Assignment Exercise 151: Budgeting

Select an organization: either from the Case Studies in Chapters 2728 or from one of the Mini-Case Studies in Chapters 2931.

CHAPTER 27 Case Study: Strategic Financial Planning in Long-Term Care Neil R. Dworkin, PhD

BACKGROUND

John Maxwell, CEO of Seabury Nursing Center, a not-for-profit long-term care organization located in suburban Connecticut, had just emerged from a board of directors meeting. He was contemplating the instructions he had received from the boards executive committee to assess the financial feasibility of adding a home care program to the Centers array of services.

Seaburys current services consist of two levels of inpatient care, chronic care, and subacute units, and a senior citizens apartment complex financed in part by the Federal Department of Housing and Urban Development. In keeping with its mission, Seabury has a reputation of providing personalized, high-quality, and compassionate care across all levels of its continuum.

The CEO and his executive team agreed to meet the following week to plan the next steps.

INDUSTRY PROFILE

When John Maxwell convened his executive team the following week, he had already decided to present an overview of the home health industry as gleaned by Seaburys Planning Department. He prefaced his comments by drawing on recent research by the federal Agency for Healthcare Research and Quality that detailed why home health care in the 21st century is different from that which has existed in the past. He cited four reasons:

1. Were living longer and more of us want to age in place with dignity. 2. We have more chronic, complex conditions. 3. Were leaving the hospital earlier and thus need more intensive care. 4. Sophisticated medical technology has moved into our homes. Devices that were used only in medical offices are now in our living rooms and bedrooms. For example, home caregivers regularly manage dialysis treatments, infuse strong medications via central lines, and use computer-based equipment to monitor the health of loved ones.1

The CEO presented a profile of national home care data as compiled by the National Association for Home Care and Hospice as follows:

Approximately 12 million people in the United States require some form of home health care. More than 33,000 home healthcare providers exist today. Almost two-thirds (63.8%) of home healthcare recipients are women. More than two-thirds (69.1%) of home healthcare recipients are over age 65. Conditions requiring home health care most frequently include diabetes, heart failure, chronic ulcer of the skin, osteoarthritis, and hypertension. Medicare is the largest single payer of home care services. In 2009, Medicare spending was approximately 41% of the total home healthcare and hospice expenditure.2

According to the U.S. Census Bureau, he continued, in 2010 Connecticuts population was 3,574,097 of which 14.4% were age 65 or older.3 A Visiting Nurse Association (VNA) analysis of revenue by payer source in the state indicated that 60% of revenue was derived from Medicare.4

Required

1. Using the organization selected, create a budget for the next fiscal year. Set out the details of all assumptions you needed in order to build this budget.