course materials

1. Assignment: Healthcare Finance and Business Plan Thesis Paper
Assignment: Healthcare Finance and Business Plan Thesis Paper ON Assignment:
Healthcare Finance and Business Plan Thesis PaperUsing the case study for Shasta
Outpatient Clinics, you will create a cost-benefit analysis (CBA). The Shasta Clinic leadership
is trying to determine whether a staffing enhancement of a physician extender is needed in
all three of their clinics or in only one or two of them. By applying the concepts of CBA, you
will make a recommendation and present it in a business plan that identifies your
recommendation for the physician extender. You will assess fixed costs (FC), variable costs
(VC), and total costs (TC). The Assignment will give you experience creating a business case
that you can use as a healthcare manager to state your case with sound financial
principles.The Assignment: (1- to 2-page Business Plan and Excel Sheet)To complete this
Assignment, you will:Complete a cost-benefit analysis (CBA) using the Shasta Family
Practice case study.Prepare a 1- to 2-page Business Plan that you will submit to the Shasta
Vice President Dr. Rudy Mason that synthesizes your CBA results.Part I. The CBA (1-page
Excel spreadsheet)Download the Shasta Family Practice spreadsheet (in the Learning
Resources)Using the data provided in the Shasta Family Practice case study, insert the fixed
and variable costs associated with each physician extender alternative into the spreadsheet.
The data will be entered into the cells shaded green. Do not enter data in the cells shaded in
pink.The spreadsheet will automatically calculate annual costs. Once you have your cost
results, you will be able to propose the physician extender plan that will provide the most
cost benefit for the three outpatient clinics.Save your results in the Excel spreadsheet for
submission. Assignment: Healthcare Finance and Business Plan Thesis PaperPart II.
Business Plan (2–3 pages)In order to communicate your results, you will prepare a
professional business plan for delivery to Dr. Rudy Mason, Vice President of the Shasta
Family Practice. You will prepare a Business Plan that addresses the following:Explain the
concept of using a physician extender and the two types of extenders.Provide a brief
description of the services of each clinic.Identify the purpose and assumptions associated
with a cost-benefit analysis (CBA)Share why a CBA was appropriate for determining the
physician extender alternative.Identify the FC, VC, and TC for an Outpatient Surgery
Center.Identify the FC, VC, and TC for an Internal Medicine Center.Identify the FC, VC, and
TC for an Eldercare Clinic.Explain which physician extender alternative provides the most
cost-benefit given the CBA results for each clinic.Explain and your recommendations for
assessing the clinical and financial outcomes.Make sure to follow APA guidelines for your
business plan format and your business plan with

2. references.case_shasta_faculty_practice_5_cost.docxspreadsheet.xlsxUnformatted
Attachment PreviewCASE SHASTA FACULTY PRACTICE 5 COST–BENEFIT ANALYSIS
SHASTA FACULTY PRACTICE (the Practice) is the not-for-profit corporation that controls
the clinical operations of the medical faculty of Shasta University. The Practice provides all
physician services for Shasta Health System (the System), which consists of six hospitals
plus ing services that, in total, provide the entire continuum of care. The main inpatient
facility is a 650-bed tertiary care academic medical center, although the System also owns
two rural 50-bed hospitals, a 125-bed community hospital, and a 250-bed long-term care
facility. In addition, the System owns multiple outpatient clinics and has established joint
ventures with several other outpatient providers. The Practice’s vice president for
outpatient services, Dr. Rudy Mason, is exploring the use of physician extenders in the
clinics to enhance physician productivity and, ultimately, the Practice’s profitability. In
recent years, the role of physician extenders has evolved to the point where they, for
example, can perform more than 80 percent of primary care physicians’ patient care duties.
