Cost Benefit Analysis of Cleveland Clinic
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Create a 5-6 page cost benefit analysis that supports a risk financing recommendation for a selected organization.
Introduction
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.
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.
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?
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?
Reference
Plowman, N. (2014). Writing a cost-benefit analysis. http://www(dot)brighthub(dot)com/office/project-management/articles/58181.aspx
Overview and Preparation
Note: This assessment should be completed third.
The following resources are required to complete this assessment.
Cost-Benefit Analysis Template [XLSX].
Scenario
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 resources provided for this assessment, for which a CBA may be conducted. The CBA should include one of the following course-related topics:
Quality.
Patient safety.
Risk management.
Regulatory standards.
Compliance.
Patient and stakeholder satisfaction.
Instructions
Step One: Identify Costs
Apply the process from Writing a Cost-Benefit Analysis article, linked in the Cost-Benefit Analysis Approach section of this assessment, to identify costs:
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.
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.
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.
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.
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.
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.
Assign monetary values to the benefits identified in steps one and two. Be sure to state these monetary values in present value terms as well.
Add all anticipated benefits together to get a total benefits value (Plowman, 2014).
Cost-Benefit Analysis
Enter the cost and benefit data you developed for the CBA in your preparation steps into the Cost-Benefit Analysis Template.
Then, write an analysis in which you do the following:
Describe the organizational, program, or departmental issue for which you have created the CBA.
Evaluate the cost versus benefit according to the general guidelines outlined by Plowman's 2014 article, which you read in the preparation for this assessment.
Make a recommendation as to whether the benefits are sufficient to outweigh the costs of the proceeding.
Describe the systems-based context for your recommendations, integrating the CBA within the organization as a whole.
Describe how the issue relates to the organization's vision, mission, and strategic direction.
Provide a rationale that explains how your recommendations are appropriate for your organization's capacity and strategy.
Your analysis should use proper APA style and formatting and include the following sections. Each section, except the title page, should include the appropriate section heading.
Title page: Use APA formatting and include the following:
Assessment number (Assessment 3).
Your name.
The date.
The course number (MHA-FP5014).
Your instructor's name.
Abstract: Include a one-paragraph summary of analysis content. This is not an introduction to the topic, but a summary of the entire analysis. Make sure to double-space.
Issue description.
CBA evaluation.
CBA recommendations.
Context for recommendations.
Relationship to vision, mission, and strategy.
Rationale.
Conclusion.
References.
Appendix: Attach your completed Cost-Benefit Analysis Template.
Additional Requirements
Written communication: Written communication should be free from errors that detract from the overall message.
Length of paper: 5–6 typed, double-spaced pages.
Font and font size: Times New Roman, 12 point.
Appendix: Include your Cost-Benefit Analysis Template as an appendix to your analysis.
Competencies Measured
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.
Reference
Plowman, N. (2014). Writing a cost-benefit analysis. http://www(dot)brighthub(dot)com/office/project-management/articles/58181.aspx
SCORING GUIDE
Use the scoring guide to understand how your assessment will be evaluated.
VIEW SCORING GUIDE
Cost Benefit Analysis
Student Full Name
Institutional Affiliation
Course Full Title
Instructor Full Name
Due Date
Abstract
Cost benefit analysis is a systematic method of analyzing the costs and benefits of a project proposal. Business analytics is critical to determining whether a proposed business case is worth the effort and resources that will go into implementing it: the purpose of cost benefit analysis is to determine the repercussions of a proposed project on the organization’s bottom line. This report conducted a cost benefit analysis of a proposed salary increment program that increased average salaries across the entire personnel system at Cleveland Clinic by 4.5% over 5 years. The CBA analysis revealed that investing in a salary increment program will result in higher revenues and significant cost savings over a span of 5 years. The potential cost of implementing the proposed program is $29,563,446,283 while the potential benefits of increasing average salaries across the entire personnel system at Cleveland Clinic by 4.5% over 5 years is $47,035,006,712. The net present value of the salary increment program is $29,563,446,283, resulting in a net positive value of $11 billion.
Cost Benefit Analysis
Issue Description
The director of human resources at Cleveland Clinic has invested in several employment management activities from staffing to employee benefits. One area that has proven challenging for the organization in terms of human resource management relates to its compensation methodology. Cleveland Clinic bases its compensation approach on staying competitive in the labor market in terms of attracting top talent as well as providing quality care consistently across the care continuum. Unfortunately, the institution’s human resource management is struggling to drive employee engagement in a globalized marketplace with competing offers from other hospitals. For instance, management team members at Cleveland Clinic have expressed concern about the effectiveness of their biannual performance. Hospitals across the country are struggling with retention and recruitment amidst ever-growing demand for healthcare and unprecedented workforce shortage. The issue of providing competitive compensation packages relates to the course-related topic of quality. The Institute of Medicine defines quality in healthcare as the extent to which healthcare services produce positive health outcomes and align with contemporary professional knowledge. Compensation plans that provide extrinsic incentives to clinicians to increase the quality and quantity of care they provide have been shown to improve overall healthcare outcomes. For instance, systematic reviews of pay-for-performance programs indicate significant improvements in healthcare processes and clinical outcomes. Pay for performance has been recommended by the Institute of Medicine as a strategy to improve overall quality of medical care in healthcare settings.
CBA Evaluation
Cost benefit analysis is a systematic method of analyzing the costs and benefits of a project proposal. Business analytics is critical to determining whether a proposed business case is worth the effort and resources that will go into implementing it: the purpose of cost benefit analysis is to determine the repercussions of a proposed project on the organization’s bottom line. A cost benefit analysis is used to estimate the overall projected cost of a project in relation to the overall expected benefits so as to ascertain if the proposed execution is financially sustainable for a company or project team (Plowman, 2014). The three parts of a cost benefit analysis are identification of potential expenses, determination of all projected benefits, and consideration of the differences to ascertain if the project makes sense from a business perspective. The purpose of this report was to conduct a cost benefit analysis of implementing a 5-year salary increment program to increase job retention and recruitment at Cleveland Clinic. A list of the monetary costs that will be incurred upon implementation of the salary increment program and throughout the life of the project includes job evaluation, pay structure creation, and salary increment implementation.
Rudimentary cost estimates indicate that the median annual costs for job analysis functions is $280,000 although expenses range between $150,000 and $4,000,000 depending on the number of personnel. Cleveland Clinic is one of the largest healthcare institutions in America with more than 5,658 salaried physicians and 19,000 registered nurses. The cost of judging the relative worth of each position in the clinic including developing an internal structure to guide fair salary increments for every employee is roughly $3 million. On the other hand, the mean standard increase in hospital and health system salary in for the 2022 fiscal year was 3%. Designing a pay structure that is consistent with the market median salary increase of 4.5% will communicate the organization’s commitment to providing competitive salaries that not only attract top talent but also increase employee retention. The interim unaudited consolidated financial statements for Cleveland Clinic indicate that salaries, wages, and benefits amounted to $2,031,792,000 for three months ended March 31. Using the figure as a starting point and applying an average salary increment of 4.5% across the entire personnel system results in annual salary costs of $5,824,268,231.
Moreover, the salary increment program will include administrative expenses related to implementing the new pay structure. Administrative expenses include the cost of personnel (administrative assistant in HR, benefits manager, and information systems analyst) as well as the systems facilitating regular compensation operations (office supplies and IT infrastructure). Administrative expenses can reach up to 14% of total revenues dependin...
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