Asante teaching Hospital - Case Study Solution PDF

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ASANTE TEACHING HOSPITAL CASE STUDY SOLUTIONSQ1. Perform a strengths, weaknesses, opportunities, and threats (SWOT) analysis. Whatimplications can you draw for the pricing strategy alternatives? What are the implications to theSWOT if Asante continues with itemized pricing or switches to bundles pri...

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ASANTE TEACHING HOSPITAL CASE STUDY SOLUTIONS Q1. Perform a strengths, weaknesses, opportunities, and threats (SWOT) analysis. What implications can you draw for the pricing strategy alternatives? What are the implications to the SWOT if Asante continues with itemized pricing or switches to bundles pricing? SWOT ANALYSIS Strengths

Weakness

1. Asante is one of the best & highly ranked hospital in South Africa 2. Loan free operations – as 100% funded by private promoters. 3. Premium health care to workers (Offers single rooms) 4. Proper and timely checks maintained by Insurance companies

1. Negligible support from government authorities. 2. Difficulty in raising funds from investors to expand due to non-profit model -> leading to limited resources. 3. Difficulties & Problems in billing process – long queues, waiting times, and even higher bill amounts.

Threats Opportunities 1.Simplification – Reducing different variations, simplify the pricing model and be more competitive to other hospitals 2. Tap into the highly potential Johannesburg middle class people of the society.

1. Competitors provide cheaper price and lesser variations -> bundled pricing. 2. Other players in the market operated in for-profit model and thus were able to raise higher finds to expand. 3. Better parts of the city had better hospitals with advanced & latest equipment’s – constant need to upgrade the services to stay up to date

Some of the implications to the SWOT analysis if Asante continues with itemized strategy is : 1. It can start adding a small mark-up percentage to the cost of per patient (20%) to gather more funds for the business operations – these funds can then be used to expand the business, deploy new and more advanced equipment’s and medical technologies and beat out the rest of the competition. 2. Tapping quickly into the middle-class population of Johannesburg – by rolling out new branches – few specially catering to lower costs to attract more people of the middle-class population. 3. Making insurance coverage policy accessible to a larger section of the society – this would not only help them to achieve their vision of improving the living and health conditions of the people without considering the race, religion or colour but to also attract people with an 100% coverage offer – the extra amount generated from premiums can be used for other growth and business operations.

Group 2 – Refer to the Excel Spreadsheet for calculations

Q2. Calculate the cost per minute for each type of employee. To Calculate the cost per minute each type of employee (resident or non-resident) – we Have calculated the total delivery minutes and the total number of natural birth ward patients for each level. Level 1: Level 1 Total

Cost per minute for each type of employee

Annual Salary

Total Natural Birth Salary for Per delivery Total Maternity (minutes) Natural Ward Birth(40%) Patients

OB/GYN - 3 doctors

3,54,03,451

Paediatrician - 4 doctors

2,34,77,139

Midwife/Nurse

1,14,557

Resident

2,31,841

Registration Clerk

9,092

Practical Nurse

7,122

1,41,61,380

30

4,160

1,24,800

93,90,856

43

4,160

1,78,880

45,823

1,422

4,160

59,15,520

92,736

225

4,160

9,36,000

3,637

43

4,160

1,78,880

2,849

99

4,160

4,11,840 77,45,920

Level 2: Level 2 Total

Cost per minute for each Annual type of employee Salary

Total Natural Birth Salary for Per delivery Total Maternity Natural (minutes) Ward Birth(40%) Patients

