NHS FPX 6008 Developing a Business Case

Business Case for a New Economic Opportunity

NHS FPX 6008 Developing a Business Case

Raulerson Hospital is situated in the medical services complex in Okeechobee, Florida. The administration of the hospital is planning to make a dedicated diabetes unit within the hospital premises. There are approximately 5,700 residents living in Okeechobee, and the residential areas fall close to the hospital. The Diabetes Unit will aim to provide diabetics with a place where they can meet specialists to discuss their problems and treatments. Diabetes, especially type 2, needs to be actively and regularly checked. For patients that suffer from a ‘Diabetic Foot’, the care taken must be meticulous. ‘Diabetic Foot’ is one of the most feared complications of the disease (Pendsey, 2010).

While providing care for the diabetes patients of the area, the diabetic unit will also serve to increase the revenue generation of the hospital, of which it is an annex. This business case is put forward in order to give an in-depth analysis of the plausibility of the project and the cost-benefit considerations of applying the proposed plan over the next five years. This paper will deal with delineating and addressing some of the risks associated with this project as well as elaborating on the opportunities this initiative will bring forth. This business case further suggests ways in which the risks can be mitigated and the benefits magnified. 

NHS FPX 6008 Developing a Business Case

Opportunities Associated With the Proposed Economic Initiative

In the first assignment, we discussed the demographic and population-related statistics of Okeechobee in order to elaborate on the opportunities and effects the initiative would have. The population of the city is around 5,700, with around 500 people presumably suffering from diabetes. From those 500, 450 can be presumed to be suffering from type 2 diabetes, on the basis of the study cited in assignment 1 (Santos-Longhurst, 2020). The Diabetic Unit can serve to be useful for the residents suffering from both type 1 and type 2 diabetes, with a special emphasis on the latter, especially the patients suffering from ‘Diabetic Foot’. 

The first opportunity that the proposed Diabetic Clinic will present will be the lessening of the burden on general physicians and surgeons who have to deal with diabetic patients on a daily basis. Since the Raulerson Hospital is the only major general healthcare center in the city, it is necessary to introduce orderliness and systematism in order to attend to the public better. If the surgeons and professionals, who have other patients that fall within their area of expertise, are busy tending to diabetic patients, it can mean neglect and lack of prioritization. The Diabetic Unit will eliminate this issue by exclusively tending to diabetic patients, the majority of which will need to come in every week or twice every week. It has been estimated that only 40% of all diabetics worldwide receive proper medical care viz. in accordance with established guidelines (Adisa & Fakeye, 2016). Taking a step in making a diabetes-specialty clinic can help counter these depressing statistics on a city level. 

NHS FPX 6008 Developing a Business Case

The diabetes specialty clinic will need to tend to patients on a regular basis in order to break even. This is one distinguishing aspect of diabetes-specialty clinics from usual ERs and UCCs. Even if there are 100 patients in the vicinity, the clinic can still thrive due to the regularity with which the patients will visit. If 100 patients visit twice a week, it will mean 200 appointments in a week, with an average cost of $100 per appointment. Taking these statistics to the city of Okeechobee, where the estimated number of diabetes patients are around 500, we can understand how favorable the circumstances will be for the financial side of the clinic.

When conducting a competitor analysis, the only noticeable medical institutes found besides Raulerson Hospital were the CVS Pharmacy and the TCMA Urgent Care. Since our clinic will be on the premises of the hospital, it will be a part of the only major hospital in the city. This will be conducive to the exclusivity of patient attendance. 

Risks associated with the Economic Initiative and Ways to Address Them

Different risks and threats were identified for the diabetic-specialty unit that is being proposed. In this part, our focus will be to enumerate these risks while simultaneously providing suitable solutions. 

The first risk that can come across a diabetes-specialty clinic is unawareness. Even more than the unawareness can be the unwillingness of the patients. According to a study, only half of the people who suffer from diabetes are diagnosed and treated on a worldwide level (Adisa & Fakeye, 2016). The rest are either unaware or unwilling to get treated. In a small place such as Okeechobee, this risk can be enhanced due to the already limited number of residents. The unawareness of the patients can be vastly detrimental to the progress of the clinic.

