A New Economic Opportunitys Business Case
The purpose of multidisciplinary care at the University of Rochester Medical Center is to go beyond medical therapy and provide patients with a holistic plan for coping with the variety of challenges that come with illness. The University of Rochester Medical Center’s administration intends to launch a new economic endeavor in the shape of the Wilmot Webster Cancer Center (University of Rochester Medical Center, 2022).
The cancer center will not only assist the community to receive exceptional health care, but it will also create an additional cash source for the University of Rochester Medical Center. The goal of this business case is to offer a comprehensive report on the feasibility and cost-benefit analysis of executing the planned economic initiative over the next five years.
The business case assesses the new initiative’s potential risks and prospects. It suggests techniques to reduce the risks involved with establishing the cancer center, as well as measures for minimizing expenses and optimizing benefits.
Opportunities Associated With the Proposed Economic Initiative
Demand, supply, and distribution are the fundamental economic fundamentals of any industry. Conversely, the economics of hospitals and health care are influenced by factors such as demand for health care, supply, and distribution. Possibilities Related to the Proposed Economic Initiative.
A financial and ecological assessment was done to identify the potential risks connected with the Wilmot Webster Cancer Center. Strong Memorial Hospital, located within the main campus of the URMC, is the primary teaching hospital and patient care institution of the University of Rochester. It is a Level I trauma facility that serves the Rochester community (University of Rochester Medical Center, 2022).
Golisano Children’s Hospital (GCH) is a freestanding, nationally acclaimed children’s hospital in Rochester, New York. It has ties to the University of Rochester School of Medicine and Dentistry. There are 190 pediatric beds at the facility. The hospital offers a wide range of pediatric specializations and subspecialties to newborns, children, teenagers, and adults. Infants, children, teenagers, and young people ages 0-21 are served by the hospital’s comprehensive pediatric specialties and subspecialties.
The hospital has a regional pediatric intensive-care unit and a level IV neonatal intensive care unit certified by the American Academy of Pediatrics. The majority of patients treated at the University of Rochester Medical Center are from the university’s 70,000 employees and students (University of Rochester Medical Center, 2022). Patients come from around New York, thus, the demand-supply principle will be satisfied. Furthermore, the area has a population of roughly 100000 people.
Wilmot Cancer Center offers a chance to minimize overcrowding at the University of Rochester Medical Center. URMC often treats cancer patients, but with a specialized facility, cancer patients will receive more intensive and tailored treatment. More diagnostics and care, as well as hospice services, will be offered. The cancer center may be able to meet the needs of the community as well.
Furthermore, to break even, WCC must treat a large number of cancer patients. As a result, locating a cancer center near the desired patient group is critical to its effectiveness. Here, it is an established learning institution that already handles cancer patients.
The desired target demographic for the WCC is located in the 70,000 URMC employees as well as the university students. Through the yearly health exams it provides, URMC has formed a relationship with local people from the community. The WCC can benefit from this connection since patients and locals being treated at URMC who are content with the care they received at URMC are more likely to return to the WCC for hospice and cancer-related difficulties.
According to a competitor analysis done in the region, there are several cancer centers in New York, but their quality of care varies, and none is as good. Most patients prefer consistent cancer centers with consistent treatments and specialized care (Pourmohammadi et al., 2020). Patients will be able to get holistic cancer health treatment at a cheaper cost than at other cancer centers at WCC.
Furthermore, because patients can visit a WCC without making an appointment, they will find the WCC more convenient for treating cancer and the complications of cancer. These advantages over competitors will enable URMC to grab a considerable market share in the cancer care sector.
A study by Rivers and Glover (2018) examined the links between competitiveness and healthcare quality, competitiveness and healthcare system costs, and competition and patient happiness. These studies illustrate that competition can potentially increase consumer value over time. Quality and process improvements result in lower costs, which leads to higher customer satisfaction.
Risks Associated with the Economic Initiative and Solutions
During the competitive analysis, it was discovered that numerous other cancer clinics in New York might represent a threat to the WCC. In addition, other cancer centers provide cancer care and treatment and are easily accessible without an appointment (Bauer, 2019). As a result, these establishments of the cancer centers jeopardize the WCC’s economic security. WCC is more equipped than other cancer centers to manage all cancer therapy and care. Because of its affiliation with URMC, the WCC may give its patients with additional services such as scans and testing.
