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Clinic Profitability Analysis: Revenue, Costs, and Risks Report

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Introduction to the Organization

The nature of the organization is that of a private medical clinic. This is a non-governmental medical institution engaged in professional examination and diagnosis of diseases, including high-tech services. Magnetic resonance therapy, hemodialysis, in vitro fertilization, and computed tomography (Secundo et al., 2019).

This private medical business has strict requirements for the quality of services provided. To match the quality of work to the European level of service, a private institution monitors the development of technologies in the medical environment, constantly trains staff, and uses better equipment (Maghaze et al., 2020).

Pricing policy is also of great importance for the organization. It is constantly monitored whether the prices of medical services meet the economic characteristics of the population in the region where there is a medical business.

The stakeholders in the organization are the manager, supervisor, patients, and employees. The manager is interested in effective interaction between their subordinates. The head strives to maximize profit and maintain the reputation of a private medical institution (Robbins & Davidhizar, 2020). Patients strive to get a high quality of service so that the payment is not too high. It is in the interests of the staff to perform work duties to receive a decent salary.

The organizational culture in this private medical institution is a culture of low risk and slow feedback. It is characterized by low risk and slow feedback; the organizational culture focuses the attention of employees and management on technical excellence, calculating the degree of risk and details. The lack of feedback forces employees to focus on how they are doing something rather than what they are doing (Antony et al., 2019). Attention is paid to registration and work with documents, records, and technical improvements. The main principle of the organization is the pursuit of technical excellence in work.

The topic of study – increasing profitability – can benefit a private medical organization. The effectiveness of the functioning of medical organizations, as well as their level and quality, largely depends on the availability of medical institutions with resources and the degree of their use (Yip et al., 2019). The solution to the problem of improving the efficiency of a medical organization is inextricably linked with the assessment of indicators of industrial and clinical activity (O’Connor et al., 2020). Indicators for evaluating the effectiveness of medical organizations should be systematic, allowing them to evaluate their activities from the point of view of social, medical, and economic significance. One of the most important indicators is profitability, the increase of which is the topic of study.

Analysis

The profitability of a private medical organization is calculated by multiplying the average cost of services by the expected number of visitors. According to Table 1, the average amount per visitor per day is $2,000. It takes about 1 hour to serve one patient. According to the regulations, one doctor should be at the workplace no more than 6 hours daily. Thus, one cabinet turnover equals 480 thousand dollars monthly (2000 dollars. * 12 visits * 20 working days). If the clinic works 24/7, with the presence of 4 doctors, the maximum profitability can be about $ 1.44 million per month (2000 dollars. * 24 visits * 30 days). The real revenue is less because achieving 100% of the medical cabinet load is very difficult. The average income of the clinic is 500-700 thousand dollars per month.

Average amount paid by visitor per day$2,000
Amount of time per patient1 hour
Working day length6 hours a day
Turnover of medical cabinet per month480 thousand dollars
Max. profitability$1.44 million per month
Profitability with current medical cabinet load$500-700 thousand

Table 1. Profitability of a private medical organization before deducting expenses.

Next, it is necessary to recalculate profitability minus expenses. The salary of specialists will be 20% of income—96 thousand dollars. The salary of junior staff will be 10% of income—48 thousand dollars. The cost of materials needed for treatment will be 20% of income—96 thousand dollars. The cost of cleaning and disinfection is 5% of income—24 thousand dollars. Thus, on average, the profitability of the clinic is $264,400.

Profitability of a private medical organization after deducting expenses
Figure 1. Profitability of a private medical organization after deducting expenses.

Risk Analysis

Disks or challenges identified due to the organizational assessment are the absence of a competent business model. The business model considers the clinic not as a medical institution but as a money-making company. The absence of a detailed plan or its unprofitability can create challenges in the organization’s development due to the risk of losses exceeding profitability (Shahid et al., 2019).

If profitability increases by reducing costs, the organization may start saving too much. This will cause problems with state and federal treatment quality control (Bhat et al., 2019). Some clinics use improper disinfection, reusable use of medical instruments, or the purchase of inadequate-quality medical materials to reduce costs. However, this puts patients’ health at great risk and is illegal.

Potential stark and anti-kickback concerns include violation of medical safety techniques. Any violation of them in the workplace will have negative consequences both for an ordinary employee and for the activities of the entire organization (Sun & Medaglia, 2021). Simple but crucial regulations must be followed to prevent unnecessary lawsuits, complaints, and other unpleasant situations for the clinic’s administration, personnel, and patients (Tahat et al., 2020). Contempt for the demands of official instructions may cause an administrative, disciplinary, or even criminal prosecution to be started.

Resources available to undermine the project may include funding needs. Therefore, it is possible to attract investments or credit for the project. It can be requested from partners, banks, or investors (Lim & Rokhim, 2021). To receive financing from foreign investors, it is necessary to focus on international standards (Gomez & Bernet, 2019). When receiving subsidies within the framework of state support, focusing on existing programs for financing medical businesses is necessary. The listed actions will help to get the financial resources needed to undermine the project.

References

Antony, J., Sunder, V., Sreedharan, R., Chakraborty, A., & Gunasekaran, A. (2019). . International Journal of Quality & Reliability Management, 36(8), 1370–1391. Web.

Bhat, S., Antony, J., Gijo, E. V., & Cudney, E. A. (2019). Lean Six Sigma for the healthcare sector: A multiple case study analysis from the Indian context. International Journal of Quality & Reliability Management, 37(1), 90–111. Web.

Gomez, L. E., & Bernet, P. (2019). . Journal of the National Medical Association, 111(4), 383–392. Web.

Khorasani, S. T., Cross, J., & Maghaze, O. (2020). . International Journal of Lean Six Sigma, 11(1), 1–34. Web.

Lim, H., & Rokhim, R. (2021). . Journal of Economic Studies, 48(5), 981–995. Web.

O’Connor, C. M., Anoushiravani, A. A., DiCaprio, M. R., Healy, W. L., & Iorio, R. (2020). . The Journal of Arthroplasty, 35(7), 32–26. Web.

Robbins, B., & Davidhizar, R. (2020). . The Health Care Manager, 39(3), 117–121. Web.

Secundo, G., Toma, A., Schiuma, G., & Passiante, G. (2019). . Business Process Management Journal, 25(1), 144–163. Web.

Shahid, N., Rappon, T., & Berta, W. (2019). . plos one, 14(2), e0212356. Web.

Sun, T. Q., & Medaglia, R. (2019). . Government Information Quarterly, 36(2), 368–383. Web.

Tahat, M. M., Alananbeh, K. M., Othman, Y. A., & Leskovar, D. A. (2020). Health and sustainable healthcare culture. sustainability, 12(4859), 1–26. Web.

Yip, W., Fu, H., Chen, A. T., Zhai, T., Jian, W., Xu, R., Pan, J., Hu, M., Zhou, Z., Chen, Q., Mao, W., Sun, Q., & Chen, W. (2019). . The Lancet, 394(10204), 1192–1204. Web.

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