NHS FPX 6008 Developing a Business Case

The solution for this problem is public outreach. Educating the masses is the answer to the general ignorance and lethargy which is attributed to diabetic patients. The diabetic-specialty unit can be used as a venue for educative programs on diabetes, the various complications and the dangerous outcomes. These sorts of programs will serve to jolt the diabetics who take their condition lightly.

Similarly, another attribute that can prove to be a risk for the diabetes-specialty unit is the non-response. Even if the patients are aware of their condition, they can fail to respond and show up for appointments. Based on a study done to evaluate the percentage of non-response from diabetic patients referred to eye examination for the detection of diabetic retinopathy, it was seen that of the 4,111 diabetics who were previously diagnosed, only 55% attended the screening camp and from the 1,076 newly diagnosed diabetics, only 11.6% attended the screening (Agarwal et al., 2005).

Non-response to this level can be dangerous. Primarily, it is dangerous for the health and well-being of the patients. From the financial side of the proposed project, it can also mean a cause of potential decline or failure.

NHS FPX 6008 Developing a Business Case

The solution for non-response in patients can be of two different types. One is the non-response from patients who have never been to a doctor before and the other is the type that is displayed by patients who have been to a doctor but had later become lethargic.

For the first type of non-response, the solution is the same as that of unawareness. Educating the people by holding programs can be useful and conducive to a responsible attitude from the patients. To ensure attendance in the programs, minor incentives could be given such as a comfortable venue, refreshments etcetera.

Cost-Benefit Analysis of the Proposed Economic Initiative

Once the risks have been evaluated and their solutions elucidated, it remains to analyze the costs involved in setting up the proposed unit and the benefits. There are different costs and expenses which will be involved in this initiative. There is the primary capital that will be needed for the setting up of the clinic, as well as the expenses that will get incurred in the form of utility expenses and administrative costs. These include the salaries of the professionals hired for the clinic, which is one of the most major costs associated with the project. 

When it comes to the capital cost required for the setting up of the diabetes unit, the cost of the land will be omitted since the premises of the hospital are being used. For reference, it can be seen that an Urgent Care Unit costs around $850,000 to $1,000,000 (Experity, 2021). That is inclusive of the cost of the land. Since land is not on our list of expenses, we can assume that half of that cost can be deducted. With a safe and loose estimate, $425,000 can be said to be the capital needed for this project. This involves the diabetic-specialty equipment, the basic paraphernalia such as the furniture, and the construction of the building. 

NHS FPX 6008 Developing a Business Case

Coming to the staffing required for the diabetes unit, it can be estimated that the basic team will be made up of 2-3 physicians, a receptionist, 3 medical assistants and a cleaner. The average wage of a Diabetes and Endocrinology specialist was calculated to be $245,000 (Wilcox, 2021) while the average wage of a medical assistant was calculated to be $35,000. A receptionist comes at an annual wage of $32,000 (U.S. Bureau of Labor Statistics, 2017) while a cleaner has an average annual wage of $25,800. 

Our analysis is for a five-year period in order to ascertain the financial circumstances and potential of success for the initiative. In order to do so, it is important for us to understand the annual increase in the costs and expenses such as the utility expenses and the salaries. 

NHS FPX 6008 Developing a Business Case

The annual increase in the wages of an employee in the US is calculated to be 2.7% (Economic Policy Institute, 2018). For the salaries of year one, $337,850 were the net total. Adding the 2.7% increase for year two, $344,600 was the estimated cost. $351,492 for year three, $358,521 for year four and $365,691 for year five. That adds to a total of $1,758,154 for just the salaries. The utility expenses can be estimated to be around $300,000 for the year, with the incremental increase resulting in a total of around $1,700,000. 

