DNRS 6211 Week 6 Assignment 4 Healthcare Budget Request

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Student name

Walden University

DNRS 6211: Finance and Economics in Healthcare Delivery

Professor Name

Submission Date

W6A4 Healthcare Budget Request – Budget Development

Summary of Analysis and Interpretation of Results

The Remote Patient Monitoring (RPM) system at Health Ways is a novel healthcare program that enables better patient outcomes by enabling them to monitor their health continuously beyond the clinical setting. This is a five-year budget estimate and outlines the expected revenue in the future, the expected risks and the costs of starting and running the system to ensure sustainability in terms of finances.

• Surplus or Deficit Over Five Years

The budget reveals that in the initial year of operation, there would be a deficit of 225, 000 dollars as the startup costs would be very high. The deficit will later reduce, however, when the RPM system drives revenue through patient services, insurance reimbursement corporate partner, and reduction in readmission of patients in the hospitals. The net cash flow is expected to reach -30 thousand towards the end of the 4th year. The system will generate positive cash flow at Year 5 and the amount is projected to be excess of 75,000. In the near future, Year 4, the RPM system will begin recouping costs, and will even make a profit, which will ensure financial sustainability in the long run. The payback period of first investment is approximately 4.29 years.

• Budget Allocation across Categories

The budget has resources allocated to both start-up and operating costs. The largest expenditure in Year 0 is the Patient Monitoring System hardware, which is at 100,000 (44.44 percent of the total startup costs). The second expense of 20,000 (8.89%) is staff training, and software development and integration follow at the second position, 50,000 (22.22%). Other startup costs are $15,000 marketing and outreach (6.67%), $10,000 legal and regulatory compliance (4.44%), and $30, 000 infrastructure setup (13.33%).

The cost of continued operation between Year1 and Year 5 is mainly on staffing and technology. The highest cost incurred is the salaries of the monitoring staff amounting to $700,000 (65.12% of the operating costs). Other operation expenses are RPM system maintenance and upgrades ($70,000 or 6.51%), server hosting and IT support, patient data management software subscriptions, and ongoing marketing expenses (35,000 or 3.26%), and insurance and liability expense (55,000 or 5.11%) are the expenses. These allocations portray the importance of technology infrastructure and skilled personnel to the success of the system.

• Risks and Mitigation Strategies

A number of risks have the potential of causing budget variances in the five years. Technology-related issues, such as device malfunctioning or software integration issues can increase costs. To minimize this risk a contingency fund should be set up and systematic system testing and maintenance should be conducted. Revenue can also be affected by changes in healthcare laws or due to changes in reimbursement policies, particularly insurance reimbursements (Rakers et al., 2023).

To prevent this threat, it is recommended to comply with regulatory changes and address the service of legal specialists. Moreover, the changes in the demand of the RPM services can influence revenues. Corporate channeling and continuous promotion campaigns help in stabilizing revenue streams. Finally, personnel problems, such as staffing problems or employee turnover can increase labor costs. Minimization of this risk may be attained through the focus on retention and competitive compensation.

• Implications for Health Ways

This budget will be a very important investment in the future of Health Ways. The RPM system will support value-based care, reduce hospital readmissions, and improve care provided to patients (Charkviani et al., 2023). The project indicates financial sustainability since the project is expected to have a positive cash flow during the Year 5 despite the initial deficit. In case the program will be implemented successfully, it will enhance patient satisfaction, operational efficiency, and the status of Health Ways as an innovative healthcare company. It is also in line with the growing trend of digital health.