They take medical histories; perform physical examinations; diagnose and treat illnesses;
order and interpret laboratory tests; and, in most situations, prescribe medications. The
term physician extender remains widely used, but other terms are used to refer to physician
extenders, such as advanced practice professionals, midlevel providers, and non physician
providers. The use of extenders allows physicians to treat more and higher-acuity patients,
expediting patient flow and increasing revenues. Assignment: Healthcare Finance and
Business Plan Thesis PaperIn addition, because compensation for physician extenders is
less than that for physicians, costs per patient visit can be lowered. Aside from the obvious
productivity and economic benefits, studies indicate that patient satisfaction improves
when physician extenders are used. In essence, they are willing (and often able) to spend
more time with each patient than physicians usually do. This extra attention typically
results in better quality of care (real or perceived) and higher patient satisfaction. However,
as the role of physician extenders expanded, it was inevitable that some conflicts would
arise. The increasing recognition by third-party payers that extenders are as acceptable as
physicians in providing many services means extenders are a potential source of direct
competition for physicians. Still, physicians at many solo and group practices are using
extenders to supplement and complement their work. Adding to the extender-use trend,
predicted shortages in primary care physicians (roughly 65,000 by 2025, according to the
Association of American Medical Colleges) means that extenders will have to fill the
physician void to prevent reduced access to primary care. The two main types of physician
extenders are advanced registered nurse practitioners (NPs) and physician assistants (PAs).
Although NPs and PAs often perform similar tasks, their training and certification
requirements differ. NPs must be licensed in the state in which they practice. To acquire
such licensure, an individual must be licensed as a registered nurse, meet additional
education and practicum requirements that historically led to a master’s degree, and pass a
national certification examination in one of several specialized areas. Now, however, most
nursing schools that offer nurse practitioner education are transitioning to programs that
lead to doctor of nursing practice (DNP) degrees. This trend has created an expectation that,
at some future date, the DNP degree will become a requirement for certification. (For more

3. information on NPs, see the website of the American Association of Nurse Practitioners at
www.aanp.org.) PAs must graduate from an accredited physician assistant educational
program and then obtain certification by the National Commission on Certification of
Physician Assistants. The educational training for a PA is similar to that of a physician but is
much shorter—historically only two years.PA programs traditionally offered either
associate or bachelor’s degrees, but most programs today are at the master’s level. (For
more information on PAs, see the website of the American Academy of Physician Assistants
at www.aapa.org.) Although it may appear that NPs and PAs are perfect substitutes for one
another, the differences in educational background create differences in philosophies of
care. Because NPs follow the nursing model of care, which focuses on health education and
counseling as well as disease prevention, they typically have a special concern for the
overall health and welfare of patients. PAs, on the other hand, generally follow the medical
model of care, which focuses on diagnosis and treatment. Of course, these are
generalizations that do not necessarily apply to specific individuals. Although most NPs and
PAs practice in primary care settings, others specialize in such areas as dermatology,
pediatrics, geriatrics, anesthesiology, surgery, and emergency medicine. The practice status
of physician extenders has been, in large part, driven by state law. Historically, some states
allowed NPs to practice independently, while others mandated some physician involvement
(collaborative or supervisory). With PAs, most states required that a physician be physically
present (or electronically available) when a PA treats a patient. In addition, many states
allowed NPs to prescribe all medications independent of physician supervision, while the
ability of PAs to prescribe medications was much more limited. However, the Balanced
Budget Act of 1997 removed many of the limitations imposed by individual states. Today,
both NPs and PAs are allowed to practice without the immediate availability of a
supervising physician. Note, however, that NPs are allowed to practice under their own
licenses, while PAs must practice under the license of a physician. The reimbursement of
physician extenders, like all reimbursement for healthcare services, is complicated by the
fact that many different third-party payers use different payment methodologies. For the
purposes of this case, assume that all payers use the same system as Medicare, which
recognizes several different situations in which extenders provide services. In general,
Medicare pays extenders in all settings 85 percent of the physician’s fee schedule. Thus, if an
extender provided a service that would result in a $100 payment to a physician, the
payment would be $85. However, there are two important exceptions to this rule. First, if
the extender and physician both see the patient during an office visit, the combined work of
both the extender and physician is reimbursed at 100 percent of the physician fee schedule.
But if the patient service is a procedure (as opposed to a visit) and the work is done
primarily by the extender, the 85 percent rule applies. Second, extenders are paid at a 100
percent rate if the service provided is “incident to” a previous visit or service provided by a
physician. This provision requires that the physician be physically on-site and that the
service provided by the extender be related to a diagnosis made earlier by a physician. Note
that incident-to billing only applies to services provided in offices and clinics as opposed to
services provided in hospitals. In effect, these rules mean that most extender billings in
offices and clinics are at the 100 percent rate, so average extender reimbursement falls

4. closer to 100 percent than to 85 percent of the physician rate. Assignment: Healthcare
Finance and Business Plan Thesis PaperThe effect of extenders on physician costs and
revenues is highly variable. After some acclimation time, which is required for the extender
to become fully productive, several financial effects are realized. First, the physician
becomes more productive (sees more patients) because the extender can provide the
service for a portion of the visit that is billed by the physician. On average nationwide, this
increase in the number of billed visits by the physician is estimated to be 10 to 15 percent.
