Quality Circles and Feedback Loops

 

Quality Circles                                                                                                                     lookfordiagnosis,com

 

                               Quality Circles and Feedback Loops:

What are they and How Do They Strengthen Quality Management?

The Quality Circles and Feedback Loops are programs made up of employees and or consumers that assist companies and healthcare organizations in determining problematical issues, communicating what they believe problems are, and finding potential resolutions to repair the problem. Locating information through research, this paper will bring together thoughts, ideas, principles, methods, and how these processes build strength within the quality of management initiatives and activities. Quality Circles, as well as, Feedback groups, transfer information to management, whereas, both are usually voluntary, small in number, from the department they work in, not from varied departments, as well are prevalent in today’s organizations.

Quality Circles

According to Savane, (2012), quality circles were born in the 1950’s in the US, and the authors state this gives employees the ability to provide contribution into the department they work in regardless of their positions in the company. A study performed by Saleh, Guo, Hull, (1990) found, that after sending out questionnaires to sixty-five auto companies that asked about their use of quality circles and feedback groups a response in the affirmative was given, and that was,  quality improvement and organizational effectiveness supported the value of their companies. Although, this particular article was written fourteen years ago it is found that Quality Circles are still as prevalent today as then. Quality Circles groups were also known by description such as, suggestion boxes, where employees would provide written suggestions for problems or changes they believed needed repaired. Quality Circle groups are varied and can have management advisors to help them stay on track of the initial issue of concern according to what each organization needs and supplemental programs may be added to enhance the company’s value and customer satisfaction.

Rohrbasser, Mickan, Harris, (2013), describe numerous studies suggesting Quality Circles groups have been known to improve performance of cost, tests, and clinical guidelines providing a more valued result for patient care and measures with indicators of change in performance.  This article also suggested that during some instances stakeholders do not totally understand the information provided by these Quality Circles groups and how they can determine the methods to provide needed solutions.

Feedback Loop Groups

While Feedback Loop Groups are generally people, this particular feedback group is an automated interactive voice response system (IVRS) that initiates a phone conversation with a patient with their permission, and then asks questions about their visit with the healthcare organization they visited. This process provides the healthcare organization needed information to compile and provide a better value for patient satisfaction. However, this process does contribute its own type of problems as in time delay in the information submitted to the clinicians, because, the information is only sent twice a day. Therefore, there are certain interactive measures that are cut short by the use of this system (James, 2013).

Cahill, (2013), indicates that the purpose for feedback loop groups are to encourage positive feedback within a particular process, or group, in addition, Cahils’ demonstration speaks to the health field in the area of hand washing, going from clean to dirty, and how to increase circumstances that can be better understood and improved by everyone. The group she chose to discuss was a thoughtful feedback group where a person finds another person to team with and they together give positive attributes of quality improvements to each other, or how they can achieve the goal of quality attainment in what she calls real time.  Cahil, (2013), denotes that this type of project reflects as a relationship, or partnership with commitment, and also believes that nurses have the ability to change the healthcare culture one person at a time.

In a review by (Hattie & Timperley, 2007), the topic is how “feedback is one of the most powerful influences in learning and achievement.”  Interpretation of feedback and how it is given can be quite different according to the type of organization that uses the feedback loop group. This article is one of education; however, the basic potential for the purpose for the feedback group are essentially the same as the feedback group for healthcare.  According to this article the meaning of feedback is to conceptualize information from a go-between, or agent as to one’s demonstration and understanding coming into focus.  A feedback group has at least two people in it; therefore, the ability to transfer information from one to another is possible. Hattie & Timperley, (2007) believe that feedback is “a ‘consequence’ of performance” in addition they   also state there is a difference between feedback and instruction; however, when the two are intertwined they become one in how they work. This process needs to provide information relating to the learning process of what is understood and what is intended to be understood. And to be powerful feedback must have an addressed context of learning.

Strengths and Weaknesses

            Quality Circle Groups and Feedback Loop Groups are tantamount in the role that they portray with more and more organizations using these two groups as a method to improve quality of sales, service, product, or they use it to enhance their probable market shares, or their bottom lines. Healthcare organizations use these methods to enhance the safety and quality given patients in the process of their care, thereby, reducing cost to the organization and patient. These groups bring strength to the organization through an efficient and logical manner in the diagnoses of issues of concern and finding methods to improve that issue. Collecting data is one way to acquire the information to help establish strength of the standard practices, as well as, bringing a unity to the employee groups in each department by providing a link that supports management and employee growth.

