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Posted: July 25th, 2023
Case Study Team Charter
Case Study Name: We Care Medical Center: Allocating Costs
Team Presentation Goals:
Determine best allocation to receive the greatest benefit from a financial and customer standpoint.
Review of financial statements to ensure align with existing practices, financial goals, and organization’s mission statement.
Benefits gained outweigh the associated risks fully detailed and explained to eliminate concerns brought by the community and Board of Directors.
Transparency to the community which the facility supports.
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Membership:
Research: All members will equally participate with researching material for the case study.
Presentation: Tammy Alsman has been selected to facilitate the presentation in Week 5 to the class with input from team members.
Subject Matter Expert (s): Connie, Renee, and Lisa will also participate and present as experts in the case study selected.
Member Roles / Obligations:
To attend and engage in meetings as scheduled.
Perform necessary research covering the specific objectives and goals.
Core Issues in Case Study:
Not-for-profit: transparency to community.
New orthopedic location due to routine care unit expanding absorbing now 50,000 sq feet into the existing orth unit.
Building new space to accommodate existing census while planning for future expansion in new complex design: for which there is no guarantee.
Not-for-profit organization: 0% eco development loan: $187,000 payments over 20 years: staying on target with build, generating revenue to support additional monthly payments during construction, while continuing current business plan.
Maintaining existing bonus structure with CFO cost allocation concerns for new build.
Objectives:
Describe the allocation process between the routine care and orthopedic care departments to determine net income post build and move.
Which allocation method is most appropriate to maintain sufficient net income to maintain direct and indirect expenses including current bonus payouts and future growth-related expenses (additional staffing and training for example).
Present research to Board for approval with sufficient evidence to support expansion.
Strategic Implications:
Lack understanding of allocation methods to determine most appropriate to realize most gain.
Understanding the up-front costs associated with build and move is an investment back into the business which in turn will build more profit over time.
Loss of revenue due to reduced orthopedic space.
Lack of marketing of new growth and treatment opportunities.
Lack of community and/or Board support.
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Scope:
Key Interfaces:
Finance – Revenue versus Square Footage Methods: which is better financial choice.
Risk Management – managing risks to realize additional revenue generated.
HR – Managing staff, training for future growth.
Operations – CFO current cost allocation algorithms, indirect and direct expense monitoring.
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Deliverables and Milestones:
Key Activities:
Benefits Gained by Solving the Problem:
Financial:
Process / Operations
Other – Non-financial or intangible:
Critical Success Factors in this Case Study:
Key Performance Measures in this Case Study:
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Case Study Team Charter
Case Study Name: We Care Medical Center: Allocating Costs
Introduction:
In this case study, our team aims to determine the best allocation method for We Care Medical Center to optimize financial benefits while ensuring customer satisfaction. We will review the financial statements to align them with the organization's mission and goals. By providing transparency to the community, the facility can garner support from the community and the Board of Directors.
Team Composition and Roles:
Our team comprises dedicated members, each with unique roles and responsibilities. All team members will actively participate in the research process. Tammy Alsman will lead the presentation during Week 5, incorporating inputs from all team members. Additionally, Connie, Renee, and Lisa will serve as subject matter experts during the presentation.
Core Issues:
Not-for-profit Transparency: We Care Medical Center needs to ensure transparency with the community about its financial practices.
New Orthopedic Location: The expansion of the routine care unit will involve allocating 50,000 sq feet to the existing orthopedic unit. The construction of new space must accommodate the current census and plan for future growth.
Financial Management: The medical center has secured a 0% eco development loan amounting to $187,000, repayable over 20 years. The challenge lies in staying on target with the construction, generating revenue to cover additional monthly payments during construction, and adhering to the current business plan.
CFO Cost Allocation Concerns: The existing bonus structure must be maintained despite the cost allocation challenges arising from the new build.
Objectives:
Allocation Process Description: We aim to outline the allocation process between the routine care and orthopedic care departments to determine the net income post-build and move.
Appropriate Allocation Method: We will identify the most suitable allocation method that ensures sufficient net income to cover direct and indirect expenses, including current bonus payouts and future growth-related costs (such as additional staffing and training).
Board Approval: Our research and evidence-based findings will be presented to the Board for approval to support the planned expansion.
Strategic Implications:
Allocation Method Understanding: Lack of understanding of various allocation methods hinders the medical center from maximizing its gains.
Up-front Investment: The costs associated with the build and move represent a valuable investment into the business, leading to long-term profitability.
Revenue Loss: Failure to effectively manage the allocation and space utilization might result in a loss of revenue from reduced orthopedic space.
Marketing and Community Support: Inadequate marketing of new growth opportunities and treatment options, coupled with a lack of community and Board support, could hinder the center's expansion efforts.
Scope and Key Interfaces:
Our study will encompass financial, operational, and non-financial aspects relevant to the allocation process. Key interfaces include Finance (to evaluate revenue versus square footage methods), Risk Management (to manage risks and realize additional revenue), HR (to manage staff and plan for future growth through training), and Operations (to monitor CFO cost allocation algorithms and direct and indirect expenses).
Deliverables and Milestones:
Throughout the project, we will produce comprehensive research reports, financial analyses, and presentation materials to facilitate the decision-making process. Key milestones include completion of the allocation process description, identification of the most appropriate allocation method, and approval from the Board.
Benefits Gained by Solving the Problem:
Financial Benefits:
Improved net income and profitability.
Efficient resource allocation leading to cost savings.
Increased revenue generation potential.
Process / Operations Benefits:
Streamlined allocation process promoting transparency.
Better resource management and utilization.
Enhanced operational efficiency.
Other Non-financial or Intangible Benefits:
Strengthened community and Board support.
Improved reputation as a transparent and customer-oriented medical center.
Long-term sustainability and growth opportunities.
Critical Success Factors:
Thorough research and analysis of allocation methods.
Effective communication and collaboration within the team.
Strong support from the Board and community.
Key Performance Measures:
Net income and revenue growth post-implementation.
Customer satisfaction and feedback.
Timely completion of milestones and deliverables.
References:
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