Cost benefit analysis that supports a risk financing recommendation
Cost benefit analysis that supports a risk financing recommendation
Create a 5–6-page cost benefit analysis that supports a risk financing recommendation for a selected organization.
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Note: The assessments in this course build upon each other, so you are strongly encouraged to complete them in a sequence.
In your current and future role as a health care leader, you can expect to conduct a cost-benefit analysis (CBA) to determine whether the positive benefits of a proposed recommendation outweigh the negative costs.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
· Competency 1: Conduct an environmental assessment to identify quality- and risk-management priorities for a health care organization.
· Specify the focus and stakeholders for a cost-benefit analysis.
· Develop a value proposition for change management that incorporates quality- and risk-management concepts.
· Describe strategies to influence and impact the needed changes for quality improvement.
· Competency 2: Apply a risk-management model or framework to a specific risk-management priority.
· Conduct a cost-benefit analysis for a risk-management intervention.
· Competency 3: Analyze the process and outcomes of a care quality- or risk-management issue.
· Identify relevant internal and external benchmarks, using a systems-based perspective.
· Competency 5: Communicate in a manner that is scholarly, professional, and consistent with expectations for professionals in health care administration.
· Use correct grammar, punctuation, and mechanics as expected of a graduate learner.
In your current and future role as a health care leader, you can expect to conduct a CBA. You may be asked to offer three alternatives and to make a recommendation.
Plowman relates that “a cost benefit analysis is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether the proposed implementation is worthwhile for a company or project team.” Plowman also identified the three parts of a CBA to be the following:
· Identification of potential costs.
· Recording of all anticipated benefits.
· Examination of the differences to determine if positive benefits outweigh negative costs.
A pre-formatted Excel spreadsheet that can be used as a template for CBAs is a good tool to have in your personal toolbox. Inputting data is simply the first step. As you fill out templates, always consider the numbers within the context of an organizational mission, strategic direction, patient safety, risk-management issues, regulatory requirements, patient and stakeholder satisfaction, and also the dynamics within the health care industry.
Plowman, N. (2014). Writing a cost-benefit analysis. Retrieved from http://www.brighthub.com/office/project-management/articles/58181.aspx
Questions to Consider
As you prepare to complete this assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as a part of your assessment.
· What steps do you need to take in order to align a CBA with an organization’s mission and strategy? Cost benefit analysis that supports a risk financing recommendation
· If you were to offer three alternative recommendations after a CBA, what types of elements would you consider to differentiate them from one another?
· How would you substantiate a recommendation for reducing financial risks in a health care setting when the quality of care is involved?
· What are the three parts of a CBA?
The following resources are required to complete this assessment.
· Cost-Benefit Analysis Template [XLSX]. Attached
The resources provided here are optional and support the assessment.
· Plowman, N. (2014). Writing a cost-benefit analysis. Retrieved from http://www.brighthub.com/office/project-management/articles/58181.aspx
This article discusses how to value risk reductions in the context of benefit-cost analysis.
· Robinson, L. A., & Hammitt, J. K. (2013). Skills of the trade: Valuing health risk reductions in benefit-cost analysis. Journal of Benefit-Cost Analysis, 4(1), 107–130.
This article discusses a cost analysis approach in medical education.
· Walsh, K., Levin, H., Jaye, P., & Gazzard, J. (2013). Cost analyses approaches in medical education: There are no simple solutions. Medical Education, 47(10), 962–968.
This article describes the cost-benefit methodology in terms of criminal justice policy.
· Manski, C. F. (2015). Narrow or broad cost–benefit analysis [PDF]? Criminology & Public Policy, 14(4), 647–651.
Additional Resources for Further Exploration
You may use the following optional resources to further explore topics related to competencies.
· Kavaler, F., & Alexander, R. S. (2014). Risk management in health care institutions: Limiting liability and enhancing care (3rd ed). Burlington, MA: Jones and Bartlett. Available from the bookstore .
· Youngberg, B. J. (2011). Principles of risk management and patient safety. Sudbury, MA: Jones and Bartlett. Available from the bookstore .
Risk-Management Professional Organizations
· The Risk Management Association. (n.d.). Retrieved from https://www.rmahq.org/Default.aspx
· American Hospital Association. (n.d.). American Society for Health Care Risk Management. Retrieved from http://www.ashrm.org/
· Assessment Instructions
Note: This assessment should be completed third.
Suppose an issue has emerged in your organization that presents significant risks to the stakeholders involved. Your supervisor has asked you to conduct a CBA, make a recommendation, and present it to the board of directors. You are expected to consider the numbers within the context of the organizational mission, strategic direction, patient safety, risk-management issues, regulatory requirements, patient and stakeholder satisfaction, and the dynamics within the health care industry.
Select a relevant issue within your workplace (or one from the Suggested Resources) for which a CBA may be conducted. The CBA should include one of the following course-related topics:
· Patient safety.
· Risk management.
· Regulatory standards.
· Patient and stakeholder satisfaction.
Step One: Identify Costs
Apply the process from Writing a Cost-Benefit Analysis article (from the Required Resources) to identify costs:
2. Make a list of all monetary costs that will be incurred upon implementation and throughout the life of the project. These include start-up fees, licenses, production materials, payroll expenses, user acceptance processes, training, and travel expenses, among others.
2. Make a list of all non-monetary costs that are likely to be absorbed. These include time, low production of other tasks, imperfect processes, potential risks, market saturation or penetration uncertainties, and influences on one’s reputation. Cost benefit analysis that supports a risk financing recommendation
2. Assign monetary values to the costs identified in steps one and two. To ensure equality across time, monetary values are stated in present value terms. If realistic cost values cannot be readily evaluated, consult with market trends and industry surveys for comparable implementation costs in similar businesses.
2. Add all anticipated costs together to get a total costs value (Plowman, 2014).
Step Two: Identify Benefits
Continuing with the CBA, proceed with the identification and quantification of benefits, per Writing a Cost-Benefit Analysis article.
2. Make a list of all monetary benefits that will be experienced upon implementation and thereafter. These benefits include direct profits from products or services, increased contributions from investors, decreased production costs due to improved and standardized processes, and increased production capabilities, among others.
2. Make a list of all non-monetary benefits that one is likely to experience. These include decreased production times, increased reliability and durability, greater customer base, greater market saturation, greater customer satisfaction, and improved company or project reputation, among others.
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