Second, the physician’s average reimbursement amount increases because the extender is
handling the less complex cases. The national average impact on physician billing amount is
estimated to be 5 to 10 percent. Finally, the extender can see patients independently and
bill for those services. On average, extenders see 10 to 20 percent fewer patients than do
physicians. In addition, because some of these visits are joint with the physician and billed
by the physician, the extender can bill only for the remaining visits, which represent 85 to
90 percent of the visits. Of course, the extent to which these synergies are realized depends
on demand (volume). The greater the demand for physician services, the faster an extender
can become fully productive and the greater the impact on physician productivity and
reimbursement amounts. At this time, the Practice does not use extenders. However, Dr.
Mason believes that extenders can play an important role in many, if not all, of the Practice’s
clinics. As a start, three clinics have been identified for evaluation: the outpatient surgery
preoperative and postoperative clinic, the internal medicine (family practice) clinic, and the
eldercare clinic. Dr. Mason then developed the selected data regarding each clinic’s
physician staffing, productivity, revenues, and costs (shown in exhibit 5.1). For example, the
preoperative and postoperative clinic has 2.5 physician FTEs (full-time equivalents) who
handle 7,560 patient visits annually, which generate $842,481 of revenue (collections).
Annual compensation for the physician FTEs totals $485,000. You have been hired as a
consultant by the Practice to look into the use of physician extenders. Specifically, Dr. Mason
has asked you (1) to estimate the financial impact of using one physician extender at each of
the three clinics and (2) to recommend the type of extender that is most appropriate for
each setting. These tasks are not trivial and might require assumptions and information to
supplement the data presented in the case. As a start, you conclude that the national
financial impact data presented earlier must be modified to reflect the actual impact on
physician productivity in the three settings. Next, you plan to estimate how many additional
visits might be generated at each clinic if one extender is employed. Then, the impact on
costs and revenues must be examined. Of course, it might be possible to use an extender to
reduce the number of physician FTEs rather than to increase volume.This outcome should
be explored if appropriate. Regarding physician extender costs, annual compensation for
both NPs and PAs falls into the $80,000 to $100,000 range, depending on geographic
location, clinical setting, and work experience. One of the keys to the analysis is an estimate
of the volumes that could be realized at each clinic should an extender be added.
Unfortunately, Dr. Mason has only anecdotal evidence (office watercooler speculation) on
future demand. The best estimate is that patient volume at the preoperative and
postoperative clinic is increasing at a 15 percent annual rate as outpatient surgery volume
increases. The situation at the internal medicine clinic is quite different. There is a several-

5. month backlog in scheduling, and hence a physician extender could be fully used in a
relatively short time. Finally, volume at the eldercare clinic has been sporadic and growing
very slowly, so there is some doubt about whether another clinician is needed at this time.
Dr. Mason recognizes that you are working with a minimum amount of hard data. Thus, you
must very clearly express and the assumptions used in your analysis. Model CASE 5
SHASTA FACULTY PRACTICE: Cost-Benefit Analysis Copyright 2018 Foundation of the
American College of Healthcare Executives. Not for sale. Model with Questions, Student
Version This case analyzes the use of physician extenders in three settings: an outpatient
surgery preoperative and postoperative clinic, an internal medicine (family practice) clinic,
and an eldercare clinic. The model is designed to focus on one setting at a time. Thus, each
clinic has to be analyzed independently. The model consists of a complete base case
analysis–no changes need to be made to the existing MODEL-GENERATED DATA section.
However, values in the INPUT DATA section of the student spreadsheet have been replaced
by zeros. Students must select appropriate input values and enter them into the cells with
values colored red. After this is done, any error cells will be corrected and the base case
solution will appear. The KEY OUTPUT section includes the most important output from the
MODEL-GENERATED DATA section. Outpatient Surgery Preoperative and Postperative
Clinic INPUT DATA: KEY OUTPUT: Clinic Data: Number of days per year Number of visits
annually Number of physician FTEs Physician costs Physician revenues Cost, Productivity,
and Reimbursement Assumptions: Assumed total volume increase Extender annual
compensation Extender assists physician: Physician productivity gain Physician billing gain
Extender replaces physician: 0 0 0.00 $0 $0 Historical Using one extender to* Assist/work
alone Replace one phys.Act independently Expected volume** Maximum Volume 0 #DIV/0!