Chapter twelve of McLaughlin, & Kaluzny, (2013) discusses the knowledgeable product of data collection with various charts showing the methods and how they are used. Data collection brings together information providing desired results, leading toward improved standards Data must be accessible, relevant and reliable, to the task at hand, producing a reasonable cost, in addition, the information should be statistical by analyzation and presented in an adequate manner to the management for their approval of the team’s findings for improvement. This chapter gives ideas of the varied types of data that may be collected for use in Quality Circle Groups and the Feedback Groups. Weaknesses can be created by employees who are willing to be a part of a group but not actually committed to the group, and providing bad data can complicate issues rather than repairing them.

 Cost and Care

As it is known, the escalation of healthcare cost in today’s society provides an unstable assurance to the patient giving them reason to have concerns over the affordability of healthcare. Many new programs, such as the Affordable Care Act are supposed to help build a stronger report with patients in assuring their safety through healthcare, however, this program has created a change in the pay ability for services and decreases the opportunity for patients to have important procedures completed. Kaplan, & Porter. (2011), describe the rising cost of healthcare and state that healthcare is being gauged by the wrong measures. According to these authors, healthcare spending in 2011 used approximately seventeen percent of the national Gross Domestic Product and it continues to rise. They also state that rather than looking at the cost for the care of a specific condition the medical community has to appraise the cost of specialty or departmental costs of a patient’s procedure. Additionally, the improper payments and billings of patient’s procedural costs are creating misrepresentations in the proficiency of care.

Value is a goal for the healthcare industry according to Kaplan, & Porter, (2011) and the way to achieve that goal is by properly measuring the value in outcomes and cost at the patient level. These authors also state that patient medical outcomes should be measured along multiple dimensions from survival to the sustainability of recovery. The measures of cost for delivery of these outcomes are the second part of the value equation and a more balanced method for dealing with healthcare cost is the biggest hurdle the US has to cross in order that the economic status does not deflate completely. The healthcare economic cost has become the burden on the backs of all Americans today.

Conclusion

In summation there are several factors which this paper has reviewed such as Quality Circle Groups and Feedback Loop Groups, the care and cost of healthcare. The information provided is to bring a more clear understanding of the purpose of these two groups and how they influence the ability for change to patient healthcare.

The rise and fall of the healthcare industry and the ability to properly staff hospitals and other healthcare organizations to provide a stable safe environment for the patient, providing them with, not super healthcare, but adequate healthcare, and  has broken and bankrupted many businesses including healthcare organizations. Small businesses have not been able to sustain the fluctuating payments for changing Medicare, and Medicaid costs. Even the new changes to the billing codes, from ICD-9s to ICD-10s have created plaques for businesses being properly reimbursed for care. With the increase in specialty medicines, innovative healthcare plans, new digitized equipment, and continual fluctuations in the number of patients a permanent fix is not in the near future. However, it does not mean that answers to the problematic healthcare issue should not continue through research, methods, and trial programs. As a nation an answer to this issue is needed and it is the responsibility of all America to participate in finding what works, not just the government, the doctors, or the medical profession.

References

Cahil, S. (2013). Thoughtful feedback loop: A nurse’s approach to personal and organizational improvement. American Nurse Today, 8(6).

Hattie, J., & Timperley, H. (2007). The power of feedback. American Nurse Today, 77(81) 81-113 doi:10.3102/003465430298487

James, H. (2013). Closing the feedback loop: An interactive voice response. Journal of Medical Systems, 37(9905), 1-10.

Kaplan, R. S., & Porter, M. E. (2011). How to Solve The Cost Crisis In Health Care. Harvard Business Review89(9), 46-64.

