Simulation Review

Health care organizations, especially hospitals, face problems with managing cash flow as there is often a change in billing as well as the economic activity. Fierce Healthcare Finance (Ziegler, 2008) states that “between 2004 and 2007, the 170 hospitals studied by best allocated a steadily greater portion of their invested assets to cash and short-term investments, climbing from 27% in 2005 to 31.1% in 2007”. They are showing that hospitals are using investment cash flow, which is usually set aside for capital expenses, to actually cover their operating expenses. When there are low funds for capital expenses, it can be difficult for these hospital systems to keep up with the technology.

Phase I- Capital Shortage

Elijah Heart Center is facing a financial dilemma that is all too common in specialized health care organizations with the need for advanced technology, a reduction in income, and a demand to expand. The hospital is having a hard time finding how to improve their income and the goal is to save $900,000 for the first year in order to help boost the cash flow problem. There are five cost-cutting options to choose from and they are: reducing benefits, cutting staff, reducing agency staff, reducing length-of-stay, and changing up the skill mix. There are two cost-cutting options that Elijah can attempt to try and achieve their goal and that may be to change the skill mix and also to reduce the agency staff. Cutting back on the agency staff can help rid of staff salaries which are contracted and twice as high as the other staff in the hospital. Eliminating some of the more costly positions can help improve the workflow for the hospital, and cutting back on the contracted positions may truly help reduce expenses without having an effect on the care of the patient’s. Also, by changing the skill mix, unlicensed staff will be able to complete more basic duties and those who carry licenses are able to focus on direct care of the patient’s.

Along with selecting...