Financial Management of Health Care Organizations
This week’s assignment is the third component of our Return on Investment (ROI) project. The focus of this week’s short paper writing will be to consider the justification of the capital expenditure. Three key aspects should be considered: (1) Amount and type of expenditure (2) Attainment of key decision criteria and (3) Detailed financial analysis. Using pro-forma data attached (A Cost Benefit Analysis- Bardon, C. G., Wang, S. J., Middleton, B., Prosser, L. A., Spurr, C. D., Carchidi, P. J., et al.(2003).. The American Journal of Medicine , 114.) prepare a net present value analysis using the data in the example and substitute the 5% hurdle rate in the problem to a 6% hurdle rate, and prepare a profitability index. Do not consider capital cost reimbursement from third-party payers in your calculation. Finally, consider in your writing how you would factor risk (technology change, Physician acceptance, competition from other HCO’s, accuracy of market data and volume projections) associated with the capital project in your discount rate…should it be increased?