Hospital expansion decision and its justification
The decision to set up another hospital seems to have been based on the desire to expand and increase the profitability of the hospital system. It did not consider a number of environmental conditions regarding economic feasibility, community demand, and collaboration with relevant stakeholders. Hospitals are an essential part of the community, requiring interaction with local residents and businesses. It implies that a detailed survey could have been conducted to ensure that there was a demand for a multispecialty hospital. The ophthalmology specialization may have experienced success due to the quality of care which attracted visitors from outside the immediate area.
Meanwhile, a multispecialty facility is focused on addressing the healthcare needs of the community. It would have been competent decision to analyze demographics, behavior trends, and public health to determine the demand for a new building. Demand drives patient visits which translates to occupancy rates that help cover operation costs. If there is a lack of initial demand, there is no economic feasibility. Furthermore, a considerable effort of increasing demand is establishing brand outreach into the community. Stakeholders include the public, health care providers, and non-government organizations. An effective opening of a hospital should provide cohesive communication with an emphasis on various community stakeholders and their role in the enterprise (“10 steps to a better hospital opening,” 2015). It creates strategic leverage for the brand with a public identity which engages the community and can lead to increased visitation rates.
Other ways of improving design and finances
Modern hospital design has been linked to improved patient experience. Therefore, updated infrastructure should respond to demands of more outpatient facilities, improved sustainability, and patient safety. This goes beyond pleasing aesthetics but focuses on the importance of design in improved patient outcomes. The patient experience matters and design has a tremendous impact on satisfaction (Wynn, 2017). When constructing facilities, it is important to encompass two elements of design which improve operational costs: sustainability to reduce energy expenses and operational factors that improve efficiency which lowers staffing expenses. In the end, incorporating relatively minor design elements can provide significant returns on investment (Brimmer, 2013). In this scenario, using in-house engineers was a poor decision. For such large infrastructure projects, the design should be carefully planned and evaluated by specialized professionals (particularly with sustainability aspects). The outsourcing of construction by the in-house engineers should have been done through careful oversight and potentially a tender process to evaluate proposals.
Finances can be improved through an optimized revenue cycle management. Information system components are a critical part to maintain track of healthcare data and finances. Overall, operating expenses should be lowered since, in the modern economy, these often exceed revenue. Staff management, acquiring private practices, and commercial businesses are some of the potential revenue pitfalls. Financial performance can be achieved through strategic and operational discipline (Goldsmith, 2017).
The reason of rising hospital operations costs and declining occupancy rate
Over the last two years, hospitals have experienced economic difficulties as revenues disappeared. Operation costs have increased due to a rise in salaries, consulting expenses, and costs to provide healthcare. Many profitable hospital services have moved to outpatient facilities, thus lowering occupancy rates. Hospitals are choosing strategies of market consolidation by purchasing private practices and building new infrastructure in hopes of increasing patient visitation, but the return has not justified the costs. New buildings and related IT and labor expenses require high capital costs. If a hospital experiences declining patient rates, it loses effectivity due to economies of scale, with revenues unable to match operational costs (Pearl, 2017). The burden of the costs transfers to the few remaining patients through increased prices for healthcare services and further driving down occupancy rates. Overall, adding beds is counterintuitive to industry trends which have experienced falling inpatient utilization. Average patient stay is shorter as healthcare models have focused on decreasing length of stay and rehospitalization rates. While bed space may not have any expenses once built, it requires staffing which leads to higher operational costs that trickle down to the consumer in some manner (Liss, 2016).
References
10 steps to a better hospital opening. (2015). Web.
Goldsmith, J. (2017). How U.S. hospitals and health systems can reverse their sliding financial performance.Harvard Business Review. Web.
Liss, S. (2016). Low occupancy rates raise questions about BJC hospital expansion in Creve Coeur. St. Louis Post-Dispatch. Web.
Pearl, R. (2017). Why major hospitals are losing money by the millions.Forbes. Web.
Wynn, P. (2017). New hospital design focuses on safety, patient experience. Web.