Consultant Evaluation and Healthcare Industry

Consultant Evaluation/Healthcare Industry

You are in the role of a consultant with ten years experience in the health care insurance industry. A group of 20 doctors are considering forming a new medical group and have asked you to prepare a report on whether they should build a facility in an area within 30 miles of the downtown center of your 500,000 population city for $100 million dollars. Prepare a report for the management team of the doctor's group on your proposed $100 million expenditure plan reflecting on the key course objectives including the financial, legal, alternative health care models, reinforced by your knowledge of strategic planning and capital budgeting.

The benefits of this proposal are truly overwhelming. One of the most major benefits of the proposal are the humanitarian efforts. There is also, as this paper will demonstrate a true potential to develop a new payment model, rather than the standard fee-based on service method that is so overwhelming in the U.S. However, as this paper will reflect, certain legal issues do need to be tended to. Though the paper will close by exploring all possible alternative health and service models.

Humanitarian Effort

The plans to build this facility truly are exciting and absolutely do offer a great deal of potential to the entire inhabitants of this community. One of the most striking aspects is that the facility can provide potential inhabitants with a true wealth of services that are currently unavailable in the town. Since only $100 million is being invested, this indicates that the money is being spent to create a niche center, such as one which fulfills the health needs of certain groups, such as women care, natal care, teen care, mental health care, or services just for veterans. $100 million simply doesn't have enough capabilities to create a truly formidable and state of the art facility, but it can specialize in serving the needs of a particular group of individuals, most certainly. For example, just last year private organizations were raising money to create a more thorough and evidence-based practice facility for soldiers at Fort Bragg (Ramsey, 2012). "A private foundation is raising $100 million to build clinics at Fort Bragg and other installations to help the military treat and research the psychological wounds of war. The Intrepid Fallen Heroes Fund's planned clinic would be the latest in a flurry of local projects that leaders in the Army and the Department of Veterans Affairs hope will make it easier to meet the growing demand for mental health care" (Ramsey, 2012). As the recent news reflects, more and more buildings are cropping up all over the nation to better help the growing number of soldiers from Iraq and Afghanistan who bear serious physical and mental wounds upon their return to this country (Ramsey, 2012). This is clinic is a shining example of how smaller investments in healthcare facilities can truly do a wealth of good for specific niche populations.

Healthcare Financing

"According to recent World Health Organization estimates, every year 25 million households (more than 100 million people) are forced into poverty by illness and the struggle to pay for healthcare.1 This coupled with the lack of basic health infrastructure in rural and remote areas aggravate the health conditions of the poor, leaving them in a perpetual state of poverty" (Ofori-Adjei, 2007). This is true in third world countries as in America. Paying for health care is a definitive struggle for so many people around the world, and the clinic proposed absolutely seeks to level the playing field so that more people with specific health needs are able to get those needs taken care of. Furthermore, in this case study, the investment proposed truly is an investment that will no doubt benefit all members of the city. When people have access to health services and health protection, it's obvious these things are a key component in not only fighting poverty but in furthering economic development. Helping to increase the economic development of any city, be it in America or abroad, truly relies upon a strong health care facet, with strong pillars of public health.

Thus, there's a truly intense burden to insure that the health care facility where all this money is being invested is in according with the proper financing model. The proper financing model is essential in ensuring that the money is not only well-spent but that the facility is empowered to the extent that it is able to stay afloat. "The viability of any hospital initiative depends on its financial performance. Financial modeling is therefore the foundation for determining feasibility, whether for a new hospital program, a joint venture or a new business" (dgapartners.com) However, the healthcare arena more often than not creates a truly intricate and confusing means of financial modeling which often co-exists with large degrees of uncertainties, particularly in regard to doctor buy-in, competitive response, and reimbursement. More than anything, the key revolves around how exactly the financial model is being used.

One of the first pillars upon which the success of this endeavor depends is insuring that the right stakeholders are made members of the planning team (dgapartners.com). While some people think that it's just important to get the right people on-board at some point, truly it's absolutely vital to get the right people involved from the beginning. "It allows everyone to work out agreement on the scope of the analysis, the constraints and the parts of the model that can be based on simple assumptions rather than in-depth analysis. Having the right team working together can uncover unexpected information that is critical to all further analysis of a venture" (dgapartners.com). Members of this planning include clinical, financial and operational stakeholder along with all appropriate doctors (dgapartners.com). Thus, in the case study presented, the doctors who are making this investment are important, as are all relevant physicians to the overall goals of the facility.

