Two Types Of Visits Provided By Durham Health Clinic ✓ Solved

Two Types Of Visits Are Provided By The Durham Health Clinic First Ti

Two types of visits are provided by the Durham Health Clinic, first-time visits and return visits. Table 8-5 provides the processing time for each work station and the available staff hours per week. Determine the production frontiers for this clinic and indicate which station should be expanded to increase the overall capacity of the clinic. Which service station could be reduced? Durham Health Clinic has a contribution margin of $35 per visit. Calculate the break-even point in visits with fixed costs at $4000, $6500, and $8500 per week. Given this analysis, as a manager, what would you recommend and why? Durham Health Clinic is considering signing a contract to perform 50 pre-employment physicals per week for a specific corporation. In terms of staff time, a pre-employment physical requires 0.20 hours in Reception/Discharge, 0.45 hours in Nursing and Testing, and 0.20 hours in Medical Examination.

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Introduction

The Durham Health Clinic operates two essential types of services: first-time visits and return visits. Understanding how each service utilizes resources and contributes to the clinic's capacity and profitability enables efficient management and strategic decision making. This paper explores the production frontiers of the clinic, identifies possible capacity constraints, and offers recommendations to optimize the clinic's operations, including revenue considerations for fixed and variable costs and planning for specific contractual commitments such as pre-employment physicals.

Analyzing Production Frontiers and Capacity Constraints

The concept of a production frontier reflects the maximum output (visits) that a resource-limited system can achieve given its constraints. For the Durham Health Clinic, the production frontier is determined by analyzing the processing times at each work station and their available staff hours per week. Referring to Table 8-5 (hypothetically provided), typical data include processing times per visit, and available staff hours, which enables calculating the maximum visits each station can support.

Assuming the data indicate processing times such as 10 minutes for first visits and 7 minutes for return visits at each station, with staff hours available weekly (e.g., 40 hours), the capacity of each station is computed. For example, if Reception/Discharge staff process visits in 10 minutes per visit and has 40 hours available weekly, then their maximum capacity per week is (40 hours * 60 minutes) / 10 minutes = 240 visits.

By comparing each station’s capacity, the bottleneck—i.e., the station with the lowest maximum capacity per week—determines the clinic’s overall capacity. If, for instance, Nursing and Testing can handle only 200 visits per week due to longer processing times, then expanding this station would increase overall capacity more effectively than expanding stations with higher capacity.

Graphically, the production frontier is a piecewise function where each segment corresponds to the capacity constraints of individual stations. Choosing the station to expand involves identifying the bottleneck and increasing its capacity, for example, by adding staff or optimizing workflow processes.

Capacity Expansion and Reduction Recommendations

Based on the analysis, expanding the station with the greatest capacity constraint—perhaps Nursing and Testing—would be most beneficial to increase overall visit capacity. Conversely, stations that consistently exceed demands or have excess capacity could be candidates for reduction or reallocation of resources. For instance, if the Reception/Discharge station has surplus capacity, it might be reduced without affecting total visit processing, thereby optimizing resource utilization.

Strategically, investments should focus on bottleneck stations to ensure that resource expansion translates into increased throughput, aligning with throughput principles of operations management. This reduces idle times and enhances operational efficiency.

Financial Analysis: Break-Even Point Calculations

The contribution margin per visit at the Durham Health Clinic is $35. Fixed costs per week are given as $4000, $6500, and $8500, respectively. The break-even point in visits (BEP) is calculated as:

BEP = Fixed costs / Contribution margin per visit

Calculating for each fixed cost scenario:

• At $4000 fixed costs: BEP = $4000 / $35 ≈ 114.29 visits
• At $6500 fixed costs: BEP = $6500 / $35 ≈ 185.71 visits
• At $8500 fixed costs: BEP = $8500 / $35 ≈ 242.86 visits

These calculations indicate the minimum number of visits needed weekly to cover costs. As a manager, evaluating the expected volume of patient visits and potential profitability at different fixed cost scenarios guides strategic decisions, including whether to increase marketing efforts or control costs to ensure profitability above the break-even point.

Planning for Pre-Employment Physicals

The clinic is considering performing 50 pre-employment physicals weekly. The time required per physical at each station is:

• Reception/Discharge: 0.20 hours per physical
• Nursing and Testing: 0.45 hours per physical
• Medical Examination: 0.20 hours per physical

Total staff hours needed per week per station are calculated by multiplying the number of physicals by the hours per physical:

• Reception/Discharge: 50 * 0.20 = 10 hours
• Nursing and Testing: 50 * 0.45 = 22.5 hours
• Medical Examination: 50 * 0.20 = 10 hours

This detailed staffing requirement enables effective scheduling and resource planning to meet contractual obligations without overburdening personnel, ensuring quality service delivery and operational efficiency.

Conclusion

In summary, analyzing the production frontiers of the Durham Health Clinic helps identify capacity constraints and guides resource allocation. Capacity expansion should focus on bottleneck stations to maximize throughput, while potential reductions can be applied where excess capacity exists. Financial analysis emphasizing break-even points assists in managing profitability, while detailed staff time planning ensures readiness for contractual commitments like pre-employment physicals. Strategic application of operations management principles ensures the clinic's operational efficiency and financial sustainability in a competitive healthcare environment.

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