Expense, Revenue, ROI Ration Analysis in healthcare essay

An Opportunity for Business in the Healthcare Industry: The Budget and Estimated expenses for the Proposed Venture

Part 1: Expense/ Revenue/ ROI Analysis

Weight Monitoring Business Opportunity for an Established Telehealth
Healthcare Business Venture
A. EXPENSES
Estimated start-up costs (expenses) for equipment purchase
Equipment Cost in USD
Smart digital scale 75
80 Smart digital scales 6000
Estimated operating costs (digital scale servicing & maintenance)
Maintaining 1 scale in a year 30
40 Maintaining 40 scales in 2020 1200
50 Maintaining 50 scales in 2021 1500
60 Maintaining 60 scales in 2022 1800
70 Maintaining 70 scales in 2023 2100
80 Maintaining 80 scales in 2024 2400
Transportation & miscellaneous costs for 5 years 3000
Total estimated operating costs for 5 years 12000
Total estimated expenses for the venture in 5 years 18000
B. REVENUES
Cost of leasing one smart weighing scale for I year 150
Service (consultation) charges 2880
Total revenue per machine per year 3030
40 Revenue from 40 scales in 2020 121200
50 Revenue from 50 scales in 2021 151500
60 Revenue from 60 scales in 2022 181800
70 Revenue from 70 scales in 2023 212100
80 Revenue from 80 scales in 2024 242400
Total estimated revenues from the venture in 5 years 909000
C. RETURN ON INVESTMENT (ROI)
ROI = Net profit/ Cost of investment
Gross profit = 909000
Net profit = (909000-180000) 891000
ROI = 49.5
ROI (%) = 4950

Part 2: Summary of Analysis and Interpretation of the Results

This is a healthcare business opportunity that will be implemented within an existing telehealth healthcare operation. Patients who need constant weight and body mass index monitoring within the telehealth program are to be given leased smart digital scales that will relay this information to the clinician whenever they take their weight. The equipment is to be bought (PCMAG Digital Group, 2020) by the business (at USD 75 per piece) and leased to the patients at a cost of USD 150 per year. The consultation or service fee charges per machine per year will be USD 2880 (USD 60 per week). Each machine will be maintained or serviced at an estimated cost of USD 30 per year. The patients that this venture will benefit are those currently being treated on the telehealth program and include those with overweight and obesity, heart disease, renal failure, and diabetes (Hammer & McPhee, 2018). The smart digital scale has Bluetooth capability. When the patient takes the weight, the machine uses it to calculate the BMI through an in-built application. The weight and the BMI are then relayed by Bluetooth to the patient’s smartphone, which then automatically sends this information to the clinician’s computer through the telehealth platform. Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

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Currently (2020), these patients (who require the smart digital weighing scale) number just about forty. This is the figure that is used to estimate the revenue for the first year (2020). It is then estimated or assumed that at least 10 patients will be added to these numbers in every subsequent year. That means 2020 will have 40 patients, 2021 will have 50 patients, 2022 will have 60 patients, 2023 will have 70 patients, and 2024 which will be the fifth year will have 80 patients.

The return on investment (ROI) is then calculated by dividing the net profit by the cost of investment (InvestingAnswers, Inc., 2019). The net profit comes from the total five year revenues minus the initial start-up costs and operating costs. Dividing USD 891000 by USD 18000 gives a ratio of 49.5 as the ROI. As a percentage (multiplied by 100), therefore, the ROI for this venture will be 4,950%. This is a very high ROI and therefore this healthcare business opportunity is worth investing in.

References

Hammer, D.G., & McPhee, S.J. (Eds). (2018). Pathophysiology of disease: An introduction to clinical medicine, 8th ed. New York, NY: McGraw-Hill Education.

InvestingAnswers, Inc. (October 1, 2019). ROI –return on investment. Retrieved 22 March 2020 from https://investinganswers.com/dictionary/r/return-investment-roi

PCMAG Digital Group (2020). The best smart bathroom scales for 2020. Retrieved 22 March 2020 from https://www.pcmag.com/picks/the-best-smart-bathroom-scales Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

Weight Monitoring Business Opportunity for an Established Telehealth
Healthcare Business Venture
A. EXPENSES
Estimated start-up costs (expenses) for equipment purchase
Equipment Cost in USD
Smart digital scale 75
80 Smart digital scales 6000
Estimated operating costs (digital scale servicing & maintenance)
Maintaining 1 scale in a year 30
40 Maintaining 40 scales in 2020 1200
50 Maintaining 50 scales in 2021 1500
60 Maintaining 60 scales in 2022 1800
70 Maintaining 70 scales in 2023 2100
80 Maintaining 80 scales in 2024 2400
Transportation & miscellaneous costs for 5 years 3000
Total estimated operating costs for 5 years 12000
Total estimated expenses for the venture in 5 years 18000
B. REVENUES
Cost of leasing one smart weighing scale for I year 150
Service (consultation) charges 2880
Total revenue per machine per year 3030
40 Revenue from 40 scales in 2020 121200
50 Revenue from 50 scales in 2021 151500
60 Revenue from 60 scales in 2022 181800
70 Revenue from 70 scales in 2023 212100
80 Revenue from 80 scales in 2024 242400
Total estimated revenues from the venture in 5 years 909000
C. RETURN ON INVESTMENT (ROI)
ROI = Net profit/ Cost of investment
Gross profit = 909000
Net profit = (909000-180000) 891000
ROI = 49.5
ROI (%) = 4950
A ratio analysis involves one or more calculations to gain insight into a project, an investment, or an organization. For example, ratios can be used to assess companies by comparing calculated values with those of other companies, or with certain benchmark values.

