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Vila Health Scenario and Interviews

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43 views4 pages

Vila Health Scenario and Interviews

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krstylor
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We take content rights seriously. If you suspect this is your content, claim it here.
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Vila Health Scenario and Interviews

Introduction
Vila Health is a health system in the Midwest, with hospitals and clinics in Minnesota, South
Dakota, Iowa, and North Dakota. You have recently taken a job in the finance department at St.
Anthony Medical Center, a Vila Health hospital in Minneapolis.

One day, your boss stops by your desk. She indicates that current financials are falling 10
percent short of projections. As a result, she has asked you to develop a strategy to reduce the
operating budget for the coming year by 10 percent.

It’s a dirty job, but someone has to do it. You think about where you might cut for awhile, but
then you realize: You need more information if you’re going to make smart and sustainable
cuts. It’s time to talk to department heads and other leaders.

Interviews with Leadership


Your calendar is full, but you cancel some meetings so you have time to meet with leaders at
the hospital. Select each character to see what they say.
1. Divya Porter, Executive Director: My number one priority is to make sure that we can
provide quality care to patients. Poor reviews would damage our reputation and create
long‐term revenue issues, but we could also lose Medicare or other funding if our care
becomes substandard. If we have to use an agency to meet minimum standards, then
we will have to cut other places, but adequate nursing and therapy coverage is a must.
At the same time, I also need to make sure that we remain profitable. No matter where
we have to cut, some tough decisions will have to be made.
2. Kim Nelson, Director of Nursing: My number one priority is to make sure we have
enough staff to take care of the patients that we accept. We cannot leave patients at
home without care. We have to meet minimum staffing requirements and stay in
compliance with all state and federal regulations. With 100 patients in our skilled
nursing facility, I need 140 hours of nursing per day, seven days a week. With 160 home
care clients, I need an additional 64 hours per day, seven days a week, just to meet the
minimum required hours. That does not include the nurse aide hours that must be
covered as well. Without the agency, I’m not sure how we can make it.
3. Winston Montgomery, Food Service Coordinator: My number one priority is to have
adequate staff to cook three meals per day. The quality of our food must be good, or
people will not want to eat it, and they will not benefit from it from a healing
perspective. But it takes a lot of staff to run a kitchen. My staffing is adequate at
present, but I can’t afford to lose anyone. I can’t even cover vacations that are coming
up. Cutting staff would definitely reduce the quality of our food, and it also might
endanger our ability to meet the food safety regulations that govern us.
4. Jana Hernandez, Maintenance Coordinator: My number one priority is to keep all of the
non-medical equipment in proper working order. We have adequate coverage for
weekends and holidays even if it is only emergency coverage. I simply can’t work 24/7. I
have to have at least one part-time assistant. If I can only keep one assistant I will have
to contract out for our landscaping, and that would be really expensive.
5. Christine Cronin, Director of Rehabilitation: My number one priority is to have enough
therapists to see all patients and home care clients. Our therapists must reach a
productivity rate of 90 percent, which means that 90 percent of their time must be
spent on patient treatment. That doesn’t leave much time for documentation or travel.
Without adequate coverage, we won’t be able to make it.
6. Tom Reynolds, Social Work Director: Our social workers need to visit each new patient
assigned to them within 48 hours of their being admitted. We have regulatory
paperwork to keep up with too. I could really use an assistant, but I don’t know that I
could get that approved in the budget. If my hours or staff are cut, we will definitely be
in regulatory trouble, as I can barely keep up now.
7. Warner Montgomery, Director of Housekeeping: I am responsible for making sure that
all of the skilled nursing facility rooms are kept clean, and I also have to keep up with
the independent living residents who have chosen to have housekeeping services once a
week, which is most of them. That includes all of the facility’s laundry. I need to hire at
least one more full-time housekeeper, but wages are barely above the minimum wage
and finding people is really difficult. I keep spending my budget on advertising, but I get
very few applications. If the skilled nursing facility isn’t kept clean, we will get in trouble
with federal and state authorities. I wonder if I could get approved for just a small bump
in starting wages. Of course, that would mean I’d have to give a raise to all of my current
staff too.
Using the financial statement, answer the following questions:
1. Would you reduce each line item by 10 percent? If so, why is this the best approach?
2. How do you intend to handle fixed costs with this approach?
3. Would you select specific line items to reduce by 10 percent? If so, why is this the best
approach?
4. How would you pinpoint which line items to reduce?
5. Would you put a freeze on all hiring, training, travel, and purchasing? If so, why is this
the best approach?
6. What other ideas do you have to cut your overall budget by 10 percent without
affecting the care that you provide?
7. Explain how the reduced operating budget aligns with an organization's target profit
margin.

