Source Of Revenue: An Increase In Medicare Payments

Source Of Revenue An Increase In The Medicare Patie

The first task is : Source of Revenue: An Increase in the Medicare Patient Population The president of Gentiva Health Services is considering increasing her number of Medicare patients served next year. However, to do so she must begin to use RNs for client visits, which Medicare reimburses at $45 per visit. An RN costs $35 per hour versus the current cost of $15 for an LPN or nurse’s aide. The president believes she can increase her patient visits by 15% by accepting Medicare patients. She is also aware that if she increases her Medicare patients, the company’s administrative costs will increase by approximately $10,000 per year because of the claims file complexity.

Using the Gentiva Health Services Statement of Income , use the following volumes for your calculations: Volume for the year: Flexible budget: 6,000 visits Static budget: 5,945 visits Actual budget: 5,889 visits Prepare a two-page report that addresses the following : How many more visits will the company generate if it accepts Medicare patients? What would be the estimated profit or loss associated with the Medicare service line? Would you recommend that Gentiva Health Services increase its number of Medicare patients served? Why or why not? The second task is : Business Plan Review the quarterly report and develop a business plan for the organization for its upcoming financial year.

Be sure to include the following in your organized business plan: Organization segment Marketing segment Financial segment Projected cash flow statement Projected income statement Projected balance sheet Feel free to take liberties with information needed that is not available in the report. You may find the quarterly report at Include all required tasks for this assignment in a Word Document, APA format, double-spaced, with references to include in-text citations. No deviations please.

Paper For Above instruction

Introduction

The healthcare industry often faces critical decisions regarding revenue enhancement and strategic planning to ensure organizational sustainability. Two pertinent tasks—evaluating the financial implications of increasing Medicare patient volume and developing a comprehensive business plan—highlight the importance of data-driven decision-making in healthcare organizations like Gentiva Health Services. This paper provides a detailed analysis of the potential increase in visits through Medicare patient acceptance and offers a projected business plan to guide organizational growth in the upcoming fiscal year.

Analysis of Increasing Medicare Patient Volume

The primary objective is to determine the additional visits generated by accepting more Medicare patients and to assess the financial impact of this change. The current scenario indicates that Gentiva aims to increase its Medicare patient visits by 15%. With existing data, we evaluate these changes using the statement of income and visit volumes.

1. Additional Visits:

   The static budget reports 5,945 visits, while the flexible budget indicates 6,000 visits, and the actual count is 5,889. Accepting new Medicare patients could boost visits by 15%, adding approximately 897 visits (15% of the current or adjusted baseline). This aligns with the proactive growth strategy of the organization.

2. Cost and Revenue Analysis:

   Employing RNs involves a significant cost increase—from $15 for LPNs aides to $45 per visit—though reimbursement remains $45 per visit. The net profit per visit with RNs thus hinges on labor costs. The incremental labor cost per visit for RNs is $30 ($45 reimbursement minus $15 for the aide's cost plus additional staffing costs), which implies a contribution margin analysis is necessary.

3. Administrative Costs:

   An increase of $10,000 in administrative expenses is anticipated with increased Medicare activity due to claim handling complexity.

Calculating the additional visits effectively results in an estimated increase of approximately 897 visits, assuming capacity and demand constraints are not limiting factors. The additional revenue from these visits would be \( 897 \times \$45 = \$40,365 \). However, labor costs for RN visits would total \( 897 \times \$35 = \$31,395 \), creating a gross margin of \( \$40,365 - \$31,395 = \$8,970 \). Subtracting the additional administrative costs, the net profit attributable to Medicare visits would be approximately \( \$8,970 - \$10,000 = -\$1,030 \).

Therefore, despite increased revenue, the marginal profit or loss is marginally negative unless operational efficiencies or reimbursement rates change. To further validate this, a more detailed cost-volume-profit analysis could optimize staffing and scheduling efficiency.

Financial Implications and Recommendation

The analysis reveals that increasing Medicare patient visits could lead to only a modest profit or potentially a slight loss, primarily due to increased administrative costs and higher staffing expenses. Given this marginal financial benefit, I recommend that Gentiva Health Services proceed with caution. If strategic initiatives can reduce administrative complexity or negotiate better reimbursement rates, the organization could turn this initiative into profitable growth.

Furthermore, the qualitative benefits—such as improved market share, enhanced reputation, and meeting community health needs—may justify the pilot program, provided it aligns with the organization’s long-term strategic goals. A phased approach with ongoing financial monitoring is advisable.

Business Planning for Future Growth

Developing a comprehensive business plan is essential to guide Geziva's organizational and financial growth for the upcoming fiscal year. The key components include organization structure, marketing strategies, financial projections, and liquidity management.

Organization Segment

The organization should focus on expanding its home healthcare services, integrating additional nurses, and adopting technology platforms to streamline claims processing and patient management. Establishing specialized teams for Medicare and private-pay patients can improve service quality and operational efficiency.

Marketing Segment

Targeted marketing efforts aimed at Medicare beneficiaries, adult caregivers, and referral sources (such as hospitals and primary care physicians) are critical. Community outreach programs, partnerships with insurers, and digital marketing campaigns can increase brand awareness and patient acquisition.

Financial Segment

Revenue streams should diversify beyond Medicare to include private pay and commercial insurance. Cost management initiatives—such as optimizing staff scheduling and leveraging technology—will improve margins. From a financing perspective, securing working capital lines and investment in staff training are recommended.

Projected Cash Flow Statement

Based on historical revenue trends and anticipated growth, the cash inflows are expected to increase by 10-15%, while outflows will rise proportionally due to staffing and administrative expenses. Maintaining at least 15% cash reserves will safeguard against liquidity shortfalls.

Projected Income Statement

The income statement projecting revenues of approximately $5 million, with a 10% gross margin and net profit margin of around 5%, is feasible given operational efficiencies. Adjustments for increased Medicare volumes and administrative costs should be reflected.

Projected Balance Sheet

Assets are projected to grow through investments in technology infrastructure and staff training, while liabilities may increase slightly due to short-term loans to finance expansion. Maintaining a healthy debt-to-equity ratio enhances organizational stability.

Conclusion

In synthesizing financial analyses and strategic initiatives, it is evident that expanding Medicare patient services presents both opportunities and risks. While additional visits can augment revenue, operational costs and administrative complexities limit profitability prospects. A cautious, data-informed approach—combining targeted marketing, operational efficiencies, and prudent financial planning—will enable Gentiva Health Services to grow sustainably. The development of a comprehensive business plan will align organizational efforts toward achieving strategic objectives, ensuring financial health, and enhancing patient care.

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