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Alpha Health System: Allocating Capital Essay


Alpha Health System (AHS) is a healthcare network with specialization in acute care (Kaufman, 2006). Nonetheless, AHS experienced financial difficulties with the budget allocation such as the lack of accuracy and analysis and no centralized system of resource distribution. They limited the possibilities for the enhancement of the financial portfolio of AHS and created a critical gap between the available cash and the sums required for investment (Kaufman, 2006). The ability to identify these problems helped the organization not only to design the well-development strategies to comply with the actions of the rivalry but also contribute to the optimization of its financial performance. The expected outcomes pertain to a greater integrity of the managerial goals with the allocation process, enhanced project analysis, “comprehensive communication”, and the improved distribution of the financial capital due to the contribution of the departments and effective control of the financial council (Kaufman, 2006, p. 82). Consequently, the primary goal of the paper is to describe the initial scheme and strategies to improve its outcomes.

To understand the company’s situation, it is critical to overview the allocation process. Initially, the firm applied the traditional planning approach by focusing on the annual cash flows of AHS (Kaufman, 2006). The company was finance-driven while highly relying on the past financial performance and its patterns. Each department was given an opportunity to describe its financial needs and report this information in the form of a list. Financial executives considered the designed lists and available cash to allocate budget effectively (Kaufman, 2006). The aspects depicted above signified that the initial process was inconsistent and offered a clear rationale for the existence of the issues related to the budget allocation.

Thus, to understand the principles of new allocation routine, it is critical to evaluate the managerial strategies that led to the successful outcomes. In the first place, the company wanted to establish a leadership board for the effective decision-making while making it “team-based” (Kaufman, 2006, p. 78). Using this strategy was expected to review the issues from dissimilar angles while paying equal attention to the actions of the competitors and internal performance of the company (Norton & Kelly, 2014). As for the actual allocation scheme, the selected members of the team diminished the link with the past performance routines (Kaufman, 2006). Meanwhile, they applied the elements of status quo strategy and offered a universal system to increase access to the information of the resource allocation. Alternatively, the company designed a novel approach to assess the capital constraints by dividing the projects into threshold (more than $500,000) and non-threshold ones (Kaufman, 2006). This segregation assisted in allocating capital based on the long-term financial objectives and profitability. This aspect implied that some non-threshold plans were offered financial resources for survival while threshold ones were highly financed. Lastly, to ensure the effectiveness of the threshold projects, new analytical standards and schedules were proposed, and they implied constantly comparing the actual financial performance with the expected outcomes.

Overall, the introduced changes helped the company increase its profitability and improve resource allocation. This strategy could be referred to as the best practice approach, as the management took into account the industrial performance and ensured the compliance of the resource allocation process with the long-term financial goals. The company became successful, as its new financial strategy involved a higher level of flexibility.

References

Kaufman, K. (2006). Best practice financial management: Six key concepts for healthcare leaders. Chicago, IL: Health Administration Press.

Norton, S., & Kelly, L. (2014). Resource allocation. New York, NY: Routledge.

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IvyPanda. 2020. "Alpha Health System: Allocating Capital." November 21, 2020. https://ivypanda.com/essays/alpha-health-system-allocating-capital/.

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IvyPanda. (2020) 'Alpha Health System: Allocating Capital'. 21 November.

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