McLaughlin, C. P., & Kaluzny, A. D. (2013). Continuous quality improvement in health care. Sudbury, MA Jones and Bartlett, ISBN:9780763781545

Rohrbasser, A.,  Mickan, S., Harris, J., (2013). Exploring why quality circles work in primary health care: a realist review protocol, 2(110) doi: 10.1186/2046-4053-2-110

Savane, A., (2012). Final Quality

http://www.slidehare.net/AshwiniSavane/final-quality-circle-4

Saleh, S.D.; Guo, Z.; Hull, T., (1990). “The use of quality circles in the automobile parts industry,” Engineering Management, IEEE Transactions on , vol.37, no.3, pp.198,202, Aug 1990, doi: 10.1109/17.104289

Health Care, Cost, and its Effectivness

Health Care, Cost, and its Effectiveness

 The Paradoxical Underachievement of the U.S. Health Care System

              Financing for health care programs in 2014 continues to be problematic for the United States population, and as financing for health care continues to increase it also raises questions of how, where and who will provide the much-needed funding for the care of the under-insured, the un-insured, the elderly, and the underprivileged.

Through an assessment of provided information like that of health reform, social justice and fairness, controlling cost through leadership and cutting health care cost will allow a view of the cost for the financial inadequacies bearing negative outcomes for the health care system of the United States, with an interpretation of probable improvement by this author.  In addition, a comparison of health care systems between Canada and the United States may offer potential improvements for health care finances in the U. S..

Balance Between Heath Care and Cost

With information given by the American College Physicians (ACP), conveying a focus for the importance of a balance between health care and cost is the most important thing that can happen in America and unless spending comes into balance the nations long- term fiscal condition will be in grave danger (Ginsburg, J., 2009).

For the reasons like those of relationships between cost constraint and universal insurance explains that if mandatory insurance were required the attainment of justice and fairness would not occur for the public.  Two elements with shared values, such as one, just sharing the costs of illness and two, Prevention of Free Riding and with these elements attached to a general fact of health economics they will lead to the issue of mandatory insurance will lead to the issue of mandatory insurance (Menzel, 2012).

When insurance causes a misrepresentation of the concept with the insight of the association between cost and value the patients’ and providers find themselves misguided in their ideas of how to determine where the effectual worth of health care and cost combine for balance.  (Menzel, 2012).

In light of the prior information, it is simple to say that a delicate balance, or a compatible ratio involving costs, and pricing in a health economics community require the assistance of everyone who requires adequate care.  In order that these precepts work a ost per person, or per capita cost needs factored in to the total over all financial budget.

Health Care Cost Per Capita

            Medicare beneficiaries continually increase since baby boomers are living longer and have a higher necessity for health care and this increases the probability of federal spending for long-term care, which allocates growth in per capita health care cost (Ezekiel, E.,  Neera, T.,  Stuart, A., Scott, A.,  Donald, B., de Brantes, F., … Spiro, T., 2012). Although, per capita relates to the idea of how much money per person is spent, it is an average, not the realistic cost per person.

The Affordable Care Act (ACA), which is a health care program, is creating a down turn to the cost of health care spending; however, with spending reforms shifting from the federal government to other entities such as state governments a resolvable solution will not occur within the health care budget.  The authors of this paper state, that with this information “the only sustainable solution is to control overall growth in health care” (Ginsburg, 2009).

            Although the United States spends more per capita $5,700 per person (as of 2005), on health insurance, i.e. health care coverage than any other nation in the Organization for Economic Co-operation and Development and approximately eleven percent more is spent in the U.S. for the global per capita average (Almgren, 2007 ch.3).

Health expenditure per capita (current US$) from 2009-2012 per capita health cost went up from $8,009 to $8,895 according to this chart the money spent on each person for an average increased from 2005 by $3,195.  This does not seem like a lot of money, or even enough money to provide adequate care to each individual per year (Health Expen…2014).

However, multiply that number times millions and give consideration to the fact one person may cost $150 for health care for the year and someone else may cost $2000, then answer the question, how health care becomes equal for all.With health care spending creating, a comparison between cost and quality Ezekiel states an understanding for the need to balance between a higher per capita cost and poor outcomes for health care is a concern to consider (Ezekiel et al. 2012).

Comparisons

            As stated, these authors believe the culture of the country in a comparison study is very vital, because it could sway the advantage of the comparison, differences in languages, governments, and citizens believes could distort the perception of those who are doing the comparison.

According to these authors, two countries Canada and the United States bear a marked resemblance in their cultural aspects and a comparison between them will give ideas through pros and cons toward the effect of health care for each country. By the statistics of this article it is not found there are any more satisfaction in Canada toward their health care as opposed to the U.S..

