Ashworth Accounting Healthcare Economics Discussion

The Stand-Alone Project for this course requires you to act in the role of a consultant to a physician who wants to establish “Oakville Open MRI Clinic.” Dr. Hughes, introduced in Assignment #6, is the physician in charge of exploring the development of an Open MRI Clinic, which will be a part of Oakville Hospital. The proposed MRI clinic will be the only “open” MRI operation in Oakville County. There are “open” units in Memphis, which is about 200 miles away, and there are many “closed” MRI facilities in the County. Oakville Hospital has highly regarded neurological and radiology groups. Many aging baby boomers live in Oakville County. There is a shortage of radiology techs needed to staff the Open MRI.

Dr. Hughes wants you to complete a draft of a business plan. The previous consultant completed the Mission Statement, SWOT analysis, and Strategies sections of the Plan. Your function is to draft any applicable economic, budgeting, and financial analysis sections, and to make conclusions and recommendations based upon your analysis. Your business plan should be 20 to 25 double-spaced pages in length, including worksheets and narrative. Your Stand-Alone Project responses should be both grammatically and mechanically correct, and formatted in the same fashion as the project itself. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your response and document in a bibliography using APA style. (300 points)

NOTE: It may be helpful to revisit Lesson #6 and the articles that discuss the format of a formal business plan. Also, perform sufficient research on Open MRIs to perform the economic analysis for this project. Keep in mind that you are primarily interested in developing the feasibility analysis for this project. You do not need to write an Executive Summary. As previously stated, you do not need to draft a mission statement, SWOT analysis, or devise strategies. However, you are free to develop any other aspect of a typical business plan you find applicable to the facts as stated in this problem or based upon your research.

