You are an intern at Nittany Lion Health System (NLHS). Your preceptor, Michelle Smith,
has noted that you have excellent analytical/critical thinking and Excel skills listed on your
esume. To fully take advantage of your experience and ability, she has asked you to prepare
a statement of projected revenues and expenses about a proposed project cu
ently under
consideration.
After you have completed your analysis, she asked you to develop a
ief APA formatted
modified business plan to include the following information:
1. A
ief 1-page executive summary providing an overview of the purpose for the
eport, your initial financial analysis, and your recommendations to hit a
eak-even,
or positive operating margin for the clinic.
2. A
ief demographic overview of the service area
3. A
ief evaluation of the local competition, (use Centre County Demographics,
https:
datausa.io/profile/geo/centre-county-pa) or you could go to
https:
www.census.gov/quickfacts/fact/table/centrecountypennsylvania/PST045216), and
how will the new location fit into that environment.
4. A
ief na
ative reflecting your financial analysis and refe
ing it to 2
financial spreadsheets. The first one illustrating your initial analysis and the second
illustrating your recommendations for improvement
5. A
ief summary of your overall analysis, and final recommendations
Scenario:
NLMS, like many hospitals, owns a number of primary care physician practices. To take
advantage of some possible economies of scale, NLHS is considering the consolidation of
their out-patient practices and relocating them to a single building close to the hospital.
The building under consideration is a 20,000 square foot existing facility and will be more
that adequate to accommodate the physician practices. At a rental cost of $20 per square
foot, the total annual rent will be $400,000. (This rent payment is considered a “fixed cost.”)
There will be three (3) physicians located in the facility on a daily basis. On average, each
physician will see approximately 15 patients per day, with each patient generating an
average of $110 per visit. Additionally, there will be two (2) Physician Assistants (PAs) in
the facility. The PAs are averaging ten (10) patients per day, and according to CMS rules,
they can only bill at 85% of the physician’s fee.
In addition to the above patient care provider’s, there will be one (1) nurse (LPN), and two
(2) Medical Assistants’ (MA’s) in the facility to assist the doctors and the PAs. Because
NLHS cannot bill for non-provider staff, their salaries are part of the overhead for operating
the clinic.
https:
www.census.gov/quickfacts/fact/table/centrecountypennsylvania/PST045216
The base physician salary is $185,000, with an additional 35% for taxes and benefits. The
P.A.’s salary is $80,000, with an additional 30% for taxes and benefits, the LPN salary is
$35,000, and the 2 MA salaries are $21,500 each. Both the LPN and the MA’s also have an
additional 30% for taxes and benefits.
The physicians and PA’s are exempt employees, and they all just renewed a 5-year
employment contract. Both the LPN and MAs are non-exempt employees under the FLSA
act, and earn $16.82/hr. are making $10.33/hr. respectively.
The facility is open 235 days/year, and has a general operating cost (electricity, water and
sewer, medical waste disposal, and supplies) which averages 40% of total payroll, including
taxes and benefits. Said another way, this cost is 40% of everything NLHS will spend on
the payroll in this project. (Just as a note, operating costs are typically considered “variable
costs,” however for the purposes of this exercise, they are constant as described here.)
The question NLHS needs to answer is, how much revenue must the clinic produce to cover
the operating cost of the clinic, including the facility fees. For this, you must prepare an
Excel spreadsheet to assist Michelle with her report to the hospital CEO to determine if the
project is viable.
Financial Analysis:
Create a spreadsheet that evaluates, and clearly illustrates, your analysis using the following
inputs:
1. Projected revenue from the physicians
2. Projected revenue from the physicians’ assistant’s
3. Projected total revenue
4. Projected cost of the physician payroll?
5. Projected cost of the physician assistant payroll
6. Projected cost of the nursing payroll?
7. Projected cost of the Medical Assistants’’ payroll
8. Given debt service of $400,000, operating costs of 40% of total payroll, the total
projected expense of operating the clinic, including all payroll costs?
9. Projected profit/loss for this proposed clinic
Your second spreadsheet should include all of the above with your recommendations being
inputted as appropriate.
Other Assignment Deliverables:
Now that you have completed the Excel portion of the assignment (financial analysis), it is
now time to prepare your modified business plan.
Your modified business plan should then be completed as follows:
1. In your Executive Summary, provide a
ief overview of the purpose for the report,
your initial financial analysis, and your recommendations to hit a
eak-even, or
positive operating margin for the clinic.
2. Your analysis and thought process will impact on your grade, so be specific in your
approach. For example, except for fixed-costs, you might recommend changes to
any 1 or more of the variables impacting your revenue or expenses. Including; days
of operation, patient’s seen/day, average charge/patient, and/or payroll costs. Feel
free to be creative in this regard. Be sure to document your choice(s) by quantifying
how your proposed change(s) would improve the clinic’s financial performance. In
other words, if you propose reducing salaries to improve the bottom line, explain
that choice by describing how much the salaries would need to be reduced and the
effect that would have on the P & L of the clinic.
Also, remember that your providers (doctors and PA’s) are under contract, so if you
make changes to those agreements, it would require a renegotiation of all terms and
conditions. Because the nurses are non-exempt (hourly waged), you must adjust their
salaries if you going to make any recommendations that may affect their work
hours/days.
Market and Demographic Analysis:
How will local competition play a role (Demographic Analysis)
How will population changes play a role (Demographic Analysis)
If you elect to proceed with the move, do you think the new location will have any
impact on the financial projection? (Demographic & Competitor Analysis)
Any other recommendations you might want to consider
Assignment Layout & Formatting Details:
APA Format
Proper citations
Cover Page
Table of Contents
Executive Summary
Brief Demographic Analysis
Financial Analysis with associated spreadsheets including proper labels and
formulas
Summary & Recommendations