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Introduction

Cleveland clinic is one of America’s outstanding medical service providers. Its heart program has been announced the best in the U.S. for the 18th consecutive year making it to earn the coveted No.1 during the U.S. News & World Reports “2012-13” Best Hospitals’ ranking. Cleveland Clinic also was placed as the 4th best hospitals in an overall ranking. This outstanding performance Implies proper planning and service delivery. The hospital is based in Ohio but the second American hospital to open a branch in the Canadian market. Cleveland Clinic is one of the hospitals that have attracted much attention from the public and the government of their progress in waste elimination and thus improving the health care outcomes. The main objective of this paper is to discuss how the planning and budgeting processes enhance its outstanding performance.

Factors to Consider when Making Pricing and Service Decisions

Cleveland Clinic’s pricing process takes place after diagnosis has been carried out. The process however is quite long and difficult to establish without going to the specific lines of service delivery. The prices charged on patients are also determined by the type of a given disease that the hospital is attending to, for instance, the type of cancer a patient is suffering from and this may cost between US $30, 000 to US $1million (Shimo, 2006). Just like other health care facilities, Cleveland clinic has proposals of controlling the rising costs of health care which it can achieve by either drastically altering the rules or players the two aspects. However, this strategy is bound to fail leaving redesigning of the hospitals as the only realistic measure that can be used as a reform effort.

The clinic is also being offered centers of excellence program by Walmart which will enable its patients to treat spine, heart and undergo transplant surgeries without out of pocket-costs. Walmart worked with Cleveland to see the development of the exclusive bundled pricing that were arranged for these forms of procedures. The hospital is, in addition, noting the importance of providing quality services while managing costs as Walmart found out that the hospital as well Mayo hospital came up with other cost-effective strategies of providing treatment services to the patients, for instance, medications preceding transplant options (“Walmart contracts with health systems to provide heart and spine surgery at no cost to employees”, 2012). 

The hospital management has to consider the increased medical knowledge which has become so voluminous to be memorized by the individual physicians. Thus, this must be considered when making service decisions, which must be done through proper routines and protocols. They are therefore aware that their main responsibility is to cure the patients’ disease. The hospital also takes into account the mission of the hospital which is basically to improve the outcomes of the patients, thus, resources are deployed to achieve the best of this. In other words, they realize that curing disease has become an organizational responsibility. Data is also very fundamental for decision making process; hence the hospital makes a relentless effort to collect and use it to improve its performance. Both resources and data collected lead to perceiving medicine as a practice and a source of innovation and insight. Through making great strides ensuring patient outcomes and eliminating waste it is becoming easy to control prices and keep them low (Bohmer, 2010).

The decision to expand to new states is aimed at providing its efficient services to other places where they are needed. Cleveland Clinic recently announced its plans to open the first Canadian offices which are scheduled to be opened later this summer in the heart of business District in Toronto. The local patients in the new Cleveland Clinic Canada will now be offered "health and wellness consulting" in addition to providing health care options information in the main U.S. clinic. Also, for easy reach by cancer patients, M.D. Anderson Cancer Center, a renowned world expert opened a Toronto office in September 2003. The patients may book an appointment themselves or be referred by an oncologist. In this centre, the patients find help in collecting information concerning their medical cases and are referred to an agent of the M.D. Anderson travel, who makes plans for them as they travel to the hospital based in Houston, Texas (Shimo, 2006). 

Overall Planning Process and the Components of Financial Plan

The main reason for conducting a proper planning process is to come up with ways of meeting the objectives and goals of the hospital based on satisfying the needs of patients. It involves various departments such as staffing and remuneration and general service delivery. Planning is done annually to provide for expectations of the forthcoming year. It does not comprise the final recommendations for what is intended. In Cleveland, the planning process is done by a committee which represents managers from different departments. Technology is utilized in the presentation and processing of data required for planning. For instance, preparing a budget and coupling it with both strategic and financial plans.

Cleveland HeartLab is one of the components of Cleveland Clinic’s financial action plan, which in collaboration with Cleveland Clinic managed to complete a round of fundraising of $ 3 million which involved investors such as Zapis Capital Group, Glengary and Second Generation. A Clinical reference laboratory, Cleveland HeartLab is specialized in diagnosis and management and prevention of cardiovascular disease. It operates a CAP-accredited with CLIA-certified and lab where inflammation samples for markers that make patients vulnerable to heart disease are analyzed. The HeartLab is also developing some tests based on Cleveland Clinic licensed research for inflammation biomarkers. The money raised will be channeled to: first, the expansion of the efforts sales and marketing as well stretch out to other regions, second, is to build of the hospital’s internal operations, third, to improve the technology of Cleveland Clinic and make it more valuable before making use of it in the market. Another component of the financial plan of the hospital is a research into the mechanisms that can form a possible link between inflammation and cardiovascular disease as well as its consequences (“Cleveland HeartLab raises $3M to expand, advance technologies”, 2010).

