Simulation Paper

Simulation Paper

Sarah Adams



Jack Heine

When looking at finances as a manager it is important to have all of the correct information. In this simulation paper we will discuss the capital shortage of the medical clinic. We will discuss how I analyzed how to cost cutting options that were selected and why. In the second phase of the simulation we will discuss what type of equipment should be used for the organization. The third phase will be discussing the type of the funding that would be best for financing a new project for the medical clinic. At the end of this paper we will have learned different types of ways to help capital shortage. Funding options for equipment, acquisition, and the types of funding options for capital expansions.

Phase I: Capital Shortage

The cost-cutting options that I selected for the capital shortage the first one is changing the skill mix in the medical center and Reducing Agency Staff then I choice the option 1. This amount is $1,500,000 with an interest rate for this option is 9.45%, the monthly installment $131,490, the term of this loan is set for 12 months, and there is no prepayment limitation. In the simulation for Elijah Heart Center the choices that I made were the correct methods when trying to turn around the medical facility’s budget. The reasons that I choice to mix the skills in the facility is that you can get staff that does not have any degrees to do work that does not require any special certificates, and this helps the nursing staff focus more on the patients, medical needs. This also reduces the cost of wages, so it saves the facility money. The other choice is reducing agency staffing because the facility was paying a lot for agency staffing and by using the mixed skill it reduces the need for more nurses because the nurses are not as busy when they have staff that can do some of the work for them that does not require licenses, or certificate.

The loan option that I choice was loan option 1 this is the best-known option that will improve the current working capital situation for the facility. By choosing this loan option it allows the medical facility have financial help during the shortfall before they receive the payments from Medicaid in the amount of $2,300,000. The option 1 helps the medical facility solve the current cash flow problem in the next three months. With this option you will be paying a higher interest rate but you are able to pay the loan back faster and there is not a prepayment limitation on this option.

The outcome of the capital shortage decision helped the medical facility by helping the registered nurses to have more open time to focus on the more complicated task directly affecting their patients, and the simple task are taken care of by the nurse assistance. With these options the company is able to save $811,249.00 in the first quarter which was over the targeted amount to save. By making these decision the medical facility is able to make money and keep the patients safe and with the proper staff that is needed to help the patients.

Phase II: Funding Options for Equipment Acquisition

In the second phase of simulation for equipment acquisition the first option that I choice for the High-Speed CT Scanner the loan option I choice refurbished Equipment Loan, the x-ray machine- capital lease equipment loan, and for the Ultrasound System- I choice the Operating lease for the ultrasound system. For the equipment options these were the best options to choose and that will help the medical facility out in the long run. By choosing to buy a refurb. High-speed CT scanner this makes it easier for the medical facility because CT scanners only have a shelf life of 10 years before they become obsolete and will make it more financially easier to get another CT scanner in 5 years because they did not spend a lot of money on a new system. For the x-ray machine I choice the capital lease option and this is the best option because this helps the facility by giving them options to where they can buy the equipment or get a new lease. This option for the x-ray machine is a good one because they have a shelf life of 15 years. The choice that was made for the Ultrasound machine was an operating lease this was the best option for the ultrasound system because this option has a lower upfront payments, and lower monthly payments this equipment only has a shelf life of about 5 years and this type of option gives them the option to upgrade the system when one is needed. Though the medical facility will be paying more with this option it gives the facility the benefit of having the best ultrasound systems with this option. So the reasons that I choice these options is because for EHC facility this is the best options in how they spend their budget and what will be best for the patients. When equipment only has a short shelf life it is important to know if it is the best option to buy a new system every 5 to 10 years or is it better to find a option to where the equipment can be leased and what the benefits would be for each option in the long run.

Phase III: Funding Options for Capital Expansion

The source of funding that I choice for the expansion of EHC was HUD 242 Loan insurance Program for the funding. The reasons that I choice this type of loan for the medical facility is that the bonds are callable for eight years. When deciding what was the best option for the funding for EHC I has to look at the (NPV) and what out of the three options would be best for this type of funding and I choice the HUD 242 because this option enables hospitals to have their debt financed as an investment grade (AA or AAA), this then provides the facility the lowest borrowing rates that are available in the capital market. If the interest falls the company will be able to make a profit if it occurred within the first eight years. During the simulation I was able to look at each option and them decide what I thought was the best option for EHC medical facility.

Summary and Conclusions:

I learned quite a bit during this simulation I was able to look at the different choices healthcare facility’s have when trying to find funding or other options available for a cash flow situation. When looking at the options you should decide on what will be best if you need to make changes in the staffing or if you need to look at different types of funding that needs to be coming in. Also, when you are looking at these options it is important that you have all of the information before a decision is made. Whether it be to cut some staff back or loan options. Being able to look at past, income statement, balance sheets and other information that will help the team make an informed decision is very important. When a company is looking to get new equipment for their facility it’s important to look at the shelf life of that is needed before making a decision whether to lease or buy new equipment. I learned that it takes, a lot of planning and research in order to make a facility run and be successful at the same time.

During this paper we talked about the decisions that were made for the facility. During the first phase of the simulation we made decision as to what the best way was in order to find funding for the cash shortfall, how the facility can cut back and still keep the staff needed in order to keep the patients safe. During the second phase we made decisions on what was best way to get equipment for the facility for the long term and how whether it be from buying a new system or finding ways to get equipment. Depending on leasing options and what type of shelf life the equipment has. If leasing equipment is ma better option than buying it because the shelf life is to short and the organization would have to replace it too soon.