Summary Paper
Simulation Results
University of Phoenix
HCS 405 Health Care Financial Accounting
Marqueita Boyd June, 28, 2015

The simulation project was a very interesting and informative project. I learned many different things about the way things are ran around a healthcare facility. There is a lot more to running a health care facility than just caring for the patients. Behind the scenes there are many other issues that come up on a regular basis that need quick attention and the right decisions to be made. In the simulation I had to know I wouldn’t make the perfect decision the first time around, but it was a great experience.
First I had to makes a decision to handle a cash flow problem at Elijah Heart Center. I had to make sure it slightly affected the facility it wasn’t the best decision. Reducing the agency staff was a good decision because it would reduce cost without it affecting any revenue. This would help EHC save on management fees and the premiums they pay to the agencies. However deciding to reduce the length of stay was not such a great decision. This would only have a limited gain because there is no significant cost savings by implementing this strategy and the revenues will remain the same on the scale throughout the year. As far on the loan option to support my decisions I chose the first one which was the best option. There may be more interest paid on this loan, but it can be paid back anytime where in option two the loan couldn’t be paid back before six months.
Next, I had to make a decision on whether to purchase new, refurbished, a capital lease, or operating lease hospital equipment. The equipment needed was an X-Ray machine, high speed CT scanner, and an ultrasound system. I decided to purchase a refurbished high speed CT scanner, a new X-Ray machine, and do a operating lease on the ultrasound machine. Purchasing a refurbished high speed CT scanner was the best decision because this is medium technology equipment that carries a usage of ten years which means it carries a lifetime of five to ten years and it may need an upgrade. Purchasing a new X-ray machine was not the best idea because it will last for a very long time. Since this equipment will last for a very long time the best option would have been to take out a capital lease. This option would have a higher present value of payments compared to taking an operating lease or purchasing refurbished equipment. With the ultrasound machine I decided to do an operating lease because this type of technology often changes. This was the best decision because it is a lower upfront payment as well as lower monthly payments.
The last and final decision I had to decide the best loan type to take out for the new facility. Looking at all three loan options I decided to choose HUD 242 Loan Insurance program. I went with this option because even though there was a higher cost of issuance than any other loan it seemed to be the best decision. When looking at the cost of funding, collateral requirements, prepayment limitations, and the period for using funding, the HUD 242 Loan Insurance Program had the best options. There were no periods of using the funding versus with the tax exempt were the IRS rules require an exemption that with the proceeds be used within three years. With the limitations on prepayment the interest paid with tax exempt would be $31,350,000, with HUD it would be $20,400,000, a private bank funding it would be flexible refinancing and prepayment with foreclosure fees of 2%. The percentage for a cost of funding was lower with the HUD 242 Loan Insurance Program also. Overall this type of loan had the best benefits as far as repayment even though the overall cost of issuance was more.
During this project I learned the importance of cash flow and how important it is to the hospital or any organization. With a better cash flow can help a company with their borrowing power, which will help in a steady income level. I also learned that it is very important to understand all concepts of financial accounting concepts so that any business can solve their issues with money so that they can be successful. I know I still have more to learn, but it was a great experience. If I were to do it again I would take a bit more time and pay attention to the numbers and better outline exactly how much affect each decision would have on the business. I would take my time to weigh out each decision instead of rushing into things. I will most likely make better decisions because I now know I have to think carefully and better analyze things to make the right decision. Making financial decisions and understanding exactly how those decisions will affect you or your business is something everyone should want to know.
I can take the things I learned in this simulation and easily apply them to my everyday decisions in life. This could help me do better in my financial situation. Instead of rushing into making such big moves I can know sit down and dissect every possible decision available and see which one would be best for my situation. I will now better balance my money because I know what things to write down and exactly what they need to be labeled as. I will have to keep my own personal balance sheet for my household. This will also be great experience to apply to future position I plan on holding later in life. If I plan on running a healthcare office it is a plus to understand all financial and accounting concepts there is to know in a business. I will not stop learning because I know there will always be something new to learn when it comes to accounting. Overall this was a great learning experience for me to apply not only in a position at work but in life situations as well. I never realized the importance of finance and handling money until a later time in life. I will take the lessons I learned from this simulation and class and not only apply them to my life situations, but teach what I learned to others around me.