For the hospital to determine the amount of money it needs for the various projects, it needs to rely on an essential and principal tool, the budget. The principal and essential tool is the budget which will comprise of the revenue and expense projections and describing the financial goals of the hospi­tal for the coming year. The total estimates for each account item will be a reflection of what the management intends to achieve in the forthcoming year. The hospital prepares a budget, which is an ongoing planning process written down and data-based plan to identify the position it expects to be in future and the way it finds itself there. This is an increasingly an important core competency that needs to be exercised by the healthcare executives.

Role of Time Value Analysis in Making Sound Management Decisions

Time is very valuable in key decision making process in various departments in the hospital. For instance, some investments can only be divested at specific times depending on the partnership agreements. The partners are normally donors who work with strictly specified timelines at the elapse of which the investment is termed as expired. Great decisions have been arrived at in Cleveland clinic since the leaders have learnt how synthesize the voluminous information arising from day to day activities and within a restricted time come up with the best decisions possible. They achieve this by first developing quantitative and qualitative filtering mechanism for the manager’s decision making process and this leads to making better decisions within a short span of time.

Previously, many organizations have found it very scary to sit down long hours to make a budget and link it to other areas such as planning. There are contemporary software tools which are easy to use and which now make integration of financial and strategic plans to be both desirable and practical. The annual budget can also use the same tools to be integrated with capital, strategic and financial plans. It is now possible and necessary to integrate strategic planning with annual budgets and long-range plans. This can be done either by forming a single document of the integrated plan or a strategic plan coupled to a capital plan and financial. This approach of an integrated financial management, the financial plan’s specific targets can be used to “drive” the development of the initial budget and thus rolling down the financial plan through this clinic. The overall result is that the time spent to carry out the long and rigorous process is extremely minimized.

With advancement in technology time taken to communicate with patients especially when taking their history has really been reduced. The Cleveland collaborated with MetroHealth System which is a public health system in Ohio in late 2010 to link the electronic medical records (EMRs) throughout both of the two organizations. The project succeeded and now the two health systems are able to electronically share the patients’ data which in 2010 was approximately 10,000 cases. It is thought to have led to better patient care since it immediately provides medical histories which are more complete. This improvement through application of technology and information resources did away with the need to carry out repetitive diagnostic tests, thus saving time for more accurate and faster diagnosis.

It is possible to share EMRs since both the Cleveland Clinic and MetroHealth possess an EMR system from Epic Corporation and through it the more complete and the Clinic and MetroHealth now have managed to increase the access network to 330 clinics and hospitals nationwide. This has therefore made it easy to share patient information with other 36 other organizations of external healthcare to assist with the treatment of the clinic’s patients. Thus, time spent in struggling to attend to one patient is much reduced as there are many professional doctors and facilities to attend to patients. Also consultation between doctors has been made easy and fast (“Cleveland Clinic Health System”, 2011).

Recommendations for Cleveland Clinic’s Major Investment

The Cleveland Clinic is said to have previously a competitor of giant hospitals like Memorial Sloan-Kettering and New York-Presbyterian Hospital but now it’s ranked as struggling and unable to live up to former glory. It has lost $500 million, which is equivalent to almost one third of the wealth it once prided of. All these have faded away as a result of too ambitious betting on some technology stocks intended to steer the hospital to greater heights but fizzled soon. So the doctors are requested to work after hours and on Saturdays in order to help patients, however some doctors suppose that it is related to increasing billings. Regular investments on nursing stations and computer systems are being delayed, and a new chief financial officer is arranging a $750 million debt refinancing plan that he hopes will delay $140 million in loan payments for at least seven years. The Clinic is now investing on the doctors energy to work longer than the normal scheduled hours and also attend duty on Saturdays which is an effort to ensure the patients have benefited. The management needs to continue investing on the clinic’s nursing stations and computer systems which have been postponed. Despite some short fall, the hospital has risen up to make more investments such as buying 47 acres of land.

