Policy  $          1,000,000.00  $        1,000,000.00  $     1,000,000.00  $  1,000,000.00  $  1,000,000.00  $       5,000,000.00
Total Costs (Future Value)  $       65,800.00  $          1,199,000.00  $        1,198,705.00  $     1,199,847.00  $  1,200,345.00  $  1,200,449.00  $       6,064,146.00
Total Costs (Present Value)  $       65,800.00  $          1,175,490.20  $        1,152,157.82  $     1,130,642.63  $  1,108,933.24  $  1,087,283.64  $       5,720,307.53
blank row
Benefits Current Year (CY) CY +1 CY +2 CY +3 CY +4 CY +5 Total Benefits
Reduced medication errors  $       89,776.78  $             237,984.37  $           276,895.90  $        258,784.00  $     262,897.65  $     267,456.00  $       1,393,794.70
Increase in net revenue  $   1,234,892.61  $          1,767,362.89  $        1,989,446.21  $     1,847,639.32  $  2,089,374.02  $  2,120,635.45  $      11,049,350.50
Total Benefits (Future Value)  $   1,324,669.39  $          2,005,347.26  $        2,266,342.11  $     2,106,423.32  $  2,352,271.67  $  2,388,091.45
Total Benefits (Present Value)  $   1,324,669.39  $          1,966,026.73  $        2,178,337.28  $     1,984,929.74  $  2,173,135.42  $  2,162,968.00  $      11,790,066.57
blank row
Present Value Discount Rate 2%
PV Denominator 1.00 1.02 1.04 1.06 1.08 1.10
Net Benefit  $       6,069,759.04


Alqenae, F. A., Steinke, D., & Keers, R. N. (2020). Prevalence and Nature of Medication Errors and Medication-Related Harm Following Discharge from Hospital to Community Settings: A Systematic Review. Drug Safety 2020 43:6, 43(6), 517–537.

Boaz, A., Hanney, S., Borst, R., O’Shea, A., & Kok, M. (2018). How to engage stakeholders in research: Design principles to support improvement. Health Research Policy and Systems, 16(1), 1–9.

Bush, T. (2020, April 13). Cost Benefit Analysis: Definition and How to Do in 4 Steps.

Dehvan, F., Dehkordi, A., Gheshlagh, R., & Kurdi, A. (2021). The Prevalence of Medication Errors Among Nursing Students: A Systematic and Meta-analysis Study. International Journal of Preventive Medicine, 12(1), 21.

Elliott, R. A., Camacho, E., Jankovic, D., Sculpher, M. J., & Faria, R. (2021). Economic analysis of the prevalence and clinical and economic burden of medication error in England. BMJ Quality & Safety, 30(2), 96–105.

Hong, J., Shen, G. Q., Li, Z., Zhang, B., & Zhang, W. (2018). Barriers to promoting prefabricated construction in China: A cost-benefit analysis. Journal of Cleaner Production, 172, 649–660.

Stolic, S., Ng, L., Southern, J., & Sheridan, G. (2022). Medication errors by nursing students on clinical practice: An integrative review. Nurse Education Today, 112, 105325.

Tariq, R. A., Vashisht, R., Sinha, A., & Scherbak, Y. (2018). Medication Dispensing Errors And Prevention. StatPearls.


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Create a 5-6 page cost benefit analysis that supports a risk financing recommendation for a selected organization.

Note: The assessments in this course build upon each other, so you are strongly encouraged to complete them in a sequence.

Cost-Benefit Analysis (CBA)

Cost-Benefit Analysis (CBA)

In your current and future role as a health care leader, you can expect to conduct a cost-benefit analysis (CBA) to determine whether the positive benefits of a proposed recommendation outweigh the negative costs.

Plowman relates that “a cost benefit analysis is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether the proposed implementation is worthwhile for a company or project team.” Plowman also identified the three parts of a CBA to be the following:

Identification of potential costs.
Recording of all anticipated benefits.
Examination of the differences to determine if positive benefits outweigh negative costs.
A pre-formatted Excel spreadsheet that can be used as a template for CBAs is a good tool to have in your personal toolbox. Inputting data is simply the first step. As you fill out templates, always consider the numbers within the context of an organizational mission, strategic direction, patient safety, risk-management issues, regulatory requirements, patient and stakeholder satisfaction, and also the dynamics within the healthcare industry.

As you prepare to complete this assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as a part of your assessment.

What steps do you need to take in order to align a CBA with an organization’s mission and strategy?
If you were to offer three alternative recommendations after a CBA, what types of elements would you consider to differentiate them from one another?
How would you substantiate a recommendation for reducing financial risks in a healthcare setting when the quality of care is involved?
What are the three parts of a CBA?
Plowman, N. (2014). Writing a cost-benefit analysis.

