Running head: MEDFIX SYSTEMS

MedFix Systems

Latoya Rone

University of San Diego

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Executive Summary

This proposal will discuss the leadership of Heartland Health in the context of the

management team. Notably, the facility is headed by a clinic head who is a licensed

physician. The clinic head is mainly assigned the role of oversight at the facility as well as the

training of the clinical providers and the development of the clinic’s protocols. Overall, the

main goal of the proposal is to implement the change from the current system of manual data

transfer and records management at the clinic. In order to determine whether this is the best

course of action, a strength, weaknesses, opportunities, and threats analysis (SWOT) was

carried out.

The findings of the SWOT analysis are detailed in the proposal. The proposal

indicates that the strengths include the adequate staffing of the healthcare facility.

Apparently, the staff members are also very well trained in their areas of expertise. More

importantly, the physicians have over 15 years of experience. As far as the weaknesses are

concerned, the manual record keeping and management system are noted to be a major one.

In light of the challenges that the facility is facing as far record keeping is concerned, there

arises an opportunity to not only invest in an electronic records management system in which

case this would also attract funding from the U.S. Government since it is one of the

requirements for the healthcare facilities.

The proposal also discusses the financial status of the healthcare facility such as the

revenue and expense assumptions. In this context, it is noted that the sales revenue for the

first year’s annual volume increase was 100 RVU’s per month x 12 months = 1200 RVU/yr.

Another assumption was made on the operating income and the operating margin. The

expense assumptions on salaries and wages were as follows: Training and productivity loss; 4

providers 40 hours training each x $200/hr. = $32000. 6 receptionists/medical assistants 40

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hours training x $15 = $3600. 1 biller 40 hours training x $15 = $600. $32000+$3600

+$600=$36,200. Informatics technician training required—No additional. There were some

other assumptions on materials and supplies, technology, depreciation and amortization,

interest and total expenses. The financial summary that is noted in the proposal shows that in

the first year of the implementation of the electronic medical record (EMR) system, there is a

forecast increase of 1,200 of the RVUs as well as an increase of 54,000 of the revenue. The

proposal also details the forecast operating margins, capital cash purchase requirements, and

the cash at end of the 3-year period.

Marketing is also discussed herein with a particular interest in how the electronic

health records influence the service delivery at the facility. In this context, the EHRs are

discussed in terms of how they can be leveraged to perform the estimation of both short and

long-term costs whereby it would be possible to identify the most cost-effective operations.

The effectiveness of the EHRs is also assessed with the intention of determining how the

system influences the delivery of healthcare services. The Health Insurance Portability and

Accountability Act (HIPAA) legislation is taken into consideration with a particular interest

in the standards set therein which provide guidelines on security and privacy. Overall, the

proposal details the need to implement the EHR at the facility detailing the positive impact it

would have on the facility in different contexts.

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Economic Climate

In order to understand healthcare economics to its entirety, one must first develop a

basic foundation on healthcare’s historic financial reformations over the years. Organizations

are either profit or non-profit, streaming from health revenue that is supplied from both

public programs and private payers (Baker et al., 2018). Governmental sources that makeup

healthcare revenue are federal programs such as Medicare and Medicaid. Medicare,

commonly referred to as the insurance for the aged and disabled, covers 95% of the U.S. aged

population along with certain eligible individuals receiving Social Security disability

benefits, established in 1965 (Baker et al., 2018). Moreover, when the Balanced Budget Act

(BBA) of 1997 was enacted, Medicare reached a significant savings point at $393.8 billion in

a ten-year period (Moon, 1997). The BBA of 1997 reduced the payments of significantly. In

addition to the savings, BBA payment cuts could have a long-lasting effect on hospitals

because the legislation not only reduced diagnosis-related group (DRG) payment levels

between 1998 and 2002 but also permanently altered the formula for special add-on payments

(Shen and Wu, 2011).

The hospital payments of any healthcare organization are categorized into

expenditures. There are hospital payments for employees, lenders, equipment supplier and

etc.; with employees representing the largest amount of hospital payments at around 60% of

total expenditures (Cleverley et al., 2018). Over the years, expenditures and legislative

changes such as the BBA, combined have contributed to the payment for healthcare services

and how the services are delivered. For example, the Affordable Care Act (ACA) signed in

2010, has reformed to drastic change to improve healthcare. Similar reforms with the same

attributes of providing cost-efficiency and quality care include programs such as: Hospital
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Readmissions Reduction Program (HRRP), Hospital Value-Base Purchasing (VBP), and

bundle payments.