There are numerous ratios that have been developed, each with a different purpose. For example, a company’s profit margin is a ratio value calculated by dividing its net income by its sales. The result is a value that suggests how much of a company\’s total sales become profit. Higher profit margins are typically desirable. Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

This week, you will forecast expenses, revenues, and financing needs for a proposed new healthcare product or service. You will also calculate some ratios to gain insight into the financial health of an organization and the feasibility of implementing the proposed product or service.

Learning Objectives
Students will:

Calculate estimated expenses for healthcare products and service solutions
Calculate estimated revenues for healthcare products and service solutions
Calculate return on investment for healthcare products and service solutions
Analyze financial impacts of healthcare products and services solutions for healthcare organizations
Learning Resources
Required Readings (click to expand/reduce)

American Nurses Association. (2015). Code of ethics for nurses with interpretive statements. Retrieved from https://www.nursingworld.org/coe-view-only

Note: Review all, with special attention on “Provision 6” (pp. 23–26).

Kelly, P., & Porr, C., (2018). Ethical nursing care versus cost containment: Considerations to enhance RN practice. OJIN: The Online Journal of Issues in Nursing, 23(1), Manuscript 6. doi:10.3912/OJIN.Vol23No01Man06. Retrieved from http://ojin.nursingworld.org/MainMenuCategories/ANAMarketplace/ANAPeriodicals/OJIN/TableofContents/Vol-23-2018/No1-Jan-2018/Ethical-Nursing-Cost-Containment.html Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

Milliken, A., (2018). Ethical awareness: What it is and why It matters. OJIN: The Online Journal of Issues in Nursing, 23(1). doi:10.3912/OJIN.Vol23No01Man01. Retrieved from http://ojin.nursingworld.org/MainMenuCategories/ANAMarketplace/ANAPeriodicals/OJIN/TableofContents/Vol-23-2018/No1-Jan-2018/Ethical-Awareness.html

Document: Healthcare Budget Request Template (Word document)

Document: Healthcare Budget Request Workbook Step-by-Step Guide (Word document)

Required Media (click to expand/reduce)

Expense Forecasting

Understanding the numbers behind effective nuring practice is a critical skill for the nurse executive. Consider how forecasting expenses in day-to-day operations might impact patient care and healthcare delivery approaches as you prepare to estimate expenses for your own proposal. (5m)

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Assignment: Healthcare Budget Request – Estimating Expenses
It can be tempting to think of “dreams” and “finance” as opposite ends of a spectrum. You may dream of things you want, such as new cars, vacations, or retirement. But a quick analysis of your current finances may awaken you to find that your dream is not yet financially feasible. Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

Dreams and finance are, in fact, not at all in opposition. If your dream is a new automobile, you soon come to realize that you’ll need a plan to make your purchase. Part of this planning is based on an understanding of your current financial position.

Photo Credit: Getty Images

Saving money will help you, and whatever cost is not covered by savings can possibly be made up for by securing financing. You’ll likely need a personal budget that accounts for any new expenses you incur, including your new car payment.

Like you, healthcare organizations have dreams, manifested as corporate objectives. Proposals for new healthcare products or services must support these objectives, typically demonstrated via a business case. To become reality, these ideas almost always require resources. By understanding current financial position, accurately estimating revenue streams and expenses, and creating budgets, strategies can be developed that bring objectives to life.

For this Assignment you will calculate estimated expenses associated with a proposed new healthcare product or service. You will also estimate revenues and calculate a return on the proposed investment.

To Prepare
Reflect on the healthcare product or service solution you have proposed for your healthcare organization. Consider expenses (including any capital expenditures) that will be required to implement your product or service.
Reflect on the estimated revenues (if any) that your proposed solution will generate.
Reflect on the need for financing to meet the estimated expenses associated with your idea.
For each of the above, consult with your internal financial counselor as needed. Expense, Revenue, ROI Ration Analysis in healthcare essay assignment
The Assignment: Estimating Expenses
Conduct an analysis of estimated expenses and revenues associated with your product or service idea by completing the following:

Part 1: Expense/Revenue/ROI Analysis:

Open your Healthcare Budget Request workbook that you created in Week 2, and navigate to the “Estimated Expenses” worksheet. Using the Healthcare Budget Request Workbook Step-by-Step Guide for guidance, create a worksheet that records the following:

Each of the estimated expenses associated with your proposed idea, including startup expenses. Be sure to label each appropriately, with enough description to make it clear what the item is and what the estimated cost involves.
Each of the estimated revenues associated with your proposed idea. Be sure to label each appropriately, with enough description to make it clear what the item is and any necessary details regarding sources of revenues (including reimbursements).
Calculate the total estimated expenses and revenues for the next 5-year period.
Calculate the Return on Investment (ROI) for your proposed idea.
NOTE: You will copy your worksheet and analysis onto the Healthcare Budget Request Template (Word document) for submission.
Part 2: Summary of Analysis and Interpretation of Results:

Create a brief (1- to 2-page) description of your analysis that clearly describes the estimated financial impact of your proposed idea. Interpret the results by explaining what your ROI calculation means to the organization. Expense, Revenue, ROI Ration Analysis in healthcare essay assignment

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