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- 1. Sheet1Financial DataFinancial DataFinancial DataPrice per UOSbB/E Point (Volume) = Formula: TFC/CM UnitERROR:#DIV/0!Price per UOSbB/E Point (Volume) = Formula: TFC/CM UnitERROR:#DIV/0!Price per UOSbB/E Point (Volume) = Formula: TFC/CM UnitERROR:#DIV/0!VC per UOScB/E Point (Sales) = Formula: TFC/CM RatioERROR:#DIV/0!VC per UOScB/E Point (Sales) = Formula: TFC/CM RatioERROR:#DIV/0!VC per UOScB/E Point (Sales) = Formula: TFC/CM RatioERROR:#DIV/0!CM per UOSd (b-c)$ - 0CM per UOSd (b-c)$0.00CM per UOSd (b-c)$0.00TFCaCM Ratio (d/b)ERROR:#DIV/0!CM Ratio (d/b)ERROR:#DIV/0!CM Ratio (d/b)ERROR:#DIV/0!TFCaTFCaAcupunctureBiofeedback TherapyYoga TherapyUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOSUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOSUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOS0$34,835.00$0.00$34,835.00$0.000$0.00$0.00$0.00$0.000 $0.00$0.00$0.00$0.00100$34,835.00$0.00$34,835.00$0.00100$ 0.00$0.00$0.00$0.00100$0.00$0.00$0.00$0.00200$34,835.00$0 .00$34,835.00$0.00200$0.00$0.00$0.00$0.00200$0.00$0.00$0. 00$0.00300$34,835.00$0.00$34,835.00$0.00300$0.00$0.00$0.0
- 3. 0 0 0 0 0 0 0 0 0 0 0 0 Volume (Units of Service) Dollars $$ Breakeven-Biofeedback Therapy TC e + f 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TR b * UOS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Units of Service / Patients Dollars $$ Breakeven-Yoga Therapy TC e + f 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TR b * UOS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Volume (Units of Service) Dollars
- 4. Week 4; DQFinancial DataFinancial DataFinancial DataPrice per UOSb$ 367.57B/E Point (Volume) = Formula: TFC/CM Unit164Price per UOSb$252.73B/E Point (Volume) = Formula: TFC/CM Unit160Price per UOSb$183.74B/E Point (Volume) = Formula: TFC/CM Unit160VC per UOSc$ 24.00B/E Point (Sales) = Formula: TFC/CM Ratio$ 60,350.51VC per UOSc$9.54B/E Point (Sales) = Formula: TFC/CM Ratio$ 40,436.38VC per UOSc$3.05B/E Point (Sales) = Formula: TFC/CM Ratio$ 29,397.99CM per UOSd (b-c)$ 343.57CM per UOSd (b-c)$243.19CM per UOSd (b- c)$180.69TFCa$ 56,410.00CM Ratio (d/b)0.962CM Ratio (d/b)0.983CM Ratio (d/b)0.9347063144TFCa$38,910.00TFCa$28,910.00Acupunctur eBiofeedback TherapyYoga TherapyUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOSUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOSUOS/PatientsTFCe (= a)TVCf c * UOSTC e + fTR b * UOS0$34,835.00$0.00$34,835.00$0.000$38,910.00$0.00$38,91
- 6. ,264.00$54,174.00$404,368.001600$28,910.00$4,880.00$33,79 0.00$293,984.001700$34,835.00$40,800.00$75,635.00$624,869 .001700$38,910.00$16,218.00$55,128.00$429,641.001700$28,9 10.00$5,185.00$34,095.00$312,358.001800$34,835.00$43,200. 00$78,035.00$661,626.001800$38,910.00$17,172.00$56,082.00 $454,914.001800$28,910.00$5,490.00$34,400.00$330,732.0019 00$34,835.00$45,600.00$80,435.00$698,383.001900$38,910.00 $18,126.00$57,036.00$480,187.001900$28,910.00$5,795.00$34 ,705.00$349,106.002000$34,835.00$48,000.00$82,835.00$735, 140.002000$38,910.00$19,080.00$57,990.00$505,460.002000$2 8,910.00$6,100.00$35,010.00$367,480.002100$34,835.00$50,4 00.00$85,235.00$771,897.002100$38,910.00$20,034.00$58,944 .00$530,733.002100$28,910.00$6,405.00$35,315.00$385,854.0 02200$34,835.00$52,800.00$87,635.00$808,654.002200$38,910 .00$20,988.00$59,898.00$556,006.002200$28,910.00$6,710.00 $35,620.00$404,228.00 $$ Breakeven: Acupuncture TC e + f 34835 37235 39635 42035 44435 46835 49235 51635 54035 56435 58835 61235 63635 66035 68435 70835 73235 75635 78035 80435 82835 85235 87635 TR b * UOS 0 36757 73514 110271 147028 183785 220542 257299 294056 330813 367570 404327 441084 477841 514598 551355 588112 624869 661626 698383 735140 771897 808654 Volume (Units of Service) Dollars $$ Breakeven-Biofeedback Therapy
- 7. TC e + f 38910 39864 40818 41772 42726 43680 44634 45588 46542 47496 48450 49404 50358 51312 52266 53220 54174 55128 56082 TR b * UOS 0 25273 50546 75819 101092 126365 151638 176911 202184 227457 252730 278003 303276 328549 353822 379095 404368 429641 454914 Units of Service / Patients Dollars $$ Breakeven-Yoga Therapy TC e + f 28910 29215 29520 29825 30130 30435 30740 31045 31350 31655 31960 32265 32570 32875 33180 33485 33790 34095 34400 TR b * UOS 0 18374 36748 55122 73496 91870 110244 128618 146992 165366 183740 202114 220488 238862 257236 275610 293984 312358 330732 Volume (Units of Service) Dollars