Healthcare reformation has set the trend for healthcare economical cost

reimbursement, overall profitability, and how our top leading providers are paid. According

to the latest research, the cost of prescription drugs has significantly increased. Currently,

pharmacists are using a variety of resources to save cost on prescription drugs. For example,

chain line pharmacies have created automated systems to identify the lowest-cost (highest

profit) manufacturing sources; similar to a price comparison tool between generic and name

brand prescription drugs (Vega et al., 2016).

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Product and Services

Heartland Health serves a community with a population of 38,393 and a 100% urban

rate. Heartland Health facilities operate on a paper base medical charting system; this system

has been implemented for the last 20 years between Heartland Health’s two facilities.

Granted there are some risks associated with the use of electronic health records (EHRs);

nevertheless, EHRs provide safer storage and prevent less human error. I believe Heartland

Health facilities would benefit tremendous with the use of EHRs, which is why I would like

to propose the implementation of AmeriHealth’s EHR system.

Expedited implementation of AmeriHealth’s EHR system for Heartland Health will

contribute to improvement to workflow, access to medical record information, and cost

efficiency reported by Gans, Kralewski, Hammons, and Hammons (2005). Moreover, the

EHR system will store manual patient files, improving the integrity of data and quality of

documents. First, we will begin the process by creating an implementation team which

consist of a lead physician, project manager and a lead super user. Second, we will

collaborate with the configuration of software by working hand and hand with a group of

information specialists (ITs). During configuration, the ITs will have to assess measures to

protect patient files, followed by conducting a Health Insurance Portability and

Accountability Act (HIPAA) risk assessment. Next, we will identify hardware needs by

mapping the workflow design and room layout of the facility; this will save the facility time

and money (Electronic Health Record, n.d). Proper placement of may reduce log-in time

spent by physicians, if provided with personal laptop or tablet to for daily checkout

(Electronic Health Record, n.d). Once we have identified the organization’s system hardware

needs, we will begin a proper approach to transferring information stored manually onto the

new EHR. Thereafter, a launch date of implementation will be determined; whether all users,
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patients and physicians, will have complete use of functions on the same day followed by

launch.

Company competitors include two reputable software installation companies: Alley

Tech Industries and Core Software. Both companies have a large client base with over twenty

years of experience providing implementation of EHRs. Buying criteria for the two

companies are categorized by priority into two groups based on the needs of the customers,

categories include functionality and price attractiveness. Alley Tech Industries compete at a

high (H) functioning rating; creating their products to be efficient, and most compatible for

easy implementation to an organization’s system. Price attractiveness is also rated low (L) for

Alley Tech Industries. Although products priced for Alley Tech Industries are substantially

higher than both Core Software and AmeriHealth, they offer the latest software equipped for

the healthcare leading private and public sectors. Core Software functioning rates at medium

(M). Recent reports confirm that software is not user friendly towards physicians when trying

to obtain access. Core Software rates high (H) for price attractiveness, it’s usually the lowest

priced EHR system on the market.

AmeriHealth rates high (H) in functionality and medium (M) in price attractiveness.

Functionality involves easy mobility through patient files, setting alerts and reminders for

patients suffering with chronic conditions and diabetes (Bates et al., 2003). Software is

wireless and downloaded onto portable tablets which are checked out daily upon each shift

started; returned after turnover. Price attractiveness is targeted to both physicians and patients

in order to provide the best cost efficiency. Providers can receive decision support and cost of

chart pulls can be eliminated (Bates et al., 2003). AmeriHealth implements computerized

medication prescribing which dramatically reduces the risk of human error, saving on

prescription cost for patients.