Answers:
Question 1: Would you reduce each line item by 10 percent? If so, why is this the best
approach?
Reducing each line item by 10 percent might seem like an equitable approach to meet the
target reduction, but it may not be the best way to achieve cost savings efficiently. Some line
items might be more flexible for reductions, while others are critical to patient care or
compliance, which cannot afford any cutbacks. A blanket reduction can also affect departments
differently, resulting in negative impacts on patient care or operational efficiency.
Question 2: How do you intend to handle fixed costs with this approach?
Fixed costs, such as rent, utilities, and salaried staff, cannot be reduced easily since they do not
vary with changes in patient volume or operational activity. These costs would require a
different approach, such as negotiating contracts, finding more efficient vendors, or
restructuring financial obligations to create savings without directly cutting essential services or
staff.
Question 3: Would you select specific line items to reduce by 10 percent? If so, why is this the
best approach?
A more effective approach would be to selectively reduce specific line items based on their
impact on patient care and operational efficiency. By evaluating each line item, we can target
areas where costs can be reduced with minimal impact. For example, there might be
opportunities to reduce costs in non-clinical areas like administrative expenses, external
contracts, or supplies through more effective procurement strategies.
Question 4: How would you pinpoint which line items to reduce?
To pinpoint specific line items to reduce, a detailed analysis of expenses is necessary:
 Identify Low-Impact Items: Identify items that have the least direct impact on patient
care, such as certain administrative overhead or non-essential services.
 Analyze Variance Data: Use variance analysis to identify line items that consistently
exceed budget expectations, indicating potential inefficiencies.
 Cost-Benefit Analysis: Determine the return on investment for each line item. If the cost
is not adding proportional value, it may be a candidate for reduction.
Question 5: Would you put a freeze on all hiring, training, travel, and purchasing? If so, why is
this the best approach?
Putting a freeze on hiring, training, travel, and purchasing can provide immediate cost savings,
but it might also affect staff morale, patient care, and operational efficiency. A complete freeze
might lead to burnout, inadequate staffing, and decreased service quality. Instead, it might be
better to apply a selective freeze—restricting non-critical roles or non-essential travel and
purchasing while ensuring that key patient care areas remain supported.
Question 6: What other ideas do you have to cut your overall budget by 10 percent without
affecting the care that you provide?
 Improved Contract Negotiation: Renegotiate contracts with suppliers and service
providers to obtain better pricing.
 Operational Efficiency: Implement lean processes in clinical and administrative
workflows to reduce waste and improve efficiency.
 Reduce Overtime: Limit the use of overtime by optimizing staffing schedules.
 Technology Utilization: Implement technology to automate routine tasks, thereby
reducing the need for manual labor in administrative functions.
Question 7: Explain how the reduced operating budget aligns with an organization's target
profit margin.
Reducing the operating budget by 10 percent will directly contribute to reducing costs and
improving the organization's profitability, provided that revenue streams remain stable. By
carefully selecting areas to cut without compromising care quality, Vila Health can ensure it
meets or exceeds its target profit margin. Aligning budget cuts with non-essential areas allows
the organization to maintain a focus on quality patient care, regulatory compliance, and overall
financial health.

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