- 8. HSA525 Week 4; Discussion Question Cost-Effective AnalysisCost Volume Profit Analysis for Proposed CAM AlAlternatives Interventions for Unresolved Lower Back Pain March 1, 2013 For this assignment, youโre assuming the persona of a health services manager working for Benson Regional Medical Center. The Center has been seeking opportunities to incorporate more complementary and alternative medicine (CAM) into its existing service offerings; however, it wasnโt until recently being awarded a federal grant from the National Center for Complementary and Integrative Health that made this goal possible. Despite western trained providersโ skepticism of non- traditional forms of medicine/therapies, there is a growing body of evidence to support the combination of complementary and conventional medical therapeutic interventions. To consumers, complementary medicine is less expensive than conventional treatments, easy to access, and attractive to patients who have tried more traditional treatment approaches with limited or no success. Dr. Dana Foster, Chief of Staff, has requested that you complete a cost volume profit (CVP) analysis looking to determine the sales and volume breakeven points for three (3) CAM alternatives: acupuncture, biofeedback, and yoga therapy. In addition to computing the breakeven points, you are also being asked to create CVP graphs for these unconventional interventions. Many who work in the local economy hold what are classically viewed as blue collar positions and are; therefore, prone to suffering from chronic lower back pain. Financial assumptions, costing data, and prices per units of service (UOS) have been identified with assistance from various
- 9. functional areas within and outside the Center. You recently completed your analysis using Microsoft Excel. Now that the CVP analysis and CVP graphs have been completed for each alternative, Dr. Foster would like for you to email her your findings, which CAM alternative youโd recommend launching first, and your supporting rationale. Hint: As you know, when a CVP graph is created using Microsoft Excel, you can manipulate the financial data used to create the graph (price, unit VC, UOS), and immediately observe how these changes impact the breakeven point within the graph. For example, perhaps you could lower your FC forecasts during the contract negotiation process; find suppliers that care produce educational materials for less; or negotiate more favorable credit terms on the purchase of supplies. CAM Alternatives Pain Management Clinic, Patient Education Department, Physical Therapy Department, and Business Office of Splendid Hills Hospital You recently conducted a cost-effectiveness analysis (CEA) of alternative interventions for the Pain Management Clinic of Splendid Hills Hospital. You were assisted by staff and practitioners from the patient education department, pain management clinic, physical therapy department, and members of the business office. The hospital has been seeking opportunities to incorporate more complementary and alternative medicine (CAM) into its existing service offerings. The CEA will be used to help the Chief of Staff determine which unconventional intervention to recommend for funding and support in FY 2014. Historically, western prepared practitioners have been skeptical of CAM and, therefore, a bit resistant to its mainstreaming in health care. With that said, there is a growing body of evidence
- 10. to support the combination of complementary medicine and conventional medical therapeutic interventions. The first alternative is acupuncture. This is an ancient process, rooted in Eastern medicine, where thin, solid needles are strategically inserted in the body, and then are carefully manipulated by the practitioner. The next alternative is biofeedbackmassage therapy. In this intervention, patients harness the power of their mind and becoming aware of what's going on inside their body, so they can gain more control over their health.long, smooth strokes, kneading and other movements are used to focus on superficial layers of muscle. The last intervention to consider is spinal manipulationyoga therapy. Yoga therapy is a type of therapy that uses yoga postures, breathing exercises, meditation, and guided imagery to improve mental and physical health. The holistic focus of yoga therapy encourages the integration of mind, body, and spirit. Modern yoga therapy covers a broad range of therapeutic modalities, incorporating elements from both physical therapy and psychotherapy. This is an intervention where certain areas of the spine are moved using massage, articulation, and high velocity/low amplitude thrusts. Manipulation involves encouraging the โstiffโ area of the spine to begin moving again, and comprises soft tissue massage, gentle mobilization movements (articulation), and firmer carefully controlled movements (high velocity low amplitude thrustsโHVTs) which stretched the stiff part often accompanied by a series of โclicksโ or โpops.โ The objective of all of these interventions is to help patients find relief from chronic lower back discomfort when more conventional medical interventions seem to fall short of expectations. An in-depth review of the literature revealed that each CAM approach has been effective in managing chronic lower back pain for a number of clients. Each is considered relatively safe when performed by certified or licensed professionalpractitioners. There are certainly intangible benefits associated with each