Canada

Pro, seen in this article is that Canada spends half as much as the U.S. per capita and lives two to three years longer.

Con, Waiting times are a barrier for health care.

Con, Canada is lower spending for health care compromises the effect of satisfaction, but not health outcomes.

United States

Con, immigrants have more trouble acquiring health care in the U.S. then Canada.

Con, finances are a barrier for health care.

Con,  more likely to forgo medical care, and drugs.

Both

A joint con for both Canada and the United States is that neither has the ability for universal dental coverage.

Adequate funding for the possibility of waiting for a procedure is necessary.  Canada has this the U.S. does not.

Universal coverage is not sufficient to eliminate all health disparities in either country.

Policies for social conditions, as in language barriers may affect health care if there are not remedies set in place.

Both countries could use breaks in their incomes whether through tax reform, or reformed educational programs and jobs.

Canada has more Asian immigrants and U.S. more Latino immigrants.

The U.S. has more health disparities with immigrants than Canada.

Low-income populace in Canada has a better chance for health care than those in the U.S.

List information from (Lasser, K., E.,  Himmelstein,D., U., and Woolhandler, S., 2006)

In this random list of pros, and cons the comparatives for either country do not show that one country is better off than the other in health care, it simply shows there are differences in opinions of the comparisons.  This author believes that the personal opinion of the individual is the judge as to whether one country is better for them in the attaining of healthcare.

As stated in this article, Canada often compares to the U.S. as a possible model, and with their health care systems being different, in that, Canada has a single payer system, and the U.S. has a multi payer system.  However, it states here that the U. S. because it is similar to Canada that this might provide the potential for the U. S. to accept Canada’s health system (Comparing the U.S. …, n.d.).

Health Care Cost and Influence

            According to Almgren, publicly funded resources in the U.S. run about 45% and the programs that are most responsible for this is Medicare at 17.5% and Medicaid at 16.6%.  The costs of the Veterans Administration is approximately $20 billion annually; however, Medicare boasts the largest and most controlled influence in the health care  cost system, with the highest support in politics and government in the health care system (Almgren, 2007).

Reform          

The healthcare system is at a stance of adopting a reform policy for the United States, changes to Medicare and Medicaid are also creating and in some instances forcing changes in health care organizations as is described by Zismer. Zismer talks about a health care market place that threatens community health systems.  He discusses a liquidity approach to the financial capabilities of “cash-to-debt ratios, day cash on hand, and other related metrics” in a transition for better financial management (Zismer, 2013).

His paper also describes the “moving into an unstable environment,” indicating that with the reform of the health care industry there will be more room for economic uncertainty and instability and Zismer states that instability can produce quick negative effects (Zismer, 2013).

Ginsburg indicates the need to restrain rapidly growing health care cost at the same time making health care coverage possible for everyone. However, the rate of spending for health care is growing so fast that it is speeding past the Gross Domestic Product for the U.S. (Ginsburg, 2009).

The intensification for not meeting the need to reduce cost is the aging population and the current fiscal economy.  Many service providers such as doctors are weighing the cost and restraint of new rules and cost pricing as to whether they will continue accepting patients, or if they will leave private practice (Ginsburg, 2009).

The reform of the health care system is a long and drawn out process that continues to baffle everyone involved, such as the Affordable Care Act set into motion by President Obama, even this new program has made changes that has caused grief and good, just as many others.

Summary

              The Paradoxical Underachievement of the U.S. Health Care System is the title of this paper and the information is based on the paradox, that while some laws and cost calculations have  changed for the better still some have changed  for the worse.  All of the information used in this paper through various articles, papers, and web sites was to try to bring a perspective to the underlying fact that regardless of the execution of the reform of health care the process will be an ongoing achievement.

Conclusion

               In the avalanche of the health care crisis to attain an effectual working plan for inciting the United States and its health care and government organizations into a joint operation to examine the possible side effects of the varied programs set into place should be the people’s goal.  Programs attributed to new laws and rules declared in the last decade will be a continuation in the rise of the healthcare cost and the under achievement of the health care system of the United States.