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Organization, Productivity and Labor

Despite a physician fee schedule being used to determine payments for the different

physician services, the specific fee charged for each service depends on its relative value

units (RVUs) which generally ranks on the common scale the different resources that are

used to provide each service (Glass, & Anderson, 2002). Taking on this cue, Heartland

Health developed a number of annual costs and RVU development assumptions. The annual

cost assumptions are broadly categorized as providers’ time, technology, supplies, and

indirect costs. The providers’ time total annual expense is estimated at $690,000 which is

almost equally divided amongst the medical director, the physician and the nurse

practitioners. Technology on the other hand is estimated to cost $33,000 which is mainly

spent on EKG machines, copiers, computers, ultrasound machines and electronic scales.

Supplies which mainly consists of paper, tongue, depressors, bathroom and exam room

suppliers was estimated to account for $25,000. A majority of the expenses are estimated to

be spent on indirect costs at $358,000. The assumptions made for the indirect costs are

categorized as information technologists, billers, receptionists, medical assistants, lease,

utilities and offices. A majority of the indirect costs are spent towards the medical assistants

and the lease for the office suites.

From the costs and RVU development annual cost assumptions, the cost of a 15-

minute patient visit is $39.51 which is basically the sum of the providers time per 15 minutes

$24.65, $1.18 for the technology, $0.89 for supplies and $12.79 for the indirect costs. The

costliest component of that visit is the providers time whose total relative value scale (RVU)

cost per 15-minute is $24.65. The least costly component is the supplies consisting of paper,

tongue depressors, bathroom and exam room supplies which cost a total of $.0.89.
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Based on the one-month expense budget, Heartland Health realized favorable

variance on various cost categories namely the provider’s time ($1,602) and the indirect costs

($874). The favorable variance in the provider’s time could be attributed to favorable

variation in the costs paid to the medical director, the physician or the nurse practitioners. As

regards to the indirect costs, the favorable variation could be as a result of saving costs on the

office utilities and the medical assistants. On the other hand, Heartland Health realized

unfavorable variance on its technology cost ($247) and the supply cost ($512). The

unfavorable variance in technology could be as a result of underestimated costs of the

equipment and wrong estimates or not factoring costs of wear and tear and equipment spare

parts (Albritton, Miller, Johnson, & Rahn, 1997). In the case of supplies, the costs of the

supplies could have been higher that the budgeted costs or the need for supplies was way

higher than anticipated. Also, there could have been more supplies required that was not

previously required (Albritton, Miller, Johnson, & Rahn, 1997).

Looking at the one month productivity report, both offices realized unfavorable

productivity variance with the Heartland South office realizing a negative $55 variation while

the Heartland North office realizing a negative variation of $1. The unfavorable variation in

productivity could be unfavorable working environment and most likely factors like the

facilities.
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Leadership

A Physician leader, otherwise known as Clinic Head, heads Heartland Health.

Fundamentally, this is a state licensed physician to offer direct healthcare services. He also

exercises oversight over both clinical and human resource functions at the Healthcare facility.

Moreover, the development of clinic’s protocols and training of clinical providers falls in his

docket. Clinic Providers at Heartland Health include a single doctor and two nurse

practitioners. They are responsible for the administration of patient healthcare needs such as

physical examinations and administration of injections. The two receptionists and informatics

technician provide ancillary services to support efficient clinical services.

Foremost, the overall administrative and service provision team leader is the clinic

head (physician head). Therefore, he has the mandate to approve changes that affect the

management of Heartland primary care clinics. Importantly though, review of any proposed

changes in an organization is a consultative process involving Heartland’s clinic head, clinic

providers, and support staff. In this regard, the clinic seeks to digitize its records management

that only the physician head can sanction. On the other hand, clinical providers such as the

physician, nurses and medical assistants can review the decisions and render advisory

opinions to the head. Furthermore, ancillary staffs who are also administrators also take part

in the review. As a result, while the leadership of the process is the preserve of the physician

head, decisions must be collective.

The goal of this proposal is to implement the transfer from manual data and records

management within the facility, while fulfilling our mission to provide quality care. It is

projected that Heartland clinics will provide efficient maternal health and general clinical

service provision once the new records system is procured and installed. Specifically,

Heartland will shift to electronic management of patient data to facilitate treatment and

management of alternative care referrals among other services. Notably, there is no need to
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hire additional staff to manage the proposed health records technology because the existing

ones provide sufficient man-hours to manage the proposed system. In light of these

developments, the hospital seeks to procure a health records management information

systems. This will also make the hospital to continue to receive funding from, the American

Recovery and Reinvestment of 2009 stimulus package which is vital for its operations.