These traits set the WCC at URMC apart from its rivals and can be utilized to market the clinic. Clients will see the WCC as a convenient and viable healthcare solution because several tests may be conducted if necessary. Furthermore, the WCC must guarantee that the clinic’s primary focus is on offering a convenient and satisfying experience for the patient. Patients who get prompt and courteous care from excellent service personnel will be motivated to return and recommend new patients to the WCC.
URMC is noted for delivering care to a large number of patients in a short period. The WCC’s staff and management must be aware that the high-volume, fast-paced healthcare delivery environment leaves room for errors such as misdiagnosis. These inaccuracies can consequence in the WCC and its staff experiencing critical legal risks. And hence, the WCC needs to preserve thorough documentation to protect itself from the repercussions of errors or medical negligence.
The complaints, physiological observations, and test findings utilized to establish a care plan should be identified to ensure that the plan is clear and rational. It is also on for WCC doctors to set patient expectations by appropriately talking with them about the nature of the services provided. According to Bauer (2019), these strategies ensure that, despite the problems caused by strong competition, both patients and health care practitioners are conscious of the service they get, and therefore this will set apart the WCC from the other cancer centers.
The Proposed Economic Initiative’s Cost-Benefit Analysis
The costs and advantages of establishing a cancer center are examined after evaluating the opportunities and hazards involved (Gachabayov et al., 2022). The present value of the expected expenses and benefits, as well as the net benefit over a 5-year time horizon, are computed to examine the economic viability of establishing a cancer center using a current value discount factor of 11%. The current value discount rates were calculated using the standard cost of capital and the expected target returns.
The anticipated capital cost covers significant building expenses as well as equipment purchases. These are expected to reach $980,000 in the current fiscal year. The expected operational costs include employee wages, basic utilities such as power, gas, Internet access, insurance, and other operating expenditures such as managerial and promotional costs.
A cancer center should include at least six full-time physicians, thirteen nurse practitioners, and four medical assistants. Staff pay in the first year of operation is estimated to be roughly $300,000 for a full-time physician, $120,000 for a nurse practitioner, and $40,000 for a medical assistant, based on national average recruiting incentives U.S. Bureau of Labor Statistics, (2022).
According to the Economic Policy Institute (2018), the average annual pay growth rate in the United States is 2.7%. For this research, salaries at the WCC are expected to rise at a rate of 3% each year. Additional expenses will be incurred in years four and five to recruit a full-time nurse practitioner and a full-time physician to meet the needs of the patients.
The cost of basic utilities is expected to rise by around 5% per year as the use of basic utilities rises due to increased patient traffic. Given that additional employees will be employed in the fourth and fifth years of operation, insurance expenses are expected to rise over these two years.
Based on URMC’s financial filings, other operational expenditures are estimated to represent roughly 12% of yearly revenue. The present value of the entire costs for the 5-year period is calculated at $20,489,745.62 using a present value discount rate of 11%, according to the cost-benefit analysis (Economic Policy Institute, 2018).
The income was determined using the charge received from each patient and the number of patients expected to use the WCC’s medical services. Most clinics serve an average of around 357 individuals each week and charge an average price of about $156 per patient visit. As a result, the expected revenue for the first year of operations will be $2,730,000.
Based on the national average, revenue is expected to grow at a 5.3% annual rate during the next five years. The present value of total benefits is projected to be $11,037,800.03 based on the expected revenue during the 5-year period and the 11% present value discount rate. Over a 5-year period, the net benefit is anticipated to be $5,548,054.41. This is computed by deducting the current value of total benefits from the present value of all expenditures. Based on the positive net benefit, it is possible to conclude that this endeavor will be financially viable.
Methods for Cutting Costs and Increasing Benefits
It is critical for management to periodically implement cost-cutting measures and analyze the WCC’s financial status. Overhead expenditures that are not directly connected to delivering health care services account for a significant amount of the WCC’s total costs. Culyer (2018) shows that building upkeep, repairs, insurance, basic utilities, and supplies are examples of overhead expenditures.
The WCC will keep building maintenance expenditures under control by doing regular maintenance checks. To minimize costly repairs, the personnel will ensure that the equipment is treated with care and kept in good shape. The WCC will control basic utility expenditures by assessing utility usage on a yearly basis. Low-cost options will be chosen depending on the WCC’s requirements to limit spending on utilities.
To reduce waste, employees will be encouraged to utilize resources sparingly. Impractical cost-cutting tactics may have a negative impact on employee morale and performance. As a result, great effort will be taken to ensure that any actions implemented are appropriate, ethical, and culturally equal.
Along with keeping expenses under control, efforts will be undertaken to maximize benefits (Culyer, 2018). Sending automatic health reminders to regular customers might be one way to increase the WCC’s benefits. This will help to ensure a steady flow of clients.
Consistently providing excellent service to all patients will motivate them to return to the WCC anytime they want quick medical assistance. This will also aid in the development of strong patient trust and loyalty. Understanding what motivates patients and their perspectives on health care would also assist WCC staff in customizing services and so increasing patient satisfaction and inflow (Culyer, 2018). As a result, ensuring efficient resource allocation and delivering quality treatment will assist the WCC in maintaining its financial stability.
Wilmot Cancer Institute will meet the requirements of cancer patients by delivering low-cost, convenient health care services. The center’s closeness to the densely populated New York area would help both URMC financially and cancer patients who may require cancer treatment and hospice care. The WCC will be able to produce extra money and contribute to the WCC’s economic growth. Furthermore, the cost-benefit analysis indicates that establishing the WCC will be a financially sustainable endeavor. This will also assist in securing URMC’s future.
Bauer, U. E. (2019). Community health and economic prosperity: An initiative of the office of the surgeon general. Public Health Reports (Washington, D.C.: 1974), 134(5), 472–476. https://doi.org/10.1177/0033354919867727
Culyer, A. J. (2018). Cost, context and decisions in Health Economics and cost-effectiveness analysis. 17. https://eprints.whiterose.ac.uk/132903/
Economic Policy Institute. (2018). Nominal wage tracker. https://epi.org/nominal-wage-tracker/
Gachabayov, M., Latifi, L. A., Rivera, R., Baluyot, F. S., & Latifi, R. (2022). A cost-benefit analysis of an overseas volunteer mission to the local healthcare system. The American Surgeon, 88(7), 1680–1688. https://doi.org/10.1177/0003134821998683
Pourmohammadi, K., Bastani, P., Shojaei, P., Hatam, N., & Salehi, A. (2020). A comprehensive environmental scanning and strategic analysis of Iranian Public Hospitals: a prospective approach. BMC Research Notes, 13(1), 179. https://doi.org/10.1186/s13104-020-05002-8
Rivers, P. A., & Glover, S. H. (2018). Health care competition, strategic mission, and patient satisfaction: research model and propositions. Journal of Health Organization and Management, 22(6), 627–641. https://doi.org/10.1108/14777260810916597
university of Rochester medical center. (2022). About us – Wilmot cancer institute – university of Rochester medical center. Rochester.edu. https://www.urmc.rochester.edu/cancer-institute/about-us.aspx
U.S. Bureau of Labor Statistics. (2022). Outpatient care centers – May 2021 OEWS industry-specific occupational employment and wage estimates. Bls.gov. https://www.bls.gov/oes/current/naics4_621400.htm
Cost–Benefit Analysis Over a 5-Year Period
|CY +1 ($)||CY +2 ($)||CY +3 ($)||CY +4 ($)||CY +5 ($)||Total Costs ($)|
|Furniture & Equipment|
|Other Operating Costs||327,600.00||343,980.00||361,179.00||379,237.95||398,199.85|
|Total Costs (Future
|Total Costs (Present
|CY +1 ($)||CY +2 ($)||CY +3 ($)||CY +4 ($)||CY +5 ($)||Total Costs ($)|
|Increase in Revenue||2,730,000.00||2,866,500.00||3,009,825.00||3,160,316.25||3,318,332.06|
|Total Benefits (Future
|Total Benefits (Present