When it comes to drafting the actual model, it helps for one to go one or two levels up from what the group thinks they will need at the moment (dgapartners.com). "Fight the pressure for a quick answer; the figures will hold up better, you'll be more comfortable and so will your stakeholders" (dgapartners.com). Since the Bismarck model for health care was such a failure and because the out-of-pocket model has meant that so many people can't afford health care, this particular project needs a health care model which will actually support the investment being made and which will ensure it is sustainable.

One successful model which would be wise to mimic would be the National Health Insurance model, most famous for being used in Canada and other countries who have health care systems which work. "This system has elements of both Beveridge and Bismarck. It uses private-sector providers, but payment comes from a government-run insurance program that every citizen pays into. Since there's no need for marketing, no financial motive to deny claims and no profit, these universal insurance programs tend to be cheaper and much simpler administratively than American-style for-profit insurance" (pbs.org, 2009). One of the overwhelming benefits of such a plan for the user is that the consumer has a great deal of power to negotiate lower prices; moreover such plans able to better control costs by narrowing the overall medical services they're willing to pay for, by making patients wait to be treated (pbs.org, 2009).

Another truly crucial aspect of proper financial modeling for this proposal is to engage in accurate volume projections. The key factor in creating solid projections is the tendency for triangulation. "Use multiple approaches to projection that provide checks on each other. Consider historical volumes where relevant (both yours and the market's). Check that your volume results in an achievable market share.Use the best available utilization benchmarks and population data" (dgapartners.com). The right financial model won't come without a certain amount of research done, also in conjunction with research about relevant technology and current growth.

A crucial aspect of going forward with the financial model means ensuring that everyone who plans on participating will buy off on all relevant assumptions. All the variables truly need to be addressed including things like the volume and growth curve, the payment rate, the payer mix, the size of the facility, the cost per square foot, the levels of staffing and the hours of operation (dgapartners.com). Moreover, the model needs to be robust and trustworthy, so that as the planning goes ahead and becomes fluid, the financial model needs to reflect that (dgapartners.com). By saying that the financial model needs to be trustworthy, one wants to double check to see that the over-arching philosophy and values of the model are indeed accurate, ensuring that no errors in logic have occurred. For instance, " if you take the volume to zero and you still have variable costs, something is wrong. If you change the volume growth rate, the model should show a proportional increase in gross revenue. Fixed costs should never vary.Have someone outside the model-building process review the model for accuracy" (dgapartenr.com). A certain amount of errors is to be expected, but there should not be so many that it demonstrates a certain level of skewedness about the model in its entirety. Thus, if the NHI model is the one which is selected, then it needs to be tested against a range of different scenarios. The following demonstrate some truly relevant what-ifs: what if the doctors only move half the projected volume; what if medicare slashes rates; what if competitors open a comparable program (dgapartners.com).

There are a range of factors which can change or adjust once a healthcare facility opens their doors for business. And as much as this facility is attempting to engage in a solid humanitarian effort, at the end of the day, it's still a business and people need to get paid. Thus, before engaging in further developmental activities, one needs to determine in what ways the model is sensitive and how it's more open to variation for controlling uncertainty.

Thus, one of the most important aspects of financial modeling for this scenario will be in creating a "worst case scenario" idea and plans/strategies as to how the company will adequately deal with it. Creating a presentation in front of a test audience of colleagues is also a suitable idea; these are people who don't have a personal investment in the project and thus can afford to be more objective and more critical regarding the success of the project.

Legal Issues Involved

One of the most pertinent concerns are going to be the legal issues of the healthcare facility. Many of those legal issues are going to depend on precisely what niche of care the facility is going to fulfill. For instance, if it's a facility described in the Fort Brag article the public response is going to be largely positive, and it's not going to suffer from the legal issues and public controversy that a woman's clinic which offers abortions will have to face. The following are a range of legal issues which are specific to urgent care centers. These are relevant because other healthcare facilities which don't offer urgent care specifically can still sometimes have to deal with these issues or comparable ones. Furthermore, it will probably be likely that this facility will want to offer urgent care in some capacity. If this healthcare clinic is going to be an alternative to the hospitals and health centers which already exist in this city center, then it should provide some sort of affordable and accessible urgent care to patients, in order to provide a decent alternative to the overcrowding and long lines in the ER.