OB/GYN - 3 doctors

3,54,03,451

Paediatrician - 4 doctors

2,34,77,139

Midwife/Nurse

1,14,557

Resident

2,31,841

Registration Clerk

9,092

Practical Nurse

7,122

1,41,61,380

37

240

8,880

93,90,856

55

240

13,200

45,823

1,422

240

3,41,280

92,736

240

240

57,600

3,637

43

240

10,320

2,849

99

240

23,760 4,55,040

Group 2 – Refer to the Excel Spreadsheet for calculations

Level 3: Level 3

Cost per minute for each Annual type of employee Salary

OB/GYN - 3 doctors

3,54,03,451

Paediatrician - 4 doctors

2,34,77,139

Midwife/Nurse

1,14,557

Resident

2,31,841

Registration Clerk

9,092

Practical Nurse

7,122

Total Salary for Per delivery (minutes) Natural Birth(40%)

Total Natural Birth Total Maternity Ward Patients

1,41,61,380

80

390

31,200

93,90,856

71

390

27,690

45,823

1,600

390

6,24,000

92,736

412

390

1,60,680

3,637

60

390

23,400

2,849

110

390

42,900 9,09,870

Combining all the three levels, to get the cost per minute as per designation. Cost per minute per designation -

Total

Cost per minute for Annual each type of employee Salary OB/GYN - 3 doctors Paediatrician doctors

-

Midwife/Nurse Resident Registration Clerk Practical Nurse

minutes

Total Salary for (annual) (1+2+3) Natural Birth(40%)

Cost per minute

3,54,03,451

1,41,61,380

1,64,880

85.889

2,34,77,139

93,90,856

2,19,770

42.730

4

1,14,557

45,823

68,80,800

0.007

2,31,841

92,736

11,54,280

0.080

9,092

3,637

2,12,600

0.017

7,122

2,849

4,78,500

0.006

91,10,830

Group 2 – Refer to the Excel Spreadsheet for calculations

Q3. Allocate overhead costs to each level of service using the appropriate cost drivers.

We identified the different cost drivers for different overhead items and calculate the Total Overhead Cost for NB Portion (40%) in the following table –

NOTE : Total OH Cost for NB = Total OH cost for MW x 40% Basis - Cost Drivers

Overhead Item

Delivery Time Registration Clerk Time Used

Equipment Depreciation General Administrative

and

Total

Total Overhead Cost for NB Portion (40%)

3,63,672

1,45,469

3,14,622

1,25,849

Duration of Stay

Insurance

2,33,991

93,596

Duration of Stay

Utilities

74,54,026

29,81,610

Duration of Stay

Rent

1,61,95,458

64,78,183

Duration of Stay

Housekeeping

2,06,241

82,496

Duration of Stay

Laundry

3,95,295

1,58,118

Duration of Stay

Information Technology

61,19,349

24,47,740

Duration of Stay

Dining Hall

8,56,684

3,42,674

Duration of Stay

Security

3,02,076

1,20,830

Duration of Stay

Groundskeeping

8,98,940

3,59,576

Count of NB Patients

Marketing

1,05,412

42,165 1,33,78,306

Next we try to find the Duration in Days for different levels – Items

Level 1

Level 2

Level 3

Total

4,160

240

390

4,790

Average Days in MW

3

3

4

10

A/Days in MW x Total NB (Duration of Stay)

12,480

720

1,560

14,760

Total Natural Patients

Birth

MW

Group 2 – Refer to the Excel Spreadsheet for calculations

Finally, we distribute the different overhead costs into three levels on the basis of different cost drivers (Splitting Factors)

Overhead Item

Total Overhead Cost for NB Level 1 Portion (40%)