References

 

Almgren, G.  (2007)   Health care politics, policy, and services: A social justice analysis.  New York, NY Springer Publishing.  ISBN: 9780826102362

 

Comparing the U.S. … (n.d.). Comparing the U.S. and canadan health care systems. Retrieved April 13, 2014, from The National Bureau of Economics: http://www.nber.org/bah/fall07/w13429.html

 

Davis, K., Schoen, C., Shea, K., & Haran, C. (2008). Aiming high for the U.S. health system: a context for health reform. The Journal Of Law, Medicine & Ethics: A Journal Of The American Society Of Law, Medicine & Ethics36(4), 629.  doi:10.1111/j.1748-720X.2008.00317.x

 

Ezekiel, E.,  ,Neera, T.,  Stuart, A., Scott, A.,  Donald, B., de Brantes, F.,  Calsyn, M., Chernew,M., Colmers,J., Cutler, D., Daschle, T.,  Egerman, P., Kocher, B., Milstein, A., OshimaLee,E.,  Podesta, ,J.,D.,  Reinhardt, U.,  Rosenthal, M., Sharfstein, J., Shortell,S., Stern, A., Orszag, P., Spiro, T..(2012), A systemic approach to containing health care spending, New England .Journal of. Med., 2012, 367, (10), 949-954, Massachusetts Medical Society, http://www.nejm.org/doi/full/10.1056/NEJMsb1205901

 

Ginsburg, J. (2009).  Controlling health care cost while promoting the best health outcomes. Philadelphia, PA, USA: American College of Physcians. Retrieved from http://www.acponline.org/advocacy/where_we_stand/assets/controll… – 393k http://www.acponline.org/advocacy/where_we_stand/assets/controll… – 393k

 

 Health expen…(2014). Health expenditures per capita (current US$). The World Bank. Retrieved from http://data.worldbank.org/indicator/SH.XPD.PCAP

 

Lasser, K., E.,  Himmelstein,D., U., and Woolhandler, S., (2006, July),  Access to Care, Health Status, and    Disparities in the United States and Canada Health: Results of a Cross-National Population-Based       Survey, American Journal of Public Health 96(7)  1-8

 

References

 

Menzel, P. (2012).  Justice and fairness: a critical element in U.S. health system reform. The Journal Of Law, Medicine & Ethics: A Journal Of The American Society Of Law, Medicine & Ethics40(3), 582-597.  doi:10.1111/j.1748-720X.2012.00691.x

 

Zismer, D. K. (2013).  How might a reforming U.S. healthcare marketplace threaten balance sheet liquidity for community health systems?  Journal Of Healthcare Management58(3), 168-172.

 

 

 

 

 

Healthcare, Disaster or Survival; Will Capital Budgeting Help?

Healthcare, Disaster or Survival; Will Capital Budgeting Help?

            Capital budgeting can create a positive environment for the survival of a healthcare organization rather than creating a disaster by using fixed assets.  With the changing laws, rules, billing, and payment methods, coupled with competition of other organizations it becomes a difficult task for healthcare organizations to sustain a profit.

In a brief description of the capital budgeting process, this web log will explain how the process works also, it will show that it is an intricate part of healthcare’s financial management, and the feasibility of its use in support to an organizations’ sustainability.

Accountability and measurability of capital budgeting helps to build an asset base through the purchasing of equip, or land, and by entering into projects that will increase the value of the holdings of the company.  Measurability gives a company the method of tracking the effectiveness of their investments, while accountability says that the company or those working for them will have the understanding, and knowledge of the risks and returns of the project (Gad, n,d.).

Health Care Disaster

            Healthcare organizations are changing venues, where they at one time formed into groups, for example, a hospital, and imaging organization, or a cardiovascular service.  Dr’s groups affiliated with hospitals are making changing, and setting up groups of their own, or the hospitals buy the businesses outright for expansion and economic growth.

According to Cleverley, W., Cleverley, & Song, (2011) when changes are made in order to cover cost and payment of services, a balance of age mix in Medicare, Medicaid and private pay patients are required in order to protect against the acceleration of usage patterns which could create a drop in payment and increase cost.  An influx of rise in cost could occur due to the increase in the aged population creating a disaster for the healthcare organization (p. 157).

As stated by Moffitt (2014) because of increase and decreases to Medicare and Medicaid payments for health care providers many financial disasters will occur.  Therefore, the provisions made by capital budgeting are once again going to support the healthcare organization by providing opportunities with which to increase profitability and sustainability for the company.