Strengths-Heartland is adequately staffed to serve 38,393 urban residents that include

men and women. Secondly, its staff is adequately trained and licensed personnel.

Furthermore, the physicians in the hospital have over fifteen years’ experience in family

practice.

Weakness-The hospital relies on manual patient information management instead of

technology-aided ones. Similarly, its competitors in primary medical care have already

invested in certified health records technology. Consequently, they are unable to render

efficient services that drive away potential clients. It also means that Heartland’s uses risky

communication approaches to manage referrals, as communication is often lost.

Opportunity-Existing information management system (manual) makes service

provision cumbersome and risky due to the likelihood of a document’s loss. In addition,

compliance with of health records technology system requirement is a key factor for retaining

funding through the U.S government 2009 stimulus package. This is an opportunity to kill

two birds with one stone.

Threats-Heartlands’ threats include a changing management environment as classical

approaches are waning in relevance as far as health records management is concerned. In

addition, the clinic faces threats of defunding under the 2009 stimulus package from the

government.
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Finance: Electronic Medical Record 3-Year Financial Prospectus

Revenue and Expense Assumptions

1. Sales/Revenue—First year’s annual volume increase is 100 RVUs per month x 12 months
= 1200 RVU/yr. Revenue is RVU= $45. 1200 x $45 = $54,000. Second and third year
annual increases in patient visits of 80 visits a month= 960 RVU/yr. x $45 = $43,200.
Similar electronic medical record implementations experienced an increase in the volume
of patient office visits/revenue due to ability to send automatic text messages reminders
of visits and seasonal reminders of flu shots ( Howley, Chou, Hansen, & Dalrymple,
2014).
2. Expense—sum of lines 5-9
3. Operating income—sales/revenue minus cost/expense
4. Operating margin—divide operating income by revenue x 100 to obtain percent

Expense Assumptions
5. Salaries and wages--Training and productivity loss; 4 providers 40 hours training each x
$200/hr. = $32000. 6 receptionists/medical assistants 40 hours training x $15 = $3600. 1
biller 40 hours training x $15 = $600. $32000+$3600 +$600=$36,200. Informatics
technician training required—No additional.
6. Materials and supplies required—no additional
7. Technology—contract services annually--support for computerized technology is $8000
8. Depreciation and Amortization—none {use when recording the depreciation of an asset
[e.g. land, building or equipment (computer)] reducing their historical cost by
accumulated depreciation (refer to page 264 in textbook for more details) Amortization
schedule records the principal and interest contained in each payment.}
9. Interest—none (use when loan is involved and cost of interest must be considered)
10.Total expense— sum of lines 5-9

Net Income Assumptions

11. Net Income—sales/revenue minus the total expense

Cash Flow Report Assumptions

12. Net income—repeat net income from line 11
13. Depreciation—repeat line 8
14. Borrowing—repeat line 9
15. Total sources—add lines 12-14
16. Capital purchasing—software $9,000 for cash purchase; no building; no equipment
17. Working capital—none
18. Total Uses—add lines 16 and 17
19. Cash at Beginning of Period—none
20. Net Cash activities—total sources minus total uses
21. Cash at Ending of Period—add line 19 and line 20

Volume/Productivity Report Assumptions

22. Volume statistic—RVU = 15 minutes of office time with provider; the volume indicator
relates to the sales/revenue: Year 1: 1200, Year 2: 960, and Year 3: 960
23. Cost per unit—total expense divided by RVU
Table 1 Heartland Health: Electronic Medical Record 3-Year Financial Prospectus
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Year 1 Year 2 Year 3

1.Sales/Revenue 54,000 43,200 43,200
2. Expense 44,200 8,000 8,000
3. Operating Income 9,800 35,200 35,200

4. Operating Margin 18.12% 81.48% 81.48%

Expenses
5.Salaries and Wages 36,200 -- --
6. Material and Supplies -- -- --
7. Contract Services and Fees 8,000 8,000 8,000
(technology)
8. Depreciation and Amortization -- -- --
9. Interest -- -- --
10. Total Expense 44,200 8,000 8,000