Equipment 1,45,469 Depreciation General and 1,25,849 Administrative

Level 2

Level 3

Total

1,23,676

7,265

14,528

1,45,469

1,05,888

6,109

13,852

1,25,849

Insurance

93,596

79,138

4,566

9,892

93,596

Utilities

29,81,610

25,21,036

1,45,444

3,15,130

29,81,610

Rent

64,78,183

54,77,488

3,16,009

6,84,686

64,78,183

Housekeeping

82,496

69,753

4,024

8,719

82,496

Laundry

1,58,118

1,33,693

7,713

16,712

1,58,118

Information Technology

24,47,740

20,69,633

1,19,402

2,58,704

24,47,740

Dining Hall

3,42,674

2,89,740

16,716

36,218

3,42,674

Security

1,20,830

1,02,166

5,894

12,771

1,20,830

Groundskeeping

3,59,576

3,04,032

17,540

38,004

3,59,576

Marketing

42,165

36,619

2,113

3,433

42,165

1,13,12,864

6,52,795

14,12,647

1,33,78,306

Group 2 – Refer to the Excel Spreadsheet for calculations

Cost Drivers Splitting Factor Using Cost per minute Using Cost per minute Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay Using Duration of Stay using Count of NB Patients

Q4. Calculate total costs per patient and price per patient at each level of care. To get the total costs and price per patent – we first need to calculate the total salary costs

per level for the different designations For Level 1: Level 1 Designation

Total minutes

Cost per minute

1,24,800 1,78,880 59,15,520 9,36,000 1,78,880 4,11,840

85.89 42.73 0.01 0.08 0.02 0.01

OB/GYN - Total for Team of Three Paediatrician - Total for Team of Four Midwife/Nurse Resident Registration Clerk Practical Nurse

Total cost 1,07,18,949 76,43,610 39,395 75,199 3,060 2,452 1,84,82,665

For Level 2: Level 2 Designation

Cost per minute 85.89 42.73 0.01 0.08 0.02 0.01

Total minutes

OB/GYN - Total for Team of Three Paediatrician - Total for Team of Four Midwife/Nurse Resident Registration Clerk Practical Nurse

8,880 13,200 3,41,280 57,600 10,320 23,760

Total cost 7,62,694 5,64,041 2,273 4,628 177 141 13,33,954

For Level 3: Level 3 Designation

Total minutes

OB/GYN - Total for Team of Three Paediatrician - Total for Team of Four

Cost per minute Total cost

31,200 27,690

85.89 42.73

26,79,737 11,83,204

Midwife/Nurse

6,24,000

0.01

4,156

Resident

1,60,680

0.08

12,909

Registration Clerk

23,400

0.02

400

Practical Nurse

42,900

0.01

255 38,80,662

Group 2 – Refer to the Excel Spreadsheet for calculations

Next, we distribute our total costs into the total number of patients as per different levels to get the cost per patient for each level. COST PER PATIENT

Items

Level 1

Level 2

Overhead Cost Salary Total cost No of patients Cost per patient

1,13,12,864 1,84,82,665 2,97,95,529 4160 7,162

Level 3

6,52,795 13,33,954 19,86,749 240 8,278

14,12,647 38,80,662 52,93,309 390 13,573

To calculate the, price per patient – we have calculated the total costs per patient, added a 20% mark-up to the cost price and divided it with the number of patients under different levels to get the price per patient per different levels. PRICE PER PATIENT

Items Overhead Cost Salary Total cost

Level 1 1,13,12,864 1,84,82,665 2,97,95,529

Mark-up (20%)

3,57,54,634

No of patients Price per Patient

4160

Level 2 6,52,795 13,33,954 19,86,749

Level 3 14,12,647 38,80,662 52,93,309

23,84,099

63,51,971

240 8,595

390 9,934

16,287

Q5. If you were Courtney, what pricing recommendation would you make to the CEO? We believe the next set of actions that Courtney should recommend to Asante teaching school would be to go forward with implementing a single bundled system – (three level) for the different types of birth care identified by Asante Teaching Hospital. A single bundled pricing system would simplify and fasten the billing out and checkout process for the patients. Bundled pricing options in accordance with different level of healthcare would allow patients to get an idea about the expected costs based on the different treatment and level of care preferred. This would not only lead to higher customer satisfaction but would make it easier for insurance organisations to figure out in advance the amount of money a patient would pay back for different price levels, to verify the patients claims and thus having lesser financial burden on the patients. Group 2 – Refer to the Excel Spreadsheet for calculations...