Capital Budgeting the Aim of Hospitals Is Essay

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Capital Budgeting

The aim of hospitals is to measure and improve the quality of health care service for the patients. Patient satisfaction is the foremost concern. However, to run a hospital, there are a lot of other factors are also involved; e.g. managing cost, budgeting, optimizing operations and increase patient satisfaction level. In order to achieve the desired level of performance, the hospital needs to be up-to-date with the latest technology.

In this era of technological advancements, every company has to maintain all their records on computer because it saves time and needs less effort than manual work. Our hospital has digitalized their data but every department has its own data base. In order to optimize the operations, hospital requires having a central data base system.

As Schuhmann (2009) stated in his article that the recent economic crisis has made it difficult for hospitals finance their capital expenditures. The capital assets purchased by hospital in 2007 consisted of 50% on building, fixtures and improvement; 46% on fixed and movable equipment and 4% on land. These percentages vary for government, non-profit and for profit hospitals. So, all the hospitals need to evaluate re-evaluate their capital expenditure and the capital required to grow and compete in the market.

Capital Purchase for Hospital

Information technology has given every industry a solution in the form of well-defined software. It helps the health care industry to effectively cut-costs without affecting the operations. Investment in information technology pays off in the long run. Now, there are software solutions available which are much more than data handling and its features (Devraj & Kohli, 2000) .

SAP® Patient Management is software designed to manage daily operations as well as cost and financial analysis. Our hospital needs to upgrade its software and SAP® provides with the best possible solution.[footnoteRef:1] [1: See]

SAP® Patient Management

SAP is the world leader in business related software and related services. Its goal is to provide efficient and effective software for all types of businesses. It also provides mobile apps for customers to empower them and make them work proficiently.[footnoteRef:2] [2:]

SAP Patient Management helps the hospitals and clinics to maintain their inpatient and outpatient operations. Main features of SAP Patient Management are: [footnoteRef:3] [3:]

Patient Admission

This module helps to optimize the use of resources while planning admission of patients. This is based on the past admission criteria and helps in time management. By using this, capital can be reserved for specific treatments which are already planned and the non-planned treatments will have suitable positions department-by-department. It allows the staff to plan at an early stage with the luxury of being allows the admission clerk to book appointment with only few specifications. It also provides customized options for emergency situations.

Care Unit Work Station

This feature is specially designed for the nurses. It has a user-friendly interface and can be customized. It provides a detailed information regarding patient which includes administrative and medical.

Open Communication

This module facilitates data exchange with internal and external systems by using applications or electronic data interchange (EDI). There is no requirement for duplicate entry. Once information about the patient is entered, it will be available to all systems. This is also a customized feature which satisfies individual requirements.

Clinical Supply Chain Management




Buy/ProvideThis module enables optimized use of employees, materials, warehouse and suppliers. If there is a medicine out of stock, then this module helps generate a request and smooth delivery of medicine.

Appointment and Resource Scheduling

This enables the staff to enter appointments from any workstation like outpatient, service facility, physician workstation etc. When appointments are scheduled, all the patient information is automatically available on the system. This also provides access to schedules of physicians, treatment rooms and medical equipment. This is a user friendly module which will enable the staff to search slots for single, group or repeat appointments.

Embedded Workflow

The goal of this module is to provide right information to right people at the right time. If a patient is discharged then the physician is notified as soon as the patient check-out. This synchronizes processes, monitor deadlines; organize the flow of information in the hospital and record history if required.

Comprehensive DRG Support

Diagnosis related group (DRG) is the common system to classify hospital cases into clinically similar groups to determine their costs. This module provides DRG-related work processes. It also provides billing and analysis for DRG and grouping patients from diagnosis and procedure entry in the system.

Patient Accounting

Case-related invoice processing provides all the related transactions and other data required for billing with insurance data, services and case data. SAP Patient Management also enables this function to re-check the data and prepare the actual bill in the form of checks, comparisons (charge comparison) and simulations (test billing). If all the data is correct then a simple mouse-click starts the billing in live or test mode. It runs the live mode then the system integrates this data in the Financial Accounting program.

Integrated Financial Accounting

The automated posting of the invoices enables a quick and easy financial accounting. By using the data of invoice, the financial accountant can determine the insurance premium, revenue from nurse's charge, revenue from private room and many others.

Integrated Cost Accounting

This is a very efficient way to determine profits from individual as well as group of patients. This enables the accountants to compare the costs of each patient and determine the revenue and eventually calculate the profit generated by each patient. This can help the administration determine whether a certain type of treatment is favorable for the hospital or not.

SAP Patient Management software is patient-centric, comprehensive, integrated, flexible, role-based and open. It increases productivity at both ends. It is a perfect tool to increase patient loyalty as well as satisfaction. It is user friendly and affordable. It has a low maintenance cost.

Estimated Cost of SAP Patient Management

Suited for medium size company

All customizations need to be done by SAP

Average implementation time of 6-12 weeks

Estimated Total average cost: $500,000 USD

Economic and Financial Impact

Nurse Managers control most of the resources in a healthcare facility. Therefore it is very important for them to understand the principles of the working capital of hospital. Finkler, Kovner & Jones (2007) emphasized on the importance of financial management for nursing managers. Since they are the ones who collaborate with all the departments, they should have the know-how of all the aspects related to operations of the hospital. Implementation of SAP Patient Management software will start with the training of nursing staff. Hence it is very important that while working on SAP, they understand the financial aspects of it as well such as inventory management, cash budget and cash requirements. The main purpose in buying this software is to cut-cost in the long run and to have efficient operations with minimum waste of resources.

Devraj & Kohli (2000) studied the impact of information technology (IT) investment (in labor, support and capital) on the health industry. Their study shows that profitability is correlated with customer satisfaction. IT investments have an effect on net patient revenue per day as well as per annum. The study also shows that highly productive companies invest more on client-server and less on the in-house software up-gradation. In a similar type of study in Menon, Lee & Eldenburg (2000) demonstrated that investment in information technology enhances and contributes positively in the services provided by the healthcare institute and improve productivity as well as quality. Devraj & Kohli (2000) also say that the countries who invest more in information technology have continually high GDP rate and productivity. Hence, we can conclude that the proper investment in information technology will lead to growing productivity of the hospital. It will also increase customer satisfaction will in turn result in profitability. Since hospital is a service oriented company, therefore it is more difficult to quantify profitability. Customer satisfaction is the ultimate productivity of healthcare industry. So, when this investment helps to improve the customer satisfaction, it will produce profitable results. SAP Patient Management is not only a tool for customer satisfaction but also a support system for better operations of hospital.

Bailey (2012) discusses ways to reduce cost in the economic meltdown. He says that one effective way is to eliminate complexity from the standard operating procedures (SOP). Manual systems should be automated and non-value-added activities should be removed. SAP provides the best automation of all the processes with a central data base. Through SAP, the hospital will be able to eliminate the waste of time by timely admission and appointment scheduling. There will be less paper work which will reduce the cost of paper.

Another method of cost reduction mentioned by Bailey (2012) is standardization of the processes. The patients should be sent to the appropriate department for treatment or test. SAP provides a great module which enables the staff to schedule the patients visit beforehand. The staff has a…[continue]

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