The medical field is constantly changing. As a health care manager, you will manage the budget and provide quality care to clients in this changing environment. A cost-effective analysis (CEA) provides one method to manage change. A CEA is a form of economic analysis that allows management to explore a number of alternatives for providing care to clients based solely on the fixed costs (FC) and variable costs (VC) associated with each alternative. The CEA process assumes each alternative will achieve the desired outcome and that a thorough review of the existing body of literature on each alternative has been explored by the organization. A CEA does not analyze the actual or perceived benefits associated with each alternative and factor that into the analysis. In fact, analysis of benefits is a separate process that should take place following the implementation of a chosen alternative.
To prepare for this Application Assignment, imagine you have been hired by Splendid Hills Hospital. The vice president of finance has asked you to work with an interdisciplinary committee to conduct a cost-effectiveness analysis (CEA) and to recommend a cost-effective CAM option. Based on the committee recommendation, one of the three proposed CAM options (spinal manipulation, acupuncture, and massage therapy) would be implemented to care for clients with chronic lower back pain where more conventional therapies have been largely ineffective. You and the committee have collected the fixed costs (FC) and variable costs (VC) associated with each CAM alternative. Review the course document in your Weekly Resources entitled, “ Cost-Effective Analysis for Proposed Alternative Interventions for Unresolved Lower Back Pain.” Search the Walden Library for scholarly sources to support CAM options.
To complete this Application Assignment, you will: 1) complete a cost-effective analysis using the data provided in this week’s course documents, 2) create a 9- to 12-slide PowerPoint presentation of your CEA results, and 3) prepare a 1- to 2-page document containing your presentation talking points.
Please be aware that you will submit three files for this assignment.
Part I: The CEA
Using the data provided in the Splendid Hills Hospital scenario, insert the fixed and variable costs associated with each CAM alternative into the spreadsheet. The data will be entered into the cells shaded green. Do not enter data in the cells shaded in red. The spreadsheet will automatically calculate annual costs. Once you have your cost results, you and the committee will be able to propose the most cost-effective CAM alternative. Save your results in the Excel spreadsheet for submission.
Part II: The Presentation of the CEA
In order to communicate your results, you will prepare a professional presentation for delivery to the members of the senior leadership team. You will prepare a PowerPoint slide deck comprised of 9–12 slides (not including title and reference slides). The following are the minimum slide expectations:
Discuss the concept of complementary and alternative medicine (CAM)
Identify the three CAM alternatives being considered with brief description of each
Identify the purpose and assumptions associated with a cost-effective analysis (CEA)
Share why a CEA was appropriate for determining the CAM alternative
Identify the FC, VC, and TC for acupuncture
Identify the FC, VC, and TC for massage therapy
Identify the FC, VC, and TC for spinal manipulation
Discuss which alternative is considered the most cost-effective given the CEA results
Discuss and support your recommendations for assessing the clinical outcomes following the rollout of your chosen CAM alternative
Refer back to the Optional Resources, in Week 1, if you need a refresher on using PowerPoint.
Part III: Talking Points
It is important that professional PowerPoint slides remain uncluttered. Having talking points, or notes, to accompany your slides helps provide your audience with additional information while maintaining uncluttered visuals. For each of your content slides (not the title and reference slide), write a brief paragraph explaining the information on the slide. Then, compile these paragraphs into a 1- to 2-page document for submission.
Your written assignments must follow APA guidelines. Be sure to support your work with specific citations from this week’s Learning Resources and additional scholarly sources as appropriate. Refer to the Essential Guide to APA Style for Walden Students to ensure your in-text citations and reference list are correct.
Introduction to Health Care Economics & Financial Management
Chapter 7, “Cost Allocation and Cost-Finding”In their operating expense budgets, many health care settings budget and report indirect costs generated by departments that provide direct services. This chapter presents an overview of the allocation of indirect costs. The concepts of cost allocation and cost-finding are explained with examples from health care settings.
Chapter 8, “Break-Even Analysis”The break-even analysis calculates how much one should charge or how many patients must be seen to cover the cost of doing business in health care. This chapter addresses these factors and includes the calculation and application of the contribution margin as well as the importance of indirect and overhead costs.
Chapter 9, “Cost-Benefit Analysis and Cost-Effectiveness Analysis”Cost-benefit and cost-effectiveness analyses are the focus of this chapter. This chapter will explain how you evaluate the benefits and resources used between two or more alternative interventions.
You use the following documents as part of this week’s Application assignment:
Document: Cost-Effective Analysis for Proposed Alternative Interventions for Unresolved Lower Back Pain (Word document)
Document: Week 5 CEA Spreadsheet (Excel document)
Laureate Education, Inc. (Executive producer). (2011). Good Samaritan Hospital organizational chart—Week 5: Costs in health care. Baltimore, MD: Author.
This week Patient Care Manager Nadja Muchow shares her team approach to value, Vice President of Finance Deana Stout discusses the financial aspects of change in the hospital and Vice President of Strategic Planning and Business Development Jennifer Weiss Wilkerson shares how Good Samaritan involves physicians in its strategic planning for major capital and equipment needs.
Good Samaritan Hospital organizational chart—Week 5: Costs in health care Description and Video Transcripts (zip file)
Kee, J. E. (1999). At what price? Benefit-cost analysis and cost-effectiveness analysis in program evaluation. The Evaluation Exchange, 5(2 & 3), 4–5. Retrieved from http://www.hfrp.org/evaluation/the-evaluation-exchange/issue-archive/methodology-15/at-what-price-benefit-cost-analysis-and-cost-effectiveness-analysis-in-program-evaluation
Hutton, G. & Reyfuess, E. (2006). Guidelines for conducting a cost-benefit analysis of household energy and health interventions. World Health Organization. Retrieved from https://extranet.who.int/iris/restricted/bitstream/10665/43570/1/9789241594813_eng.pdf
Centers for Disease Control and Prevention. (n.d.). Cost benefit analysis. Retrieved from http://www.cdc.gov/owcd/eet/cba/PrintAll.html
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