Reasonable returns on investments of fixed assets can be impairing, however, too much investing in past projects can be deadly.  As an example old equipment that is outdated and spending excessive amounts of money to keep it repaired, or the upkeep on an older building that should be sold and a new building purchased (Cleverly, et al., 2011 p.262).

Capital Budgeting

            Capital budgeting is a method to determine the value of investing in a project by using a process to determine whether the company can, one-afford the capital needed for the project, and two-whether a profit figured by the rate of return will be acceptable.

New projects go through the capital project analysis process in order to decide whether it will be the chosen project.  Whereas zero-based budgeting deals with old or existing projects, and past projects unlike the new are already set in place as a fixed asset and change is not possible without the payoff, or sale of that project.

Capital budgeting equates to the rate of return, and spoken of here it has to do with fixed assets i.e. new projects, the implementation of those new projects, and whether those new projects are charitable or business (Cleverly, et al., 2011, p. 369).

            In their paper Reiter & Song (2013) describes capital investment strategies are no longer viable.  The authors of this article also define a process called the Accountable Care Organization (ACO) that will re-evaluate capital budgeting processes and changes needed due to one a new law the Patient Protection and Affordable Care Act and it is transforming healthcare,.  The authors also state that the use of the ACO is new and they are not positive at this time that model for capital budgeting will be the most successful (Reiter, et al., 2013).

Formulas and methods are the processes of capital budgeting: it is also about the insight of those in charge to forecast the vision of the investment and determine the profit for the organization (Morgan, n.d.),
Who is in charge?

The governing board for capital budgeting equals, the Medical Staff, the Board of Trustees, and the Chief executive officer (CEO) who has overall responsibility, Controllers are budget Directors, responsibility center managers, and the budgetary committee.  There are outside forces that also create external pressures on the decisions made by these managers, for example, whether or not a project may fit the demographics of the community.  There may be companies providing items for the new project and their prices will have a determining factor on the end-result.  Patients can also play an intricate role in the decision of the managerial group by their potential cash inflow (Cleverly, et al. 2014, chap 16, 19)

Managers make decisions every day however, one of strategic importantance that they can be involved with is to understand how capital investment decisions are made in order to improve corporate investment, which will support sustainability (Keršytė, 2011).

Sustainability in Capital Budgeting

In looking at the economics of sustainability a view of how sustainability management can be a driving factor in capital budgeting techniques.  Sustainability should become a proactive part in the capital budgeting strategy, becoming the driving force for sustainability efforts. They also state that sustainable budgeting techniques can be used to “discuss and evaluate their projects and to experience the benefit of economical, social and financial efficiency” (Kwok, & Rabe, n.d).

            The paper by Burger (2013). writes about the government, capital investment and the process of budgeting.  This paper brings out a solid point by asking the question; how much should the primary balance need adjusted to support sustainability?  (Burger,  & Hawkesworth, 2013).

Process

The process of capital budgeting starts with a plan that will cover the project, the available cash needed for the long-term arrangements of the project and the return of investment project over the long-range term.  Studies have found that community health design can help with efficiency and higher returns of investments (Reiter, & Song, 2013).

In the words of Cleverley, et al. (2011) “the capital decision making process in healthcare is complex.”  Healthcare entities have a greater challenge to produce a project and the procedures needed to make everything fit together unlike other businesses. In the capital budgeting process external funding is dependent on what “investment bankers, bond-rating agencies, bankers, and feasibility consultants”… can influence the amount of money borrowed, affecting the “size of the capital project” (p. 421).

Information given by, Keršytė, (2011) conveys the peculiarities of the capital budgeting process and according to the author during capital budgeting processes, new projects seek the financial resource of the organization and with many proposed projects, not all projects receive funding. Kersyte gives a six-point description of important factors for the effectiveness of capital budgeting decisions, one, “it is not static”…, two, “it is linked to strategy implementation”…, three, “it recognizes options inherent to”…, and four, “it takes a cross sectional approach,”… five, it views the companies compensation”… six, “it stresses the importance of performance based training,” (p.1130).