#DIV/0! #DIV/0! 0 *Assumes historical physician productivity **Assumes physician
productivity increases can handle hig 0.0% (Assumed total increase in clinic volume) $0
0.0% (Increase in number of physician billings due to extender) 0.0% (Increase in physician
billing amount due to extender) Page 1 Extender productivity Extender reimbursement %
Assists/works alone mix Model 0.0% (Extender visits as a percentage of average physician
volu 0.0% (Percentage of physician reimbursement paid to extender) 0.0% (100% = used
only to assist physician; 0% = used only to w in-between indicate mix of both roles)
MODEL-GENERATED DATA: Current (Historical) Situation Baseline physician revenues
Baseline physician costs Contribution $0 0 $0 Using One Extender to Both Increase
Physician Productivity and Bill Separately (Assumes Historical Physici as Enhanced by Exte
Baseline physician revenues $0 Incremental physician revenues #DIV/0! Extender revenues
#DIV/0! Total revenues #DIV/0! Baseline physician costs $0 Extender costs 0 Total costs $0
Contribution #DIV/0! Change from historical: Dollar change Percentage change #DIV/0!
#DIV/0! Using One Extender to Replace One Physician (Assumes Historical Physician
Productivity) Baseline physician revenues Incremental physician revenues Extender
revenues Total revenues Baseline physician costs Incremental physician costs Extender
costs Total costs Contribution $0 #DIV/0! #DIV/0! #DIV/0! $0 #DIV/0! 0 #DIV/0! #DIV/0!
Change from historical: Dollar change Percentage change #DIV/0! #DIV/0! Page 2 Model
Adding One Extender to Practice Independently (Assumes Initial Physician Productivity)
Baseline physician revenues Extender revenues Total revenues Baseline physician costs

6. Extender costs Total costs Contribution $0 #DIV/0! #DIV/0! $0 0 $0 #DIV/0! Change from
historical: Dollar change Percentage change #DIV/0! #DIV/0! Volume Growth Without
Using Extenders (Assumes that Physicians Can Increase Productivity to Meet Inc Baseline
physician revenues Incremental physician revenues Total revenues Baseline physician costs
Contribution Change from historical: Dollar change Percentage change $0 0 $0 0 $0 $0
#DIV/0! Page 3 Model 12/1/2017 ves. Not for sale. nt surgery c, and an eldercare clinic. o be
analyzed made to the existing tion of the student ut values and enter be corrected and
important output Contribution $0 #DIV/0! #DIV/0! #DIV/0! $0 Dollar Change #DIV/0!
#DIV/0! #DIV/0! $0 Percentage Change from Historical #DIV/0! #DIV/0! #DIV/0! #DIV/0!
productivity vity increases can handle higher volume nic volume) an billings due to
extender) mount due to extender) Page 4 Model Page 5 Model ase Productivity to Meet
Increased Volume) END Page 6 Question 1 Describe the differences between nurse
practitioners and physician Question 2 Consider the Outpatient Surgery Preoperative and
Postoperative Clinic. a. What type of extender is most suitable for this clinic? Justify your
answer. b. Assume that one extender is hired and that the number of physicians remains at
the level given in exhibit 5.1. Furthermore, the extender can be used both to increase
physician productivity and to increase volume. What would be the financial effect on the
clinic? c. Now repeat the analysis, but assume that the extender replaces one physician. d.
Repeat the analysis again, but now assume that the extender is used solely to increase the
clinic’s capacity. (The extender acts independently to increase patient volume.) e. Which of
the three scenarios (increasing physician productivity/capacity, replacing a physician only,
or increasing capacity only) appears to be best at this point? f. Suppose that the expected
volume increase could be met by increasing the productivity of the current physician staff.
How would this fact influence the final decision? increase eplacing Question 3 Consider the
Internal Medicine Clinic. Repeat Question 2 in this setting. Question 4 Consider the
Eldercare Clinic. Repeat Question 2 in this setting. Question 5 Compare the relative
attractiveness of using extenders at the three clinics. Explain your results. Question 6
Considering all your findings, what are your conclusions and recommendations regarding
the use of physician extenders? Question 7 In your opinion, what are three key learning
points from this case. Assignment: Healthcare Finance and Business Plan Thesis Paper