11. Net Income 9,800 35,200 35,200

Cash Flow
Year 1 Year 2 Year 3
Sources
12.Net Income 9,800 35,200 35,200
13.Depreciation -- -- --
14.Borrowing -- -- --
15.Total sources 9,800 35,200 35,200
Uses
16.Capital purchasing 9,000 -- --
17.Working capital --
18.Total uses 9,000 -- --

19.Cash at Beginning of Period -- 800 36,000

20.Net Cash Activities 800 35,200 35,200
21.Cash at Ending of Period 800 36,000 71,200

Volume
Year 1 Year 2 Year 3
22. RVU (Volume statistic) 1200 960 960
23. Cost per unit 36.83 8.33 8.33
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Electronic Medical Record 3-Year Financial Prospectus

Financial Summary

The health information technology project proposal is for the implementation of an

electronic medical record (EMR) in the offices of Heartland Health (Table 1). In the first

year, RVUs are forecast to increase by __1,200___ with an additional revenue of

___54,000___. The first year’s operating expense of for the EMR installation is

___44,200___. The operating margin is ___18.12%___. The cost per unit for Year 1 is

___36.83___. A capital cash purchase of ___9,000___ is required. Cash at ending of a 3-year

period is ___71,200____.
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Marketing

Electronic Health Records (EHRs) play a significant role in the improvement of the

quality of health care services as well as the reduction of health care costs. The perceived

benefits of EHRs for physicians and nurse practitioners, medical assistants, the biller, the

receptionists, and the patients are realized by the capability of the EHRs to improve the

quality of health care. They play a significant role in improving the quality, effectiveness,

safety, equity, efficiency, timeliness, and patient centeredness of the services being delivered.

EHRs are associated with cost efficiency, streamlining of workflows, elimination of patient

burden, and the prevention of medical errors (O'reilly, et al., 2011). The integration of the

EHR infrastructure at Heartland Health will result in the simplification of the health care

delivery process and thus as a consequence, both the welfare and outcomes of the patients

will be enhanced.

EHRs can be leveraged to perform the estimation of both short and long-term costs,

thus creating the opportunity for the identification of the most cost-effective operations.

EHRs utilize a combination of metrics to track all the relevant processes, thus creating the

opportunity for both process prioritization and redesign. The capabilities of EHRs can be

leveraged to realign research with both patient needs and clinical practice priorities. EHRs are

equipped with functionality to ensure patient satisfaction and engagement, and improve the

care process through the reduction of medical errors (Menachemi et al., 2011). Although

EHRs have numerous benefits, the drawbacks are evident in their adoption and

implementation because comprehensive training is deemed to be a critical factor of their

success.

EHRs leverage interactions and communication between all the relevant stakeholders

since they are geared towards the collection, processing, and the sharing of health
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information. In order to effectively listen to the customers in a quest to obtain valuable

feedback and testimonials both before and after the implementation of the EHR, it is essential

to understand the needs of the patients. The adoption of an interactive strategy will pave the

way for patient engagement thus creating an environment where health disparities are

significantly reduced (Gans, Kralewski, Hammons, and Dowd, 2005). The strategy will be

aimed understanding the risks which have the capacity to undermine the delivery of quality

health care services such as language barriers, income levels, gender, literacy levels, and

patient age.

The assessment of the effectiveness of EHRs will be geared towards the identification

of the factors which influence the delivery of health care services. EHRs derive their

standards from the 1996 legislation, the Health Insurance Portability and Accountability Act

(HIPAA) which provides the directions on how to safeguard medical information. HIPAA

provides the guidelines on data privacy and security in a quest to ensure that patient

information is kept confidential, as a consequence, patient information can only be accessed

by relevant authorities and in an appropriate environment. The metric system applied will

therefore reflect the guidelines provided by the HIPAA and as a consequence, each

stakeholder will be held responsible for each task assigned to them as well as the

implementation and optimization process. The results will be tracked through the

determination of patient satisfaction, engagement, and outcomes; this will create the

opportunity for the customization of the EHR to meet the needs of all the relevant

stakeholders. EHRs are essential health information tools which equip patients with the

capacity to interact with their health care providers. In order to attract and retain customers,

Heartland Health should launch a web-based patient portal with the capacity to enable the

patients to communicate with their primary caregivers, track their health information, and

make payments (Fix, et al., 2016).

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