Rely on the research and reading you have done on hospital staffing, salaries, direct and indirect costs, and insurance reimbursement to support your work. The purpose of this piece of the project is to determine the financial feasibility of the program and to learn whether any adjustments should be made to the strategic plan to improve the financial status of the program.

proposal

Diabetic treatment clinic(there should be licensed clinical staff including physicians, nurse practitioners, nurses, medical assistants, lab technicians, administrative staff, nutritionists, and social workers)

Part 3: Program Finances

Factors that determine the financial feasibility of a health care program include the cost of the facility, equipment, staff salaries, patient out-of-pocket expenses, and insurance reimbursement. Referring to the concepts practiced so far, work on the following:

1. Determine how many physicians and supporting staff are needed to operate the clinic, applying the appropriate ratio of clinical and support staff per physician.
2. Determine the direct costs of the program. Direct costs in this case are patient expenses, and they increase as the number of patients increase. These include:
3. Physician and procedural support staff costs per patient/procedure
4. Gloves, sutures, gowns, equipment, lab supplies, other supplies
5. Determine the indirect costs of the program. Indirect costs are overhead costs that include but are not limited to:
6. General support staff and related costs
7. Electronic medical records
8. Insurance and taxes
9. Facility and administration
10. Employee benefits such as health and life insurance, retirement plans, and fringe benefits
11. Determine the equipment costs of the program. This includes items for the physician clinic that will be used for more than one year. This is in contrast to variable costs which occur per patient and include such items as gloves, syringes, needles, and gauze, and would include items such as:
12. Examination tables
13. Workstations
14. Desks and chairs in the waiting room
15. Other equipment of this nature
16. Determine reimbursement for clinic services based on HCPCS/CPT codes with geographical adjustment.
17. Determine net reimbursement after variable costs per patient.
18. Determine how many patients the clinic will need to see (a) on average per day and (b) annually to break even on expenses.

Note: Refer to the health financial instructions and sample calculations document to help you with this part of the project.

Table 1. Staffing and Salaries

Complete Table 1 by adding the staff positions including physician specialty, nurses and support staff, and the number of positions in your clinic. Multiply the number of positions by average salary for those positions to obtain total salaries.

Staff Position	Number of Positions	Average Salary	Total Salaries
Primary Care Physician
Nurse
Support Staff

Total Salary:

Table 2. Fringe Benefits Expense and Total Salary Expense

These expenses have been established by the hospital system at 25% of salaries and added to salaries for Total Salary Expense.

Factors	Dollar Amount
Total Salaries
Fringe Benefit Expense 25% of Salaries

Total Salary Expense w/ Fringe Benefits:

Table 3. Overhead (Indirect) Costs and Total Fixed Practice Costs

Begin with total salaries including fringe benefits. Multiply that amount by 40% (0.40) and combine the 2 numbers for total fixed practice costs. These costs do not vary based on the number of patients.

Cost Factors	Dollar Amount
Overhead Costs 40% of Total Salary Expense
Total Salaries Expense
Overhead Costs 40% of Total Salary Expense

Total Overhead and Fixed Costs:

Table 4. Equipment Costs

These items will be used by the clinic for 5 years so the costs will be divided equally over 5 years (depreciation).

Cost Factors	Dollar Amount
Total Equipment Cost
Depreciated Equipment Cost (cost for year one)

Total Clinic Costs (for year one including salaries, overhead, and equipment costs):

Table 5. RVU and Reimbursement Calculation

The cost of physician care varies in different locations, as do the cost of operating a practice and the rates of physician malpractice claims. In addition, each year Medicare adjusts the conversion rate either up or down.

Category	RVU	GCI	Total RVU

Totals

• RVU:
• GCI:
• Total RVU:

Table 6. Variable Costs and Net Reimbursement

To complete Table 6, multiply reimbursement per visit by 10% (0.10) and subtract this number from reimbursement to obtain net reimbursement per patient.

Cost Factors	Dollar Amount
Reimbursement per visit
Variable cost per patient 10%

Net Reimbursement per patient:

7. Breakeven Analysis

To calculate the number of patients needed to break even, divide total practice costs by net reimbursement. To calculate the number of patients per day, divide the total number of patients for an annual breakeven number by the number of days the practice is open. Enter text below.