- 11. therapy. For example, many patients report being pain free after years of intolerable discomfort. Others reported being able to resume leisurely and work-related activities that were not possible due to the back pain prior to receiving complementary and alternative medical interventions. You and your colleagues the other members of the committee know that in addition to the intangible benefits there are those that can be measured in dollars and cents. These include a reducedtion in the frequency number of doctor visits; lead to less reliance on pain management medications (opioids); and lowerlessen lost productive time at work. These tangible and intangible benefits are not quantified for the purposes of completing the CVP analysis and graphing. the CEA. The plan is that once an alternative is identified and implemented, it will be evaluated using a cost benefit analysis (CBA) at a later date. Intervention Costs (FC and VC) In order to decide which therapy to recommend for funding, you need to and the other members of your team identified the relevant costs (fixed and variable) associated with each alternative on a per client and annual basis, as well as developed financial assumptions which were used to estimate the costs. Fixed costs (FC) remain more ofr less unchanged irrespective of the volume of clients seen; . Howehowever, in reality, all costs will tend to vary over time. Generally speaking, direct labor is considered a variable cost (VC); however, in health care we typically consider direct labor (practitioners, nurses, therapists, nursing aids, medical assistants, etc.) to be a semi-fixed cost or mixed costsFC. For CVP purposes, semi-fixed costs are FC. For example, fixed costsFC, for purposes of the CEACVP include hourly wages for the staff and any equipment used in the provision of care. Variable costs (VC) vary with output, so the greater the volume of clients see the greater the VC. For the CEA and CVP, the VC will include patient education materials and consumable
- 12. supplies used in the provision of care. Financial Assumptions It was assumed that the pain management clinicomplementary and integrative health service linec, which will incorporate the chosen CAM alternative into their its existing services, will have 150160 clients, for the first year of operation, which will be appropriate for this new service. It was also assumed that the provider will be contracted (non- benefited) with the hospitalCenter and will be expected to dedicate a total of 10 hours per week at the facility Center providing care to clients. This includes time to not only evaluate and treat the clients, but also provides ample time for charting and other necessary paperwork. It is assumed that the provider will only be available 50 weeks per year allowing 2 weeks for rest and relaxation (vacation). The hospitalCenter will allot a total of 2 hours per week of one (1) clerical worker who will assist in scheduling; ensuring patient education materials are stocked and available; coordinating resources necessary to meet the clientsโ needs; and place follow-up calls with clients and other persons connected with the clientsโ care. For the spinal manipulation alternative, the hospitalCenter will need to retain the services of an outside Radiologist to read the radiographs. This is estimated to take a total of one (1) hour per week. There will also be a need for an to an X-ray Technician, who will be responsible for taking the radiographs and sending them to the Radiologist. The Technician will be employed by the hospitaCenterl and supporting this alternative shouldnโt consume more than an hour per week. It was assumed that each alternative will routinely provide appropriate patient education materials (take-away pieces) for their clients, and that this cost will vary based on the market value of these collaterals. Under spinal manipulationyoga therapy, the clients would receive five (5) appropriate brochures at $.61 apiece; for massagebiofeedback therapy the clients receive a single trifold