Even so, one such relevant issue is the corporate practice of medicine. "Some states prohibit the corporate practice of medicine. This doctrine, intended to protect the integrity of the medical profession by keeping it separate from the interest of corporations, prohibits employment of physicians by corporations. For example, in New York it is a felony for an unlicensed person to practice medicine, and corporations may not hold licenses to practice medicine. In practical terms, that means that an urgent care center in New York owned by a corporate entity may not employ physicians at the facility" (Burnstein et al., 2012). On the other hand, Florida is a place which has absolutely no prohibition on the coroporate practice of medicine or all comparable entities (Burnstein et al., 2012). Thus given the intensity of this issue, one needs to look into the state law immediately to figure out what the final word on the corporate proactice of medicine is, where this facility will be opening. Furthermore, if there is a ban or narrowing of provisions, one will need to figure out what all the necessary loopholes can be and what all potential alternatives are. Thus, when figuring out the structure of ownership for this facility, finding out once and for all whether the state bans the corporate practice of medicine is something that needs to be determined immediately. In this case, the group of doctors will most likely be treated as entrepreneurs, making the prohibition on corporate practice unimportant. However, there are many legal ways for non-doctors to own and operate an urgent care center in the form of a "professional coproation" (PC): "The PC provides the physicians to staff the center, and the non-physician-owned company desiring to open an urgent care center contracts with the PC to provide management services, including paying the physicians, handling billing and collection for services and employing non-physician personnel. The PC receives a management fee to provide these services" (Burnstein, et al., 2012). Thus, this is truly a vital issue to present to all parties involved and to find a solution to once and for all before proceeding further with any organization, planning or development of the proposed facility. This absolutely cannot be underestimated. Before any more planning or development occurs, this particular legal matter -- how the facility will exist in the eyes of the law -- must be addressed.

In a similar fashion, the issue of state licensure needs to be address, mostly because the ways that healthcare facilities are licensed varies from state to state (Burnstein et al., 2012). "Currently, Arizona is the only state that specifically requires the licensure of urgent care centers. Florida licenses healthcare clinics, and urgent care centers may fall under the definition of healthcare clinics in that state" (Burnstein et al., 2012). Thus, as urgent care centers become more and more popular, states are becoming more and more likely to put state licensure requirements (and fess with it): this means that before moving forward, the team should absolutely check with the Department of Health in the town or another comparable agency so that they can determine if the center needs licensing (Burnstein et al., 2012). Another thing that needs consideration is whether or not the center will be engaging in CLIA certification or a CLIA certificate of waiver; this will be contingent on whether or not the center decides to engage in clinical laboratory testing (Burnstein et al., 2012). This will be another conversation that all stakeholders will need to have and to determine: things such as whether or not the facility will offer clinical lab testing or x-rays (which will require an x-ray permit) (Burnstein et al., 2012). Ultimately, once all decisions are made, a long conversation will have to be had with the state Department of Health about the necessary licences and permits needed.

Since it is highly likely that this facility will be providing some sort of emergency care, this means that the center must be aware of the requirements and necessities of EMTALA (the Emergency Medical Treatment and Labor Act). Basically, if this health care facility is going to be indpenedent of any hospital it probably won't be subject to EMTALA processes and procedures. However, if a hospital is involved as a partner in this joint venture, then this means that the neew facility will be obligated to comply with EMTALA obligations. Regardless, the new facility needs to determine where it stands with EMTALA; even if we discover that EMTALA regulations aren't applicable, it will still be worthwhile to determine how patients will pay for urgent care services.