Formulas

There are many formulas and measurements used to determine the cost and return of a new project for example,

Profitability index                                                         NPV = net present value

Compares rates of return                            Investment cost

For instance a new truck is $100,000, savings in operating cost is $20,000 per year for 10 years, times the Present Value of $1 Received Each Period for n Period = 6.1446.

Present value of operating savings = $20,000 × 6.145 = $122,900

NPV = $122,900 – $100,000 = $22,900

Profitability index $22,900 /$100,000 = .229

“Given no funding constraints, all projects with profitability indices greater than zero should be funded” (Cleverley, et al., 2011 p. 431).

The processes of capital budgeting have many steps and methods, not every organization uses the same methods, although there are basics that are followed by most healthcare organizations, or businesses. The cash flow of healthcare organizations depend on the payments received from insurance companies, Medicare, Medicaid, and patients.  Penalties and fines levied against organizations for improper use of new laws and rulings can be quite expensive and lower the profitability of the organizations. Although, valuation tools are important, investment success comes from renewing the process (Keršytė, 2011).

Summary and Conclusion

            This author has gone through a brief explanation of capital budgeting and explained how capital budgeting has become such an intricate part of financial management.  The breakdown covers examples of Healthcare disaster, Capital Budgeting with a breakdown of four areas, Who’s in Charge, Sustainability in Capital Budgeting, Process and Formulas.

Conclusion

            Capital budgeting is defined a little different from fixed assets only in the aspect that fixed assets refer to projects that have already been financed.  Capital budgeting chooses and decides the financial perspectives that cover the selection of a new project through evaluation accountability and measurement.  Determining how the project will add to the growth and expansion of an organization is important for creating an increase in profitability.

References

Burger, P., & Hawkesworth, I. (2013).  Capital budgeting and procurement practices. OECD Journal On Budgeting, (1), 57-104.

Cleverley, W. O., Cleverly, J. O., & Song, P. H.  (2011)   Essentials of health care finance.  7th ed.  Sudbury, MA   Jones & Bartlett Learning.  ISBN: 9780763789299

Gad, S., (n,d.). Capital budgeting: The importance of capital budgeting, Investopedia,

         Retrived, March. 07, 2014, from, http://www.investopedia.com/university/capital-budgeting/importance.asp,

Keršytė, A. (2011).  Capital budgeting process: theoretical aspects. Economics & Management161130-1134.

Kwok, J., S., Rabe, E., C., (n.d).  The Economics of sustainability: Environmental accounting and capital budgeting, Retrieved March 8, 2014 from: http://www.fma.org/Denver/Papers/Sustainability-CapitalBudgeting.pdf

Morgan, E., (n.d.), Capital budgeting, Retrieved March 8, 2014 from Ezine Article: http://ezinearticles.com/?Capital-Budgeting&id=195855

Moffit, R., E., (2014).  Replacing the medicare sgr: Getting the policy and the financing right, The Heritage Foundation, Issue Brief #4134 on Healthcare

http://www.heritage.org/research/reports/2014/01/medicare-sgr-getting-the-policy-and-financing-right

Reiter, K. L., & Song, P. H. (2013). Hospital capital budgeting in an era of transformation.  Journal Of Health Care Finance39(3), 14-22.

A Glimpse of Corporate Social Responsibility

 

 

A Glimpse of Corporate Social Responsibility

 

            Van Cranenburgh, K. C., Liket, K., & Roome, N. (2013).  Tells how the Corporate Responsibility (CR) created changes in the way companies conduct themselves with the social activist.  A quote by the authors gives insight into the period between 1998 and now “During the past fifteen years, companies have begun to formulate corporate responsibility policies and appointed management teams dedicated to CR, resulting in a change in the way companies interact with social activists.”  During the time when Rachael Carson pushed the governments to band DDT in 1973, more social activist groups formed denouncing the manners in which companies handled public, community, social affairs.  This paper shows that even in the early years of business there was a move to change company policies and institute Corporate Responsibility.  In the introduction a discussion of the affect of CR practices describe how the reputation of the companies and the ineffectual practices of no specific control over corporate responsibility invades the community.

            Maltz, E., Thompson, F., & Ringold, D. (2011), states, “… managers are still struggling with how to systematically assess the value of corporate social responsibility (CSR) efforts.”  Companies once believed it was enough to create revenue and provide a return to investors.  Companies also thought it fine to demand that employees deal with rules of conduct, which applied only to the company.  However, this type of policy finally became known to the public; therefore, discrediting companies, revenue decreases creating very large legal battles with huge settlements. 

