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  • Subject Name : Management

Predicting Healthcare Expenditure by Multimorbidity Groups

Table of Contents

Introduction.

Identify a new project or service and supply an appropriate rationale for this to be funded.

Budget Preparation.

Break-even Analysis.

Conclusion.

References.

Introduction to Healthcare Quality Improvement Work

Australia's publicly-financed national universal health insurance program, Medicare, was developed to encourage equality by enhancing health facilities' efficiency and affordability. Patients are willing to receive Medicare. Free care in public facilities and private services out of town. Patients earn a reimbursement rate on facilities required on non-hospital care. The refund is based on a proportion of a fee schedule for each service form. For e.g., with a 20 min or more visit with a general physician, the 2017 schedule fee is $71.70 and the profit is 100 percent, or $71.70; the blood test relevant to the treatment of diabetes is $16.80 in schedule fees, and the gain is 75 per cent of the schedule fee; or $12.80 in schedule fees. Although the state operates public hospitals, most healthcare facilities are rendered by private entities. The actual amount charged by providers for services is decided by the providers themselves and these charges are not limited such that providers may charge higher than the schedule. This project will base on the new products which offers by the hospitals and doctors to the patients which are reasonable and affordable to them. Biologic medicines are the new products which are highly demandable and costly in the market. With the help of government support the private and public company can manufacture the Biologic medicines which are easily available in the market at affordable prices.

1. Identify a New Project or Service and Supply an Appropriate Rationale for This to Be Funded

The healthcare sector delivers a range of services to support a community or individuals’ health needs. The healthcare industry classifies the multiple products it provides by sector. Hospitals and healthcare facilities continuously adjust their strategies and respond to diverse internal and external influences, including issues of reimbursement, innovations in technology and improvements in the populations they represent. There is no widely accepted sector classification so a non-exhaustive but inclusive and condensed limited sector classification will be used in this exploration (Gadolin & Andersson, 2017). The primary industries of the health industry can be commonly categorised into four sub-segments:

  • Healthcare facilities and services
  • Manufacturers of medical devices, appliances and healthcare supplies
  • Services of medical, medical insurance and managed care
  • Pharmaceutical products and associated segments

Biologic drugs (biologics) are manufactured by using live organisms through biotechnology processes, 1.2 Like several new cancer treatments and other severe illnesses, such as rheumatoid arthritis and multiple sclerosis, these complex goods are very costly particularly as they are patent. The Sharp & Dohme metastatic melanoma medication cost patients for one year after care approximately A$150,000 before it was funded with Australia's PBS3. Biologics form an increasing aspect of the pharmaceutical market and are estimated to make up 19–20 percent of the global industry by 2017. If sound procedures promote the implementation of bio-similia, these rising prices would bring additional pressure on health systems (Ross, 2018). In Australia, the Government has committed A$ 20 million in biosimilar immune responses and education over 3 years to expand the use of PBS and improve its sustainability.

Sources of a fund for a new product:

Venture capital is only one-way medical product manufacturers collect funds to launch projects or products, with distinct benefits and drawbacks for various forms of financing. Such other forms of financing include:

Borrowing money: A bank loan is the most conventional type of debt. Some businesses still use credit cards to support their early work.

Angel Investors: Any wealthy people regarded as "angels" have assets reserved for high-risk investing. Industry gurus acquainted with the specific field of an entrepreneur can be helpful as investors, particularly in the early stages where entrepreneurs require little financing. Angels do not have personal time to help develop the company, though, and may not actually intend to participate in many financial rounds (Talley, 2020).

Investment Banking: Investment banks will often gather a community of buyers for a commission extracted as part of their raised money in what is regarded as a 'private investment.'

Corporations: Corporate investors often lend a start-up company credibility; however, their agenda is typically to secure marketing rights for the product or to gain an inside track for the business if profitable. Corporate funding may be a promising move toward the future liquidity of the start-up, but may also deter any prospective investors (Troy et al., 2017).

Customers: If the product of the venture addresses a consumer concern, the consumer will be inspired to help support the venture. This will build brand reputation, but it can contribute to strategic issues for start-ups as they try to gain new clients.

2. Budget Preparation

Zero-based budget: Zero-based budgeting in management accounting requires a zero-base budget planning from scratch. Which requires reassessing anything in the cash flow statement and evaluating all the costs that the agency is to incur. Thus, zero-based budgeting is a budgeting approach whereby all spending for the new period is measured on the basis of real cost that may be incurred, not on a variable basis, and just includes adjusting functional operations. According to this approach, each operation should be explained, justifying the profits produced by the business at all costs (Moreira, Gherman & Sousa, 2017).

Zero Budgeting Steps

1) Task recognition

2) Identify forms and means to carry out the task

3) Assessment of these solutions and even examination of fund sources alternatives

4) Set the figures and goals for the budget

Zero Based Budget Advantages

  • Exactitude: In contrast to regular budgeting approaches that merely include making random adjustments to the budget of the previous year, zero-based budgeting ensures that each agency looks at every factor of its cash flow and estimates its running costs. This aids to a degree in lowering costs since it offers the target output a good view of the costs (Snoswell, Taylor & Caffery, 2019).
  • Efficiency: this allows to effectively distribute capital (departmentally) while it continues to look at past statistics but investigates the real figures
  • Reducing repetitive tasks: it helps to find possibilities and cost-effective approaches to do stuff while avoiding any unproductive or unnecessary practises.
  • Budget inflation: Because any item on the budget needs to be justified, the null budget overcomes the vulnerability of budget inflation incremental budgeting.
  • Coordination and cooperation: It also increase departmental coordination and collaboration and motivates workers by engaging in decision-making.

While zero budget merits seem like a lucrative process, the drawbacks mentioned below are necessary to know:

Zero-based Budgeting Disadvantages

  • Time-consuming: Null-based budgeting is a time-consuming job for a corporation or a government-funded business to conduct toward cumulative budgeting per year, which is much simpler.
  • High personnel requirements: Creating a whole budget from scratch can involve a large number of workers to participate. Many agencies do not have the time and staff capital to do so.
  • Failure to illustrate each line item and expense is a challenging activity that needs management preparation.
  • Conclusion: Zero-based budgeting seeks to represent the true costs a government or State would experience. This is a more appropriate budgeting tool, albeit time-consuming. At the end of the day, an organisation asks for time to work in the budgeting procedure to include greater accuracy numbers or for a streamlined form of gradual budgeting (Schakel, Jeurissen & Glied, 2017).

Zero-based Budget for Biologic Medicines Manufacturing

1. INCOME

 BUDGET ($)

Gross Income 1

200,000

Gross Income 2

500,000

Social Security

150,000

Interest / Dividends

100,000

TOTAL

950,000

 

2. ADJUSTMENTS

 BUDGET

Tax Withholdings

 25,000

Other Pay check Deductions

15,000

SUBTOTAL

40,000

BUDGET REMAINING

910,000

 

3. BIG BILLS

 BUDGET

Mortgage/Rent

12,000

Health Insurance for employees

10,000

Property Tax

16,000

Major Car Repairs

1,500

Unexpected Medical Bills

1,350

Repairs

2,000

Appliance Replacement

1,650

SUBTOTAL

44,500

BUDGET REMAINING

865,500

3. Break-Even Analysis

Analysis of breakage is used to define where the project will be capable of covering all the expenses. It is often used in business to determine when a profit begins. It is necessary to calculate start-up costs, human resources costs and continuing consumables costs, etc. A break-even analysis is a financial instrument that enables a business to evaluate how successful the organisation, a new project or a commodity is. In other words, a financial estimate specifies the amount of goods or services that a corporation can sell or provide to fund its expenses (especially fixed costs). Break-even is a condition in which a company does not gain profits or lose income nor pays its expenses. In the examination of the interaction between variable expenses, fixed costs and income, break-even analysis is helpful. In addition, a low fixed cost business has a low break-even point of sales. 

Break-even analysis components

Fixed Costs

Overhead costs are also known as fixed costs. Such overhead costs arise after a decision is made to start an economic activity, and these costs are directly associated with production levels but not with production quantities. Fixed costs include interest, taxes, wages, rent, depreciation costs, labour costs, energy costs etc. These prices are set independent of demand. Costs must also be incurred in the event of no production.

Variable Costs

Variable costs are costs which will increase or decrease immediately with regard to the volume of production. Such costs involve raw material costs, costs for packaging, fuel and other costs directly linked to production.

Used of Break-even Analysis

Beginning a new company: A break-even analysis is a must to launch a new company. It not only allows to determine if the possibility of launching a new venture is feasible, but it also forces the firm to be cost reasonable and provides a strategy for pricing.

Developing a new product: In the case of an existing company, a breakthrough review can also be carried out before a new product is released — particularly where a certain product introduces a considerable expense (Caballer-Tarazona, Guadalajara-Olmeda & Vivas-Consuelo, 2019).

Changing the model of business: If the organisation is on the path to changing the business model from manufacturing to market, then a break-even review has to be completed. The cost could shift dramatically, and breakdown analysis would help to set the sale price (Paid, 2019).

For the following purposes, breakeven analysis is useful:

  • It helps to assess the unused of the company's capacity until the failure has been achieved. This allows to demonstrate optimum value for a given product / service that can be produced.
  • The effect on benefit on manual automation may be calculated (fixed costs exceed variable costs).
  • When the price of a good is increased, it tends to assess increases in earnings.
  • It helps to assess how many damages will be incurred if there is a drop in revenue.

In comparison, break-even analysis is important to consider a company's potential capacity to make a profit. In the case of a business whose revenue falls above the highest profits amount, this implies that except under the strongest conditions, it is virtually unworkable for the organisation to generate a profit. It is also the management duty to continuously track the failure stage. This control definitely limits the breakeven point as much as possible (Barasa et al., 2017).

Conclusion on Healthcare Quality Improvement Work

This report concluded that the budget plays main role in planning a new projects and break-even analysis tells when the company is in no loss and no profit condition. The Australian government expenditures on biological medicines and future savings from the early adoption of biosimilars is given in this report. Given the barriers to the biosimilar market entry, the timely introduction of bio-similar is an effective tactic to ensure that savings are gained through the biosimilars. There is no evidence to support arguments that long stretches of control offer grounds for expanded local research and development spending. In the other side, there are major costs of delayed biosimilar entry. Savings of between A$ 367 to A$ 560 million per year could be predicted if the biosimilar PBS listed for any of the biologic items could be decreased by 24% in annual aggregate PBS and RPBS spending of A$ 2.2 billion on biologics.

References for Healthcare Quality Improvement Work

Barasa, E. W., Cleary, S., Molyneux, S., & English, M. (2017). Setting healthcare priorities: a description and evaluation of the budgeting and planning process in county hospitals in Kenya. Health policy and planning, 32(3), 329-337.

Caballer-Tarazona, V., Guadalajara-Olmeda, N., & Vivas-Consuelo, D. (2019). Predicting healthcare expenditure by multimorbidity groups. Health Policy, 123(4), 427-434.

Gadolin, C., & Andersson, T. (2017). Healthcare quality improvement work: a professional employee perspective. International Journal of Health Care Quality Assurance.

Moreira, M. R., Gherman, M., & Sousa, P. S. (2017). Does innovation influence the performance of healthcare organizations?. Innovation, 19(3), 335-352.

Paid, P. (2019). Break Even Analysis. Policy, 9, 29.

Ross, T. K. (2018). A Comprehensive Guide to Budgeting for Health Care Managers. Jones & Bartlett Learning.

Schakel, H. C., Jeurissen, P., & Glied, S. (2017). The influence of fiscal rules on healthcare policy in the United States and the Netherlands. The International Journal of Health Planning and Management, 32(4), 595-607.

Snoswell, C. L., Taylor, M. L., & Caffery, L. J. (2019). The breakeven point for implementing telehealth. Journal of telemedicine and telecare, 25(9), 530-536.

Talley, B. (2020). Economics and Finance of Healthcare. Transformational Leadership in Nursing: From Expert Clinician to Influential Leader, 277.

Troy, P., Westaway, L., Grondin, A., & Rezanowicz, T. (2017, December). Rationalizing healthcare budgeting when providing services with mandated maximum delays: a simulation modeling approach. In 2017 Winter Simulation Conference (WSC) (pp. 2740-2751). IEEE.

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