- 13. brochure at a cost of $.19; and finally the acupuncture service would provide three (3) separate brochures at a unit price of $187 apiece for the Q&A and First Visit brochure and $6.50 for the Steps of Care brochure. Completing the CEA In order for the committee to complete the CEA, you had to determine the labor costs associated with each alternative; the cost of the patient education materials; the cost of consumable supplies; and then calculate the annual and per client costs (FC and VC) for each alternative. Based on labor research and input from Human Resources, you were able to determine that an experienced, doctor prepared, licensed acupuncturist will cost $50 per hour; an experienced, certified message therapist with cost $62 per hour; and an experienced, licensed Chiropractor, with a PhD, will cost $105 per hour. The clerical worker is paid $11.00 per hour and is benefited, so this amounts to an additional 10% to the hourly rate for an adjusted hourly compensation of $12.10. For the spinal manipulation alternative, there are additional labor costs, which needed to be taken into consideration. The X-ray technician who will be needed to take the radiographs of the clientsโ back will cost $23 per hour plus an additional 10% for benefits which will come to an adjusted hourly rate of $25.30. The annual FC (i.e., salaries) was calculated using the following formula: (hourly rate of compensation * number of hours dedicated to these clients per week) * 50 weeks in a given year. (See table 1) To determine the FC cost per client, the following formula was applied: (hourly rate of compensation * number of hours dedicated to these clients per week) * 50 weeks in a given year)/150 anticipated clients during the rollout year. (See table 1). To calculate the VC (i.e., patient education materials and consumable supplies) for each alternative, we applied the following formula: unit cost of brochures and consumable supplies * the anticipated total number of clients in
- 14. a given year. (See table 1) To get the annual cost (FC and VC) for each of the three (3) CAM alternatives, the committee simply added the annual FC plus the annual VC to reach the total cost (TC). (See table 1) Completing the Cost Volume Profit Analysis (Sales & Volume) In order to complete the CVP analyses for each CAM alternative, you will need the price per unit of service (UOS) or patient, the VC per UOS or patient (i.e, patient education materials and consumable supplies), the total variable cost (TVC), the annual FC, the total fixed cost (TFC) per year (i.e., salaries), the unit contribution margin (CM), and the contribution margin ratio. In addition to computing the CVP (sale & volume breakeven point) for each CAM alternative, youโll be constructing a CVP Graph for these alternatives. The FC (i.e., salaries) was calculated using the following formula: (hourly rate of compensation * number of hours dedicated to these clients per week) * 50 weeks in a given year. (See table 1) To determine the TFC per year, the following formula was applied: (add the annual compensation for each alternative). (See table 1) To calculate the VC (i.e., patient education materials and consumable supplies) for each alternative, the following formula was applied: unit cost of brochures and consumable supplies * the anticipated total number of clients in a given year. (See table 1) To calculate the TVC, the following formula was applied: add the VC for the consumable supplies and brochures for each alternative. (See table 1) To determine the VC per UOS/patient, the following formula is to be applied: TVC / total number of patients seen in a given period of time (initial year). The price per UOS was estimated by taking the national average for each alternative being considered. (See table 1) To compute the unit CM, the following formula was applied: price per UOS โ VC per UOS. (See figure 1) To calculate the CM ratio, the following formula should be applied: unit CM / price per UOS. (See figure 1) To