Thus, as it's highly probable that this health care center will provide some sort of urgent care, there needs to be a solid and simple means of reimbursement, if the facility intends to sustain itself. "To be economically viable, most centers will likely want to accept reimbursement by insurance companies. The first step is to determine the payors from which the center will accept payment. Getting on a payor's approved list can be an extended process, so this process should be started as soon as possible" (Burnstein et al., 2012). This forms of contracts and agreements can get quite complex so it's important to start as soon as possible so that forward momentum is achieved. One also needs to keep in mind that different insurance companies reimburse different amounts; furthermore reimbursements can take time, thus creating a cash flow issue for some facilities. Furthermore, certain government payors can take a lot longer to deliver reimbursements; these are entities like Medicare and Medicaid (Burnstein, et al., 2012). These payments are also generally delivered retroactively.

Other Legal Considerations

There are of course, other legal considerations to bear in mind, though these generally have to do with the physical and visual aspects of the actual facility, once it is built. For instance, by law the facility needs to bear the following: "Accessible path-of-travel into and throughout the facility; wide and easy-to-open exterior and interior doors; accessible examination and/or treatment rooms and equipment; accessible office and examination room hardware; appropriate reach ranges; accessible toilet and dressing rooms" (in.gov). Thus, a facility has a legal obligation to create a space which allows all people access; if there are any barriers to access, then they must be removed (in.gov). Certain hotspots can be tricky in allowing access, so in the construction of the facility, special attention needs to be paid to: parking lots, doorways, waiting rooms, lobbies, stairways and comparable spaces. "In order to meet the guidelines set forth by the ADA, parking lots should include accessible parking spaces, stairs should have alternative ramps or elevators, doorways should be wide enough for wheelchair access and waiting room or lobbies should be spacious enough to accommodate wheelchairs.

Providers should also ensure that people with disabilities have access to scales, exam tables or chairs without charging patients for the provision of the required services or devices" (in.gov). Furthermore, the actual facility needs to offer provisions in communication access for people who need aid in communicating, such as hearing or being heard. Communication access refers to auxiliary aids, services and other forms of program access which might be necessary (in.gov). Health care professionals need to be certain that they can communicate efficiently with people who have a variety of handicaps and disabilities, such as those who are deaf, or who have a vision or learning disability (in.gov). This means that a range of auxiliary aids and services need to be made available to help bolster communication (in.gov). Some of the people and resources which can help in this capacity are interpreters, readers, Braille, large print and TDD (in.gov).

Once the facility is actually built, it needs to be cognizant of and compliant with the Americans with Disabilites Act of 1990 which gives those with disabilities the same access to employment, government services, all business and telecommunication services. "Under Title III of the ADA, heath care providers are required to remove barriers, make reasonable modifications and provide auxiliary aids and services if necessary. People with disabilities should have access to the same goods and services as those provided to people without disabilities. If this is not possible, health care providers should modify their policies or procedures" (in.gov). One of the most common examples of this is the way that pets aren't allowed in most healthcare facilities, except for service dogs and other comparable animals. These animals can help certain disabled people in walking through the building, opening doors and accessing items that might be otherwise unreachable (in.gov).

Alternative Health Models

These models need to be scrutinized and placed under real consideration so that the healthcare facility has a higher likelihood of surviving from a fiscal perspective. Alternative health models allow for greater flexibility along with greater adaptability and a higher likelihood of the business thriving and being able to serve the community from the most nuanced and multifaceted perspective. For example, as one expert as aptly pointed out, "Our nation's health care system is high cost and high volume, but it is certainly not high value. This year, we will spend more than $8,000 per person on health care, which is more than twice the average of $3,400 per person in other developed nations. But spending more on health care has not made us healthier. Even within the United States, different areas of the country spend very different amounts on health care, again with no correlation to better outcomes" (Calsyn & Lee, 2012). There's absolutely no reason why this new facility can't be a maverick in the field of health, demonstrating new and viable methods and platforms and for health and payment plans. In fact, one of the overwhelming reasons for the fact that health care spending is quite so out of control is the fact that the most dominant system in America is the fee-for-service payment plan (as this paper alluded to earlier). This plan is so problematic because it rewards quantity over quality, particularly for expensive and high margin transactions and services (Calsyn & Lee, 2012). it's true that every healthcare facilitiy is a business and does need to make money, but that should not be the primary and overarching goal. The love of money is one of the reasons that greed is such a motivating factor in the health care industry. With this plan, health insurance plans, even government ones pay health care professionals and facilities for different items and services given to the patient: this structure is the bulk of how all systems go in America at 78% (Calsyn & Lee, 2012).