For this case study, we$$ll take a look at St$.$ Sebastian Health System, a modest$-$sized Midwest hospital system. The CFO

has brought you in to examine some long$-$term financial trends in his system. She is projecting a loss of $$12\mathrm{.}5$ million in

$2023,$ which is concerning, since $2020,2021$ and $2022$ all had modest operating gains. She is concerned that state and

federal aid payments received in those years $($but not $23)$ related to the Covid pandemic may have masked some

underlying weakness in St$.$ Sebastian$$s operations. So$,$ she$$s asked you to take a look at the financial picture from $2013$

and compare that to the $2023$ year.

In the year $2023,$ St$.$ Sebastian had $238,900$ patient visits $($combined IP and OP$)$ with an average cost per visit of $$1,785$

with an average charge per visit of $$4,650.$ In $2013,$ the average cost per visit was $$1,426$ and the average charge per

visit was $$3,637.$ In $2013,$ Commercial plans were reimbursing $($paying$)$ St$.$ Sebastian $55\mathrm{.}25\%$ of their charges, Medicare

paid $30\%$ of charges, Medicare Advantage paid $29\mathrm{.}1\%$ and Medicaid paid $25\%$ of charges. Uninsured patients were

paying around $2\%$ of charges. In $2023,$ Commercial plans paid $51\mathrm{.}25\%$ of charges, Medicare paid $30\%$ of charges,

Medicare Advantage paid $25\mathrm{.}5\%$ and Medicaid paid $25\%$ of charges. Uninsured patients paid $2\%.$ A complete look at the

breakout of total visits is below:

Part B $$ Prepare an exhibit similar to what you did in Part A$,$ but this time, project what things will look like in ten years

$(2033).$ As a help, assume the following are true $($and should be considered in this order$)$:

Looking at Total Services and Charges:

$$ Overall Services, and Total Charges grow at same rates as $\text{'}13-23$

$$ Medicare grows at same rate as $13$

$23,$ but MA is $70\%$ of total Medicare by $2033($vs$.51\%$

in $2023)$

$$ Medicaid and self$-$pay stay at same portion of $2023$ total $($i$.$e$.$ if Medicaid was $15\%$ of

services in $2023,$ it will still be $15\%$ in $2033)$

$$ Commercial svcs and charges 'fill in$\text{'}$ the remainder for services and charges

Looking at Payments and Costs

$$ Payments and Cost should reflect $$$/$svc growing at same rate observed $\text{'}13-\text{'}23$

$$ For MA only, for $2033,$ assume things don$$t get worse and they still earn $85\%$ of Medicare

Once done comment on what you observe. Are the trends positive or negative? How would you explain what$$s

happening to your CEO? If your hospital$$s goal is to achieve a $3\mathrm{.}0\%$ operating margin, how much would you have to add

to the projected bottom line by $2033$ to make that happen? Give three specific strategies you$$d recommend pursuing to

get that done.

Patient

visits Commercial Medicare

Medicare

Advantage Medicaid

Uninsured$/$

Self$-$pay

Total

Visits

$2013110,44044,03520,40710,00320,297205,182$

$2023108,50050,10052,30019,5008,500238,900$