In the Shasta Faculty Practice case study for Choice 1, which clinic has the greatest net benefit?

A. Outpatient Surgery Pre- and Post- Operative Clinic

B. Internal Medicine (Family Practice) Clinic

C. Eldercare Clinic

- What is the cost-benefit analysis of hiring a physician extender at the clinics? START WITH CHOICES AND COST-BENEFIT - We will frame the problem by limiting our choices to: - Choice 1: hire physician extender to replace one physician - Costs: effects such as increases wages paid \& decreases in revenue - We will frame the problem by limiting our choices to: - Choice 1: hire physician extender to replace one physician - Costs: effects such as increases wages paid \& decreases in revenue - Benefits: increases in revenue \& decreases in wages COST-BENEFIT - You will notice in our example "costs" that I listed are inputs which reduce profitability, and "benefits" increase profitability. There are others as well such as patient happiness, changes in physician burnout, etc. We are not able to measure everything due to limitations and resource constraints. Nevertheless, they are important in a thorough cost-benefit analysis. - I will show you a complete set of calculations for one clinic. - Next, I will let you perform the calculations entirely on your own for the second and third clinics. It is my hope, in this manner, that you will get to practice both making assumptions and performing the calculations without being overwhelmed! OUTPATIENT SURGERY PRE-AND POST- OPERATIVE CLINIC - CHOICE 1 (REPLACE ONE PHYSICIAN) - Baseline revenue is given in Case Study - Incremental physician revenues - Decreases by the average revenues per physician (note: there are a total of 2.5 Full-Time Equivalent physicians in this clinic) - $842,481/2.5=$336,992 decrease (or negative value) - Extender revenues - Increases by the percentage of work that they can do compared to one physician (i.e. 85% is given in case study) - $336,992 per physician x85%=$286,444 - Total revenues Revenue Changes - Sum of the base plus the changes - $842,481$336,992+$286,444=$791,932 OUTPATIENT SURGERY PRE- AND POST- OPERATIVE CLINIC - CHOICE 1 (REPLACE ONE PHYSICIAN) (CONT.) - Baseline physician cost is given in Case Study - Incremental physician costs - Decreases by the average cost per physician (note: there are a total of 2.5 Full-Time Equivalent physicians in this clinic) - $485,000/2.5=$194,000 decrease (or negative value) - Extender costs - Increases by the wages for the number of days worked per year. We will take the median of the salary range provided in the case study, l.e, $90,000. The days worked is provided in case study, - $90,000 ( 5 days per week x42 weeks / 250 days worked per year) =$75,600 - Nole: 250 work days is 5 days per week &2 weeks vacation - Total costs - Sum of the base plus the chenges Cost Changes - $485,000$194,000+$75,600=$366,600 PUTTING IT TOGETHER - Choice 1 at the Outpatient Surgery Pre- and Post- Operative Clinic - Original profit - $842,481$485,000=$357,481 - New profit (with physician extender) - $791,932$366,600=$425,332 Change - $425,332$357,481=$67,851 increase in profitability - Net Change is > 0; therefore, we should choose to hire the physician extender. - What is the net change for hiring one physician extender to replace one existing physician at the other two clinics? - Internal Medicine (Family Practice) Clinic - Eldercare Clinic - Out of the three clinics, which will benefit the greatest? - Is it unwise to hire the physician extender at any of the clinics (meaning when net benefit is less than zero)? - What is the cost-benefit analysis of hiring a physician extender at the clinics? START WITH CHOICES AND COST-BENEFIT - We will frame the problem by limiting our choices to: - Choice 1: hire physician extender to replace one physician - Costs: effects such as increases wages paid \& decreases in revenue - We will frame the problem by limiting our choices to: - Choice 1: hire physician extender to replace one physician - Costs: effects such as increases wages paid \& decreases in revenue - Benefits: increases in revenue \& decreases in wages COST-BENEFIT - You will notice in our example "costs" that I listed are inputs which reduce profitability, and "benefits" increase profitability. There are others as well such as patient happiness, changes in physician burnout, etc. We are not able to measure everything due to limitations and resource constraints. Nevertheless, they are important in a thorough cost-benefit analysis. - I will show you a complete set of calculations for one clinic. - Next, I will let you perform the calculations entirely on your own for the second and third clinics. It is my hope, in this manner, that you will get to practice both making assumptions and performing the calculations without being overwhelmed! OUTPATIENT SURGERY PRE-AND POST- OPERATIVE CLINIC - CHOICE 1 (REPLACE ONE PHYSICIAN) - Baseline revenue is given in Case Study - Incremental physician revenues - Decreases by the average revenues per physician (note: there are a total of 2.5 Full-Time Equivalent physicians in this clinic) - $842,481/2.5=$336,992 decrease (or negative value) - Extender revenues - Increases by the percentage of work that they can do compared to one physician (i.e. 85% is given in case study) - $336,992 per physician x85%=$286,444 - Total revenues Revenue Changes - Sum of the base plus the changes - $842,481$336,992+$286,444=$791,932 OUTPATIENT SURGERY PRE- AND POST- OPERATIVE CLINIC - CHOICE 1 (REPLACE ONE PHYSICIAN) (CONT.) - Baseline physician cost is given in Case Study - Incremental physician costs - Decreases by the average cost per physician (note: there are a total of 2.5 Full-Time Equivalent physicians in this clinic) - $485,000/2.5=$194,000 decrease (or negative value) - Extender costs - Increases by the wages for the number of days worked per year. We will take the median of the salary range provided in the case study, l.e, $90,000. The days worked is provided in case study, - $90,000 ( 5 days per week x42 weeks / 250 days worked per year) =$75,600 - Nole: 250 work days is 5 days per week &2 weeks vacation - Total costs - Sum of the base plus the chenges Cost Changes - $485,000$194,000+$75,600=$366,600 PUTTING IT TOGETHER - Choice 1 at the Outpatient Surgery Pre- and Post- Operative Clinic - Original profit - $842,481$485,000=$357,481 - New profit (with physician extender) - $791,932$366,600=$425,332 Change - $425,332$357,481=$67,851 increase in profitability - Net Change is > 0; therefore, we should choose to hire the physician extender. - What is the net change for hiring one physician extender to replace one existing physician at the other two clinics? - Internal Medicine (Family Practice) Clinic - Eldercare Clinic - Out of the three clinics, which will benefit the greatest? - Is it unwise to hire the physician extender at any of the clinics (meaning when net benefit is less than zero)