            Legal battles constituted laws to the corporate world demanding that they pursue the rights of the employees and the public, creating Corporate Social Responsibility (CSR).

This paper discusses that there should be a sharing of responsibility internal and external with the stakeholders of the company through shared values.

            André, R. (2012).  Reviews Corporate Responsibility (CSR) as being a gray area and that it acquires its moral legitimacy from its owners and a third party.  Andre believes that because corporations follow private interests their potential use for CSR is low.

            Milton Friedman supports agency theory, in this theory he believes that social involvement is necessary; however, he also says if corporate plans carried out at a lesser cost due to illegality, and having to pay fines cost more, then to do it illegally.  If the fines of improper behavior are too great because of the illegality, then do it legally.  If this method makes it difficult to retain and keep employees then do things legally.  “Friedman also advocates for positive law in controlling behavior, which is to say obey government law such as taxes, and government regulations.  This comes by Friedman believing that a CEO should act in the best interest of the shareholders interest.  (Jennings, M., 2012).

            Freeman feels that “managerial capitalism will maximize the interests of stockholders.”  He believes that he can revitalize managerial capitalism by replacing a manager’s duty from the stockholder, to the stakeholder, he also, inclusifys stockholders, customers, suppliers, employees, stakeholders, and the community as a group.  “Externalities, moral hazards, and monopoly power have led to more external control on managerial capitalism.”  Freeman states that due to these types of restraints constraints are put on the solution of problems resolution.  (Jennings, M., 2012 p. 98)    

            Authors, Jennings and Entine in their book Jennings, M., (2012), state that Corporate Social Responsibility (CSR) captured the attention of the academic community.  Jennings and Entine, discuss the branding effect that company’s names impress on the public.  To name a few, Ben and Jerry’s homemade ice cream.  Starbucks creates flavored coffees.  Nike’s swoosh is tennis shoes and sports clothes.  Celestial Seasons depicts tea.  Branding is creating a picture, an image, a saying that evokes a person, or the community to remember what the business is.  Jennings and Entine look at these company names as icons associated with CSR. These corporations use branding to engage in marketing campaigns to promote their social conscious. 

            These two authors believe that a corporation has a soul, and believe that this makes the interpretation of business ethics more complex, as compared to the breeziness of the social responsibility.  Jennings’s and Entine’s says, “Understanding the corporate soul

requires far more than the shallow categories of the CSR.  The soul of a company is

more complex than that of an individual,” In measuring a firms ethics, gauging their market place in the community sometimes become cannibalized by the CSR Movement, (p.102).  

Contrast

 

            Jennings and Entine believe that the corporation has a soul, and that an individual has a soul; however, they are different in the fact corporations are made up of many and the individual one. Their interpretation is that business ethics and Corporation Social Responsibility (CSR) need to utilize different rules for their success.  Whereas Friedman upholds agency theory with positive, law , following the government law. He supports the view that if a problem can be solved contrary to the law it is ok, as long as it does not cost the company lots of money or cost the loss, or hire of employees, this also supports the stockholder for their return of investment.  Freeman believes that the stakeholders should be the driving force in a corporation that all would be served and CSR would be upheld. They are all three looking for the same type of response, accountability; however, the method by which to achieve this goal appears different.

            A list of eight questions all come under social responsibility, and ethical moral standards. Social responsibility covered how the company, corporation would interact with the public; however, since that time ethics and morals that include the employees are now considered part of that social responsibility.

  1. Does the company comply with the law?
  2. Does the company have a sense of propriety?
  3. How honestly do product claims match with reality?
  4. How forthcoming is the company with information?
  5. How does the company treat its employees?
  6. How does the company handle third-party ethics issues?
  7. How charitable is the company?
  8. How does the company react when faced with negative disclosures?

Fanny Mae

            Fannie May cannot be labeled, or called an honest company. They used inside information, methods and practices to circumvent the law in acquiring larger payouts for the administrative staff.  They defrauded the investor, stockholders, and the stakeholders. They created an impact on the United States citizens and it will take years to recoup from their disaster.