Coming to the benefits of the initiative, 200 patients (from the total ~500) can be assumed to visit the facility twice a week with an average fee of $100 per visit, inclusive of treatments and medication. An average benefit of $40,000 per week can be assumed, which leads to a per annum revenue of $2,160,000. Giving this figure a wide berth due to non-response and failure of attendance, $1,500,000 can be estimated to be the annual revenue for year one. Giving this revenue an average increase of 3% per year, the revenue at the end of the five-year period can amount to almost $8,000,000. 

NHS FPX 6008 Developing a Business Case

Considering the expenses and costs to be around $4,000,000 for the five-year period, it can be seen that this initiative can be a lucrative step. However, it has to be necessarily borne in mind that the figures used in these calculations are largely optimistic. The number of patients, as well as the cost per visit, can vary. Other hurdles and challenges are sure to present themselves. 

Ways to Control Costs and Maximize Benefits

Aside from the costs calculated above, there can be other miscellaneous expenses that can prop up from time to time. Any repair or any unforeseen maintenance costs related to the equipment, the building or the general paraphernalia can become frequent if the care of usage and handling is not taken. 

The method which can be employed using which costs can be minimized is to inculcate within the staff to use and handle the equipment carefully. The equipment that is used for diabetes care is not very cheap, and repairs and replacements can be costly. Regular check-ups on the equipment and the building itself can help us avoid unprecedented repairs and maintenance costs. If the building and the equipment are left unchecked, a problem that could have been nipped in the bud could evolve into something that needs some hefty monetary investment to get fixed. 

NHS FPX 6008 Developing a Business Case

Similarly, the modus operandi that can be adopted for the maximization of benefits is to conduct and hold educational programs and seminars on diabetes so that the patients can become aware of the severity of their conditions. Sending texts to the patients who have already been to the clinic can also help motivate the patients to get treated.

Conclusion

The diabetes-specialty clinic will deal with patients who are suffering from type 1 and 2 diabetes. Complications such as the ‘diabetic foot’ will also be treated in this unit. From the above business case, we observed that opening a diabetes unit will be a lucrative and beneficial project for the hospital.

NHS FPX 6008 Developing a Business Case

References

  • Adisa, R., & Fakeye, T. O. (2016). Do diabetes-specialty clinics differ in management approach and outcome? A cross-sectional assessment of ambulatory type 2 diabetes patients in two teaching hospitals in Nigeria. Ghana Medical Journal, 50(2), 90. https://doi.org/10.4314/gmj.v50i2.7
  • Agarwal, S., Mahajan, S., Rani, P. K., Raman, R., Paul, P. G., Kumaramanickavel, G., & Sharma, T. (2005). How High is the Non-Response Rate of Patients Referred for Eye Examination from Diabetic Screening Camps? Ophthalmic Epidemiology, 12(6), 393–394. https://doi.org/10.1080/09286580500278418
  • Economic Policy Institute. (2018). Nominal wage tracker. https://epi.org/nominal-wage-tracker/ 
  • Experity. (2021, March 20). How Much Does it Cost to Open an Urgent Care? Retrieved June 11, 2021, from https://www.experityhealth.com/resources/cost-to-open-an-urgent-care/
  • Pendsey, S. (2010). Understanding diabetic foot. International Journal of Diabetes in Developing Countries, 30(2), 75. https://doi.org/10.4103/0973-3930.62596
  • Santos-Longhurst, A. (2020, August 15). Type 2 Diabetes Statistics and Facts. Retrieved June 9, 2021, from https://www.healthline.com/health/type-2-diabetes/statistics#:%7E:text=Worldwide,have%20diabetes%20have%20type%202.
  • Wilcox, L. (2021, May 26). Physician salary report 2021: Compensation steady despite COVID-19. Retrieved June 11, 2021, from https://weatherbyhealthcare.com/blog/annual-physician-salary-report
  • U.S. Bureau of Labor Statistics. (2017). Occupational employment statistics [Data set]/ https://www.bls.gov/oes/current/naics4_621400.htm