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HLTH5193 Assignment 3: Case Study
Weighting 45% in total
Presentation Professional report (with academic references), plus a video presentation
Context
Location: The Light Square General Hospital
Light Square General Hospital has appointed a new business manager, Ms Jones, to work
closely with staff in its Heart and Lung Division to develop and implement its 2023 budget.
While Ms Jones is an experienced business manager, this is her first appointment in the health
industry.
At the end of her first week on the job, Ms Jones discussed with the Chief Operating Officer
(COO) her experience in the hospital:
“To develop this budget, I will need to make some assumptions. However, I do not feel
comfortable doing so given the knowledge I have about how hospital divisions run.”
The COO suggested that it would be helpful for Ms Jones to work closely with the Clinical
Director of the Heart and Lung Division to start the engagement process with clinical staff.
The COO reminded Ms Jones that clinical staff had not been in favour of additional
administrative overheads (e.g. the appointment of the business manager) being incurred
during a period of budget restraint. The hospital’s executives hope that the appointment of
Ms Jones will demonstrate the benefit of establishing a close working relationship between
administrative and clinical staff. Consequently, the clinicians will have greater trust in the
budget process and participate in identifying cost-saving strategies in the coming years.
Failure could set relationships between the clinicians and corporate services back
considerably.
In previous years, the Administrative Department has determined divisional budgets without
the significant involvement of the clinical directors. Additionally, the budgets have only shown
the costs but not the income for providing services.
For this assignment, you are required to put yourself in Ms Jones’ shoes, developing various
budget models and providing a valuable report to hospital executives.
Ms Jones’ Approach
Having had a chance to reflect on the COO’s words, Ms Jones decided to create a draft budget
as a means of helping to show the potential of what the Administration Department could
support the clinicians to achieve – namely, a better understanding of the budget and how
they might control it.
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Ms Jones has investigated the Division’s inpatient activity levels in the previous year and
decided to use it as a basis to form next year’s budget. The underlying information has been
included in the following table.

DRG	Description	Average Length of Stay (Days) Last Year	Number of Patients Last Year	Inlier Weight
E62A	Respiratory Infections and Inflammations, Major Complexity	8	350	1.5534
E62B	Respiratory Infections and Inflammations, Minor Complexity	5	530	0.8202
E65A	Chronic Obstructive Airways Disease, Major Complexity	6	400	1.4738
E65B	Chronic Obstructive Airways Disease, Minor Complexity	3	450	0.6743
E66B	Major Chest Trauma, Minor Complexity	4	320	0.6624
F42B	Circulatory Dsrds, Not Adm for AMI W Invasive Cardiac Inves Int, Minor Comp	5	580	1.5485
F62B	Heart Failure and Shock, Minor Complexity	5	500	0.9512
F73B	Syncope and Collapse, Minor Complexity	2	450	0.3149
F74A	Chest Pain, Major Complexity	4	300	0.4375
F74B	Chest Pain, Minor Complexity	2	900	0.1416
F76B	Arrhythmia, Cardiac Arrest and Conduction Disorders, Minor Complexity	2	400	0.3242

In addition, she discovered the following services were used for each DRG with a particular
frequency:

DRG	Description	No. of X-Rays	No. of Pathology Tests	No. of Scripts
E62A	Respiratory Infections and Inflammations, Major Complexity	4	5	3
E62B	Respiratory Infections and Inflammations, Minor Complexity	2	3	5
E65A	Chronic Obstructive Airways Disease, Major Complexity	2	5	4
E65B	Chronic Obstructive Airways Disease, Minor Complexity	4	5	5
E66B	Major Chest Trauma, Minor Complexity	2	5	4
F42B	Circulatory Dsrds, Not Adm for AMI W Invasive Cardiac Inves Int, Minor Comp	2	6	5
F62B	Heart Failure and Shock, Minor Complexity	4	5	2
F73B	Syncope and Collapse, Minor Complexity	3	3	3
F74A	Chest Pain, Major Complexity	3	5	4
F74B	Chest Pain, Minor Complexity	2	2	1
F76B	Arrhythmia, Cardiac Arrest and Conