Healthcare Finance Term Paper

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constitute itself as a business plan for a heart hospital, with a determine goals to establish the main factors and outcomes that may determine both the outlet's utility and its success as an economic entity. We will aim to analyze the reason for investing in a heat hospital, the financial assumptions we are dealing with, as well as the risks associated with such a project.

From the very beginning, we need to point out towards the distinct specificity that such a business project implies. When referring to the specificity of a heart hospital, we tend to include it in the larger category of healthcare facilities, where a distinct approach is needed in order to correctly blend the two different levels of description we will describe below.

First of all, any healthcare centre and a heart hospital in particular is designed to help the patients improve their health condition. As such, the main goal of any such a hospital would be to provide the best healthcare services to its patients, at the highest levels.

On the other hand, and this is the second pillar we are referring to, a healthcare facility is also a business unit. As a business unit, it functions as any other facility on the market and we ma notice that the patients become consumers or customers, the heart hospital is competing on the market with the services provided by other heart hospitals in the world etc. Further more, as a business unit, our heart hospital needs to deal with all the gruesome details any business facilities controls. We are referring here especially to issues such as costs, maintaining a reasonable level for them in order to be able to boost profits etc.

So, as a business unit and healthcare facility, the heart hospital will need to be able to find the proper means of expression that will allow it to retain the profit maximization goal any company or business unit normally has with respecting the interest of the patient. Given the fact that the quality of service and what the hospital has to offer in terms of equipment and staff is what will mainly differentiate its services from those of other outlets in the market, giving way to a higher number of consumers and better profits, this may pro-less difficult than believed.

Market Analysis and Evaluation

Any proper evaluation for a business unit begins with a market analysis, especially in terms of the targeted segment of consumers, their size and socioeconomic factors that may influence their decision. According to statistics, the diseases of the heart are the number one cause of death in the United States, with 28.5%

of all total deaths.

For 2005, the statistics show yet more troubling data. Approximately 1.2 million Americans will have a first or recurring coronary attack and predictions show that about 494,000 of these people will die because of it

. On the other hand, statistically and historically speaking, about 7.1 million Americans over the age of 20 have survived a heart attack. Our mission must be to improve these figures and reduce the number of heart disease related deaths. Unfortunately, no matter how morbid, we need to be aware of the fact that a growing number of heart diseases are likely to increase hospital revenues. Trends are likely to be ascending in this area, but, on the other hand, the hospital's prevention activity will act as a hedging measure if this trend will be inversed.

Following this brief statistical incursion, we may point out the hospital's activity will be aimed at two different directions: prevention and implication in limit situations. The latter activity will probably only intervene in distinct cases, as it is most likely to occur for patients that have been on the hospital's list. We are referring here to patients that are treated by the hospital staff and that may suffer a hear attack. We are to believe that it is quite likely they will chose to go to the hospital where they have been treated rather than choose a normal emergency room.

On the other hand, we have the prevention activity, where we are referring to day-to-day activity on treating people who have a heart condition of some gravity. Further more, the prevention activity can be extended in the direction of courses and seminars on risk factors for heart diseases, how to lead a healthy life and avoid major impact sources etc.

The segment of consumers we are addressing can be defined in terms of income levels, level of education and other socioeconomic factors.

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First of all, because the quality of the human resources used and the equipment that will be purchased imply recurring costs that need to be justified and somehow recuperated, we are targeting a segment of consumers ranging in the upper middle layer, probably in the $75,000 - $90,000 a year segment. This income level is characterised by individuals who are not only willing to use a heart practice when they are sick, but also those interest in protecting their health in the long run and ensuring that the possible conditions that may lead in the future to heart problems are eliminated in due time. These are also consumers who like to have their checked at least three or four times a year and who are willing to invest in expensive treatments in order to fight any heart conditions they may have.

In terms of social factors, our targeted segment of consumers most likely have a higher education, proportionally probably around 80% are likely to have gone to college or university. As previously mentioned, their interest in health issues is likely to be higher than average.

A market outlook will not be complete without an investigation of possible competition in the field. There are several layers that need to be analyzed, with a comparison of the response the hospital is likely to have at hand in each separate case. First of all, we have the hospitals for other types of diseases. This is not a relevant market segment in which the hospital is going to have a response, as it is addressing a specific group of consumers, patients with a heart condition or prevention activity in this field.

On the other hand, we have other similar private facilities, facilities that target the same income segment. Additionally, these are also likely to have similar strategies as our own health facility, with an increased attention towards the quality of service and equipment. The response in this case is similar to what any other company would do in similar conditions on the market: a differentiation strategy. The concern of our hospital should be to always offer something extra with regards to the competition in the exact same market segment. This can take several forms, from the employment of well-known specialists in the area to the use of techniques unavailable in other similar hospitals. We will be able to further refer to these aspects when discussing the service philosophy and internal issues.

Third of all, we have public health facilities and other places where heart conditions, including severe attacks, can be treated. Again, competition in these areas is not relevant for the consumer segment we have identified. Indeed, these are health facilities for people with a lower income and, generally, individuals who are less willing to pay more for better medical services.

Development Plan

The service philosophy comes in close connection with the mission statement we have previously referred to. Indeed, the heart hospital we are planning to build will be constantly aiming to provide the highest quality in all services it offers to its patients. As shown before, this is also included in a larger differentiation strategy the hospital will be using against competition. The fact that the main philosophy of the hospital only refers to offering highest quality services leaves quite a lot of manoeuvring means. We are not interested in practicing lower prices, but, on the other hand, we may be interested to have a financial policy that will be able to properly control costs so that the hospital can achieve sustainable revenues. Further more, a highest offered quality policy implicates a long-term strategy that is determined to build a market share rather than make short-term profits. One needs to keep in mind the fact that the initial investment is definitely not negligible, especially if we consider the equipment and investment in human resources. We need to expect a longer period of amortization for all equipment.

The hospital can build for itself the image of a market leader and trend definer in this field. There several means we have thought of in this sense. First of all, by paying higher salaries or offering other potential financial benefits, it can gather a team of well renowned specialists in heart diseases in the country, working thus on its reputation that the hospital ignores costs when it comes to offering the best and highest quality services to its patients. Second of all, a department can….....

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