- 15. compute the CVP breakeven point, in sales ($$), you should apply the following formula: TFC / CM Ratio. (See figure 1). To compute the CVP breakeven point, in UOS, you should apply the following formula: TFC / Unit CM. (See figure 1). Completing the Cost Volume Profit Graphs To create CVP graphs to visually display the breakeven point for each alternative, you will need the following financial data for X number of periods into the future (example, 10 years): anticipated UOS, FC, TVC, TC, and total revenue (TR) (See figure 1). When anticipating the UOS, you may want to begin with โ0โ UOS, and then include evenly spaced intervals going forward (See figure 1). For example, you may start with โ0โ UOS, and then anticipate an increase of 100 UOS per year for the next 10 years (0, 100, 200, 300, 400, 500, 600, 700, 800, and 900) (See figure 1). You can use any interval you choose and for any period of time into the future. The FC is simply FC you computed when calculating the CVP (See figure 1). Since FC donโt change with changes in volume (or UOS), this value will be the same for each period (See figure 1). The TVC is computed by using the following formula: VC per UOS * each UOS (See figure 1). The TC is calculated using the following formula: FC + TVC for each UOS (See figure 1). TR is calculated by using the following formula: price per UOS * each UOS (See figure 1). Figure 1 to the left provides an example of data needed to compute CVP graphs. This illustrates the calculations needed to construct a graphical representation of the CVP breakeven in Microsoft Excel (See Figure 1). Figure 2 provides an example of a CVP graph using the TC and TR data contained in Figure 1. Figure 2: CVP Graph
- 16. TTable 1: Cost Effective Analysis of CAM Alternatives Item Cost Per Patient Annual Cost Fixed Costs: Acupuncture Contracted, experienced, doctoral prepared Acupuncturist @ $50110.00/hr. for a total of 10 dedicated hrs/wk $343.75166.67 $2555,000.00 Clerical support @ $124.10/hr., including benefits, for a dedicated 2 hrs/wk $8.0782 $1,2410.00 Total Fixed Costs (TFC) $56,410.00 Variable Costs & Price: Acupuncture Q&A Brochure $187.00 $21,700120.00 First Visit Brochure $187.00 $21,700120.00 Steps of Care Brochure $186.050 $1,0402,700.00 Acupuncture Needles $3.50 $52560.00 Total Variable Cost (TVC)
- 17. $3,840.00 Variable Cost per UOS $24.00 Total Cost for Acupuncture (TC) $232107.2482 $34,835.0060250.00 Price per UOS/Patient $376.57 Fixed Costs: Massage TherapyBiofeedback Contracted, experienced, certified MassageBiofeedback Therapist @ $6275/hr. for a dedicated 10 hrs/wk $206.6734.38 $31,00037,500.00 Clerical support @ 124.10/hr., inclusive of benefits, for a dedicated 2 hrs/wk $8.0782 $1,4210.00 Total Fixed Cost (TFC) $38,910.00 Variable Costs & Price: Massage TherapyBiofeedback Various trifold brochures with display (anticipate one (1) per client) $0.19 $2830.4.50 Massage lotion (8 oz. bottle)Consumable supplies per client $9.35 $1,,40296.500 Total Variable Cost (TVC) $1,526.40 Variable Cost per UOS
- 18. $9.54 Total Cost for MessageBiofeedback (TC) Therapy $224.2852.74 $3340,641436.040 Price per UOS/Patient $252.73 Fixed Costs: Spinal ManipulationYoga Therapy Contracted, experiencesd, certified PhD prepared, licensed, ChiropractorYoga Therapist @ $5105.005/hr. for a dedicated 10hrs/wk $350.00171.88 $52,500.00$27,500.00 Clerical support @ 124.10/hr., inclusive of benefits, for a dedicated 2 hrs/wk $8.8207 $1,2410.00 Contracted, licensed, Radiologist @ $72/hr estimating an 1hr/wk of service $24.00 $3,600.00 X-ray Technician @ $25.30/hr, inclusive of benefits, for an estimated 1 hr/wk $7.67 $1,150.00 Total Fixed Cost (TFC) $28,910.00 Variable Costs & Price: Spinal ManipulationYoga Therapy Patient education brochures (assume 5 per client) $3.05 $457.5088.00 Total Variable Cost (TVC) $488.00 Variable Cost per UOS
- 19. $3.05 Total Cost for Spinal ManipulationYoga Therapy (TC) $393.55183.75 $59,032.5029,398.00 Price per UOS/Patient $183.74 You and the Resources Management Committee have all the data you need to make a decision. You have agreed to prepare the PowerPoint Presentation for the Chief of Staff. You last task for the data given is to prepare a table that lists the cost per patient and annual costs for each option. This will be one of the slides you present. Price per UOS b $65.00 VC per UOS c $7.50 CM per UOS d (b-c) $57.50 CM Ratio (d/b) 0.885 TFC a $58,575.00 UOS/Patients TFC e (= a)
- 20. TVC f c * UOS TC e + f TR b * UOS 0$58,575.00$0.00$58,575.00$0.00 100$58,575.00$750.00$59,325.00$6,500.00 200$58,575.00$1,500.00$60,075.00$13,000.00 300$58,575.00$2,250.00$60,825.00$19,500.00 400$58,575.00$3,000.00$61,575.00$26,000.00 500$58,575.00$3,750.00$62,325.00$32,500.00 600$58,575.00$4,500.00$63,075.00$39,000.00 700$58,575.00$5,250.00$63,825.00$45,500.00 800$58,575.00$6,000.00$64,575.00$52,000.00 900$58,575.00$6,750.00$65,325.00$58,500.00 1000$58,575.00$7,500.00$66,075.00$65,000.00 1100$58,575.00$8,250.00$66,825.00$71,500.00 1200$58,575.00$9,000.00$67,575.00$78,000.00 1300$58,575.00$9,750.00$68,325.00$84,500.00 1400$58,575.00$10,500.00$69,075.00$91,000.00 1500$58,575.00$11,250.00$69,825.00$97,500.00 1600$58,575.00$12,000.00$70,575.00$104,000.00 1700$58,575.00$12,750.00$71,325.00$110,500.00 1800$58,575.00$13,500.00$72,075.00$117,000.00 Financial Data