HCA312 Healthcare Finance-Capital Investment Project

Capital Expenditures Proposals

Altonice Cox

HCA312: Health Care Finance

INSTRUCTOR'S NAME: Paula Arceneaux

July 3rd , 2017

Introduction

Summerdale Medical Center is proposing an expansion of its facilities and range of services being offered. This upgrade will see the medical center expand its patient-handling capacity by improving and expanding the bed capacity, number of specialists, equipment, and facilities as well as the specialized procedures that the medical center can handle. This expansion will need a breakdown of costs and the expenditures both in the short term and the long term. For that reason, there is a need for financial mapping of Summerdale Medical Center so that there is an alignment of the short term and long term goals of this healthcare organization. Planning for the expansion of the medical center facilities enables a systematic breakdown of the expenditures to be incurred and the resources to be used in the process (Smith, 2014) Budgeting allocates actual resources at disposal depending on the priority of the projects and the resources available.

Budgeting process

Summerdale Medical Center will draft a budget timeline. Within the timeline, operating budget will include items from the operating budget: revenues and expenses. The capital budget, on the hand, takes the balance sheet items into consideration highlighting property, plant, and equipment as well as money borrowed to finance the expansion of these elements (Berwick, Nolan & Whittington, 2008).

Summerdale Medical Center budget timeline (operating and capital budget)

Mechanics of budgeting

At Summerdale Medical Center, the key mechanics of budgeting will focus on forecasting the expected revenues, profits and then the preparation of the capital budget. The objective of this is to establish the expected revenues generated from the investments made through the capital budget and the expenses that the Summerdale Medical Center is likely to incur in the process (Berwick, Nolan & Whittington, 2008).

Expected revenues

The expected revenues will be based on the patient volumes and will be broken down into four levels. Depending on the level of medical attention needed, Summerdale projections differ a great deal.

Going by the rough projections that were based on last year’s visits, total visits of the four levels is expected to be 15600. The projected revenues from the four levels are expected to be $27,815,500. This has been based on growth visits calculated annually and then projected over the expected annual visits.

Projected expenses

From the expenses and revenue projections, Summerdale Medical is likely to have a projected profit of $5,063,500 from the new investment. Although the increase in patient’s visits come at a cost, the overall effect is an increase in profits.

Proposed capital budget

Phase 1

Summerdale is looking at the prospects of spending around $11 million in the expanding of its facilities in phase 1 of the expansion projects. The expansion projects will include the facility expansion, hiring of a permanent medical team and additional strategic programs. These will see an addition of revenue stream for Summerdale Medical Center in the coming year as seen in the projection of revenues (Smith, 2014).

References

Berwick, D. M., Nolan, T. W., & Whittington, J. (2008). The triple aim: care, health, and cost. Health Affairs, 27(3), 759-769.

Smith, D. G (2014). Introduction to Healthcare Financial Management. San Diego, CA: Bridgepoint Education.