Overview and Preparation
Note: This assessment should be completed third.

The following resources are required to complete this assessment.

Cost-Benefit Analysis Template [XLSX].
Suppose an issue has emerged in your organization that presents significant risks to the stakeholders involved. Your supervisor has asked you to conduct a CBA, make a recommendation, and present it to the board of directors. You are expected to consider the numbers within the context of the organizational mission, strategic direction, patient safety, risk-management issues, regulatory requirements, patient and stakeholder satisfaction, and the dynamics within the health care industry.

Select a relevant issue within your workplace, or one from the resources provided for this assessment, for which a CBA may be conducted. The CBA should include one of the following course-related topics:

Patient safety.
Risk management.
Regulatory standards.
Patient and stakeholder satisfaction.
Step One: Identify Costs
Apply the process from Writing a Cost-Benefit Analysis article, linked in the Cost-Benefit Analysis Approach section of this assessment, to identify costs:

Make a list of all monetary costs that will be incurred upon implementation and throughout the life of the project. These include start-up fees, licenses, production materials, payroll expenses, user acceptance processes, training, and travel expenses, among others.
Make a list of all non-monetary costs that are likely to be absorbed. These include time, low production of other tasks, imperfect processes, potential risks, market saturation or penetration uncertainties, and influences on one’s reputation.
Assign monetary values to the costs identified in steps one and two. To ensure equality across time, monetary values are stated in present value terms. If realistic cost values cannot be readily evaluated, consult with market trends and industry surveys for comparable implementation costs in similar businesses.
Add all anticipated costs together to get a total cost value (Plowman, 2014).
Step Two: Identify Benefits
Continuing with the CBA, proceed with the identification and quantification of benefits, per Writing a Cost-Benefit Analysis article.

Make a list of all monetary benefits that will be experienced upon implementation and thereafter. These benefits include direct profits from products or services, increased contributions from investors, decreased production costs due to improved and standardized processes, and increased production capabilities, among others.
Make a list of all non-monetary benefits that one is likely to experience. These include decreased production times, increased reliability and durability, greater customer base, greater market saturation, greater customer satisfaction, and improved company or project reputation, among others.
Assign monetary values to the benefits identified in steps one and two. Be sure to state these monetary values in present value terms as well.
Add all anticipated benefits together to get a total benefits value (Plowman, 2014).
Cost-Benefit Analysis
Enter the cost and benefit data you developed for the CBA in your preparation steps into the Cost-Benefit Analysis Template.

Then, write an analysis in which you do the following:

Describe the organizational, program, or departmental issue for which you have created the CBA.
Evaluate the cost versus benefit according to the general guidelines outlined by Plowman’s 2014 article, which you read in the preparation for this assessment.
Make a recommendation as to whether the benefits are sufficient to outweigh the costs of the proceeding.
Describe the systems-based context for your recommendations, integrating the CBA within the organization as a whole.
Describe how the issue relates to the organization’s vision, mission, and strategic direction.
Provide a rationale that explains how your recommendations are appropriate for your organization’s capacity and strategy.
Your analysis should use proper APA style and formatting and include the following sections. Each section, except the title page, should include the appropriate section heading.

Title page: Use APA formatting and include the following:
Assessment number (Assessment 3).
Your name.
The date.
The course number (MHA-FP5014).
Your instructor’s name.
Abstract: Include a one-paragraph summary of analysis content. This is not an introduction to the topic, but a summary of the entire analysis. Make sure to double-space.
Issue description.
CBA evaluation.
CBA recommendations.
Context for recommendations.
Relationship to vision, mission, and strategy.
Appendix: Attach your completed Cost-Benefit Analysis Template.
Additional Requirements
Written communication: Written communication should be free from errors that detract from the overall message.
Length of paper: 5–6 typed, double-spaced pages.
Font and font size: Times New Roman, 12 point.
Appendix: Include your Cost-Benefit Analysis Template as an appendix to your analysis.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

Competency 1: Conduct an environmental assessment to identify quality- and risk-management priorities for a health care organization.
Specify the focus and stakeholders for a cost-benefit analysis.
Develop a value proposition for change management that incorporates quality- and risk-management concepts.
Describe strategies to influence and impact the needed changes for quality improvement.
Competency 2: Apply a risk-management model or framework to a specific risk-management priority.
Conduct a cost-benefit analysis for a risk-management intervention.
Competency 3: Analyze the process and outcomes of a care quality- or risk-management issue.
Identify relevant internal and external benchmarks, using a systems-based perspective.
Competency 5: Communicate in a manner that is scholarly, professional, and consistent with expectations for professionals in health care administration.
Use correct grammar, punctuation, and mechanics as expected of a graduate learner.
Plowman, N. (2014). Writing a cost-benefit analysis.

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