I would recommend that the clinic focus on a target for clinic’s long-term returns which exceed the capital costs. This is an effort to optimize its asset/liability mix which will lead to preserving and making it possible to maintain its strong structure in finance sector. Then, the allocation of the assets portfolio should be spread out throughout the classes of global fixed income asset as well as alternative investment strategies. The aim of this is type of investment is that it is designed to mainly maximize the probability that the organization can achieve by long term investment objectives with a suitable risk level. At the same time a level of liquidity has to be maintained so that the needs of the portfolio management to which is on progress. This allocation is formalized to become a strategic policy and a yardstick serves as a guide for the portfolio management as well as provides a standard for use in evaluating performance of the portfolio. As a result of large unpaid loans, the investments would basically be primarily maintained in a master trust fund administered using a bank as trustee. Formal investment policies have been established through which the objectives of hospitals and an appropriate balance is reached between risks and returns (Teisberg & Porter, 2009).

How Cleveland Clinic should Address Financial Risk and Required Returns

In order to reduce the financial risk of the patient deciding to start using IVF treatments, Cleveland Clinic was privileged to be the first medical facility to begin using the IntegraMed Program. This was an initiative of IntegraMed America which is an organization that provides specialty healthcare services in technology-focused emerging niche segments. The body announced during the launch of the program that Cleveland Clinic was already started providing the Attain IVF Program to patients attending the hospital to undergo treatment of problems related to fertility issues. IntegraMed designed Attain IVF Program with an intention on providing the services rendered by the program to the whole nation. With this program, it is easier for the patients to get patient refunds of approximately 70% - 100% of the charges they are expected to pay in case their fertility problem is not solved so that they go home with a baby (“IntegraMed program now at Cleveland Clinic”, 2009).

This program has motivated many patients, however, to stay in treatment longer than they should have stayed without the program since they see it as a significantly increased chance of the in-vitro Fertilization. Their opportunity to stay in treatment longer is expected to improve the odds with IVF success. This intervention has thus promoted the trust of the patients in the services provided by the hospital and thus not only it is able to maintain old clients, but also attracting many others who cannot get the services of the program elsewhere. This is also a financial risk since a good number of such treatments are bound to fail and hence calling for refunds.

The hospital has also taken up a study of early penile program using patient provided information which is in form of written consent. Following nerve-sparing RP carried out during cancer treatment, the patients were unable to have erections for generational sexual activity to take place as well as severe ED. This patient was not expecting patient returns and therefore necessitated the study as an effort to address the problem. After several interventions, it was found out that the recovery period for erectile function ranges from 6 to 24 months. The patients who complied with the treatment procedures showed a 50% of these cases registering a spontaneous return of erections after around six months (Raina et al., n.d). This is just one of the cases where the patients return for extra services and they get solved adequately by the Cleveland Clinic. This is made possible as a result of proper planning and budgeting.

In the hospital’s involvement in cancer treatment, the team in Cleveland Clinic undertakes a time sensitive process of describing a technique that will be essential in fine –tuning urological cancer, which is a cancer of the kidney. This is a very expensive process in terms of technology, time and therefore requires proper funding and consequently proper financial management (Derweesh et al., 2006). Cleveland clinic has issues with McDonalds which operates a fast-food giant within the hospital court. As much as this is a source of income to the hospital, the fast foods are identified as one of the risk factors that lead to cancer. Yet, the hospital is a world renowned cardiac hospital. Technology is used to produce the fast foods by the Agricultural Research Service. However, the costs of producing this food are cheaper than the costs o treating the cancer patients. The hospital made a resolution to let McDonald finish the hospital 10-year lease but on conditions that minor adjustments be done on the menu (“News Digests”, 2005).

Conclusion

Planning and budgeting are broad areas that can sometimes be used interchangeably. They are processes that find a lot of application in all organizations. The more and better they are carried out, the better the organization is expected to perform. Using Cleveland Clinic as the Study case, planning and budgeting have contributed to its excellence not only because of its best services but also its service to the community such as research and business. Work in the clinic begins with patients who bring money to the hospital for treatment and therefore pricing of the services proved an inevitable process in the clinic. Pricing is determined by the type of and the level of a disease a patient is suffering from. It is noticed the cost for medical services is rising very fast; hence strategies are needed to provide the services without necessarily digging into the pockets.

There are several components of financial action which may include expansion of the hospital to other regions and states, expansion of infrastructure and several research projects and philanthropic contributions. The hospital has won several titles and has remained among the top performing hospitals and the best in areas such as cancer treatment. The hospital has new plans to expand its infrastructure and contributing $3 million for a number of such projects listed. Time is very valuable when it comes to making sound management decisions such as the use of EMRs between 36 hospitals which quickens history taking, storage retrieval and transmission. The clinic has an efficient way of addressing both financial risks such as through incorporating expert bodies such as IntegraMed and also forming a team of experts to respond to returns of patients or claims.

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