STAND-ALONE PROJECT
MH688 Health Care Economics and Financial Management
Stand-Alone Project: Business Plan and Feasibility Analysis
(300 points)
You should begin working on the Stand-Alone Project early in the course. Each assignment
provides a benchmark for completing the Stand-Alone Project in a timely manner while working
through the course. You will find this information in the “Stand-Alone Project Benchmark”
section of each assignment.
The Stand-Alone Project for this course requires you to act in the role of a consultant to a
physician who wants to establish “Oakville Open MRI Clinic.” Dr. Hughes, introduced in
Assignment #6, is the physician in charge of exploring the development of an Open MRI Clinic,
which will be a part of Oakville Hospital. The proposed MRI clinic will be the only “open” MRI
operation in Oakville County. There are “open” units in Memphis, which is about 200 miles
away, and there are many “closed” MRI facilities in the County. Oakville Hospital has highly
regarded neurological and radiology groups. Many aging baby boomers live in Oakville County.
There is a shortage of radiology techs needed to staff the Open MRI.
Dr. Hughes wants you to complete a draft of a business plan. The previous consultant completed
the Mission Statement, SWOT analysis, and Strategies sections of the Plan. Your function is to
draft any applicable economic, budgeting, and financial analysis sections, and to make
conclusions and recommendations based upon your analysis. Your business plan should be 20 to
25 double-spaced pages in length, including worksheets and narrative. Your Stand-Alone Project
responses should be both grammatically and mechanically correct, and formatted in the same
fashion as the project itself. If there is a Part A, your response should identify a Part A, etc. In
addition, you must appropriately cite all resources used in your response and document in a
bibliography using APA style. (300 points)
NOTE: It may be helpful to revisit Lesson #6 and the articles that discuss the format of a formal
business plan. Also, perform sufficient research on Open MRIs to perform the economic analysis
for this project. Keep in mind that you are primarily interested in developing the feasibility
analysis for this project. You do not need to write an Executive Summary. As previously stated,
you do not need to draft a mission statement, SWOT analysis, or devise strategies. However, you
are free to develop any other aspect of a typical business plan you find applicable to the facts as
stated in this problem or based upon your research.
Part A
Economic Issues: Dr Hughes would like for you to address the economic issues
arising from the following. (96 points)
1.What type of price elasticity might be applicable to Open MRI services in
Oakville County? In other words, is pricing more likely to be elastic or inelastic?
Give two (2) reasons for your answer.
2.Identify four (4) factors (other than “utility” and “managed care organizations”)
that will influence the demand for Open MRI services.
3.Identify two (2) factors that will influence the supply (other than “utility” and
“managed care organizations”) of Open MRI services.
4.How might the concept of utility impact demand for Open MRI services?
Identify five (5) potential impacts.
5.How would managed care organizations impact demand and supply? Identify
four (4) potential impacts.
Part B
Financial Analysis: Dr. Hughes obtained the following information from Memphis
Hospital Open MRI Clinic (MHOMC). This information for MHOMC is the most
analogous in scope to the clinic he is proposing to start. (104 points)
Table 1: Memphis Hospital Open MRI Clinic Income Statement
Table 2: Memphis Clinic Comparative Balance Sheet
Based on the above information, Dr. Hughes wants you to prepare the following
information as attachments to the business plan:
1.Prepare a pro forma Income Statement for 2004. Dr. Hughes asks you to assume
that revenues and expenses will increase or decrease at the same rates as they did
in the period from 2002 to 2003. NOTE: Do not budget for Non-operating
Gains/Losses. As a part of your analysis, explain one (1) possible flaw with this
methodology.
2.Prepare a Budgeted Statement of Cash Flows for 2004. Use the information from
the 2002 and 2003 Balance Sheets and Income Statements to develop the
statement of cash flows. (Do not use the 2004 pro forma Income Statement).
NOTE: You have two unusual reconciling items.
a. Place a line item “Other Changes to Net Assets” in the Financing Activities
section as a positive adjustment of $32,288.
b.Make a Net cash adjustment line item of ($290) (negative adjustment), also in
the Financing Activities section. Also note that bad debt expense does not
require a cash outflow, so it will be a positive adjustment in the Operating
Activities section.
3.Ratio Analysis: Use the information from the 2003 Balance Sheet and Income
Statement to develop the following ratios. Show your calculations with your
answers.
a. Profit Margin Ratio
b.Return on Assets
c. Return on Equity
d.Current Ratio
e. Days Cash on Hand
f. Debt to Equity Ratio
g.Fixed Asset Turnover
h.Days in Patient Accounts Receivable
4.Conclusions: Analyze and form conclusions about the following Oakville Clinic
ratios in relation to the industry averages. Describe your conclusions. Base your
conclusions on your ratio calculations and the following industry averages.
a. Profitability Ratios: Profit Margin, Return on Assets Ratio, and Return on
Equity Ratio
b.Liquidity: Days Cash Ratio
c. Utilization of Assets: Fixed Asset Turnover Ratio and Days in Patient Account
Ratio
d.Solvency: Current Ratio
e. Capital Structure: Debt/Equity
5.Break-Even Analysis: Regardless of your previous calculations, assume the
following in performing a break-even analysis.
a. Fixed costs are $180,000
b.Variable costs are $350 per patient
c. Reimbursement per patient is $550
d.Anticipated volume for year 2004 is 1,200 visits.
Calculate the breakeven point in 1) Units-patient Visits, and 2) Dollars-Net
Patient Revenue. Calculate what the projected profit or loss would be based on
anticipated volume.
Part C
Feasibility Analysis: Base your responses to Part C on your economic analysis
from Part A, the Pro Forma Income Statement, the Statement of Cash Flows, Ratio
Analysis, and the Breakeven Analysis from Part B. Develop a Feasibility Analysis
as a part of the Business Plan, which assesses the probability of success or failure
for the Oakville Open MRI Clinic. Recommend a course of action that is based
upon your analysis. (100 points)
1.Are the results of the overall analysis positive or negative? Explain.
2.Make a recommendation to proceed with or halt the proposed venture.
3.Identify at least six (6) indicators that factored in to your recommendation.