St. Elsewhere is preparing to open a 30-bed med/surg unit later this year. The unit will specialize in cardiac rehabilitative services and will follow an interdisciplinary model of care specializing in that management CHF patients across the continuum of care. The goal of the program will be to decrease the inpatient average length of stay for CHF patients from 5.3 to 3.5 days through evidenced-based best practice protocols designed to improve quality, standardize patient care practices, and improve cost efficiency. Last year, St. Elsewhere treated 8,500 CHF patients. DRG 127 Congestive Heart Failure is reimbursed by Medicare at $5,250 per patient. The average reimbursement from insurance companies is $7,680 per CHF patient. The average cost of treating the CHF patient is $1,150 per day.

1. Office supplies per patient is estimated at $50. They will need to add 3 additional phone lines at a cost of $30 a month for each additional line and 3 additional data ports at $40 a month for each. Case management department will support the program by providing 2.35 dedicated FTEs to the unit. They will require training on the new CMS core measures and ICD 9 documentation requirements. Training is scheduled for one week and the registration fee is $100 per attendee. Case manager team will need resource material that costs $800. The unit will be required to maintain service agreements on the new cardio equipment bought for the program. These contracts will cost $120 a month.

a. Calculate the annual Operating Budget for the unit.

2. Conversion (renovation) of two patient rooms into office space for the nurse case managers is expected to cost $20,000. Office furniture is estimated at $8,000. Laptop computers at $2,500 each will be needed for each nurse case manager. Accounting has informed you that the renovations and office equipment will be depreciated equally over 5 years.

a. Develop the Capital Expense Budget for the unit.

b. Calculate depreciation value using the straight-line depreciation method.

3. Assume the personnel budget is $3,162,842. Total the Personnel, Operating and Capital expense budgets.

4. If the CHF Interdisciplinary program achieved its goal of decreased LOS from 5.3 days to 3.5 days, what would the cost savings or loss be for St. Elsewhere?

5. If the DRG reimbursement rate of $5,250 per patient remained the same, what would the financial impact be for the Interdisciplinary program? You previously calculated (see question #4) cost of care based on LOS.

6. Based upon your budget analysis, what would your management recommendation be for the unit?