Financial Forecasting Memo

To: Nurse Manager-Orthopedics

From: Jessica Durkin

Date: August 7, 2023

Re: Financial Forecast

Part One – Financial Forecasting Model

Prior Year Revenue Budget			300 patients
Source of Payment	Per cent	Number	Payment	Income
Medicare	34%	102	22,436	2,288,472
Medicaid	11%	33	18,400	607,200
Contracted Insurance	45%	135	29,540	3,987,900
Non-contracted Insurance	3%	9	32,350	291,150
ACA Plans	5%	15	16,400	246,000
Self-pay	2%	6	17,400	104,400
Total	100%	300		7,525,122

Next Year Revenue Projections			340 patients
Source of Payment	Per cent	Number	Payment	Income
Medicare	42%	143	22,463	3,212,209
Medicaid	18%	61	18,400	1,122,400
Contracted Insurance	18%	61	29,549	1,802,489
Non-contracted Insurance	1%	3	32,350	97,050
ACA Plans	18%	61	16,400	1,000,400
Self-pay	3%	11	16,400	180,400
Total	100%	340		7,414,948
		To be cut from the budget to serve the same number of patients		110,174

Part Two – Financial Forecasting

Your request was well received. The number of hip replacements is expected to increase to 340 next year from the current 300 as well as the payer mix. The financial and payer mix projections show that Medicare and Medicaid payments are expected to increase by 8% and 7%, respectively, in the next year. Payments under ACA Plans and self-pay are also expected to increase from the current 5% to 18% and 2% to 3%, respectively. However, a significant decrease is expected from contracted insurance by 27%, and non-contracted insurance will drop from the current 3% to 1% in the next year. Due to this change in the payer mix, income is expected to drop by 1.464% from the current $7,525,122 to $7,414,948 next year.

The changes in the payer mix will result in a loss of $110,174. This means an adjustment to next year’s budget is necessary. Although an increase in the number of patients served is projected, as well as an increase in Medicare and Medicaid, ACA Plans, and self-pay payments, it is not enough to offset the loss from lost high-paying contracted and non-contracted insurance. Basically, a change in the payer mix leads to significant variations in revenue generation (Rascoe et al., 2020). As evidenced in trends in hospital incomes between 2019-2022, the changes in the payer mix, especially overdependency on Medicare/Medicare and loss of other insurers and payer types such as self-pay, contribute to lower financial performance (Melnick & Maerki, 2023).

To compensate for the estimated 1.5% drop in the next year’s income, I request you to consider the following recommendations:

Renegotiate with suppliers of essential supplies for the orthopedics unit, including medical supplies, implants, and equipment.

Benchmark against the competitor. Benchmarking against competitors is one of the ways to evaluate a hospital service quality (Ulkhaq, 2018) and a motivation towards better performance in healthcare (Bevan et al., 2019).

Eliminate unnecessary expenditures by allocating the unit’s resources according to patients’ specific needs.

Educate the unit’s staff to improve their effectiveness and efficiency in the use of available resources. Staff efficiency and effectiveness are top determinants of hospital performance (Carini et al., 2020).

Thank you for your consideration.

Regards,

Jessica

References

Bevan, G., Evans, A., & Nuti, S. (2019). Reputations count: Why benchmarking performance is improving health care across the world. Health Economics, Policy and Law, 14(2). https://doi.org/10.1017/S1744133117000561

Carini, E., Gabutti, I., Frisicale, E. M., Di Pilla, A., Pezzullo, A. M., de Waure, C., Cicchetti, A., Boccia, S., & Specchia, M. L. (2020). Assessing hospital performance indicators. What dimensions? Evidence from an umbrella review. BMC Health Services Research, 20(1), 1–13. https://doi.org/10.1186/S12913-020-05879-Y/TABLES/2

Melnick, G., & Maerki, S. (2023). Heading for an acute crisis? Utilization, revenue, expenses, and margins in California’s hospitals, 2019–22. California Health Care Foundation.

Rascoe, A. S., Flanagan, C. D., Kim, C. Y., & Vallier, H. A. (2020). Variations in revenue generation for the care of orthopedic trauma patients. Journal of the American Academy of Orthopaedic Surgeons, 28(4), E151–E157. https://doi.org/10.5435/JAAOS-D-17-00871

Ulkhaq, M. M. (2018). Evaluating Hospital Service Quality: An application of CZSQ and CZIPA. International Journal of Innovation, Management and Technology. https://doi.org/10.18178/

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Question

Instructions
Prepare a financial forecasting memo to your nurse manager that:

Part One – Financial Forecasting Model

Contains a completed financial forecasting model by downloading:
NUR4327-Deliverable03-Financial-Forecasting-Memo-Template_Revised.xlsx
Calculate the income projected from each payer source and total for the year to compare next year’s revenue to this year’s revenue.

Financial Forecasting Memo

Provide your nurse manager with your estimates on the increase/ decrease in revenue for next year’s budgeting.
Part Two – Financial Forecasting Memo

Explains how the change in payer mix will impact the overall projected revenue of the unit.
Describes the financial impact of a changing payer mix.
Lists recommendations for the manager to consider in expenses so that the budget will balance as neutral.
Provides stated ideas with professional language and attribution for credible sources with correct APA citation, spelling, and grammar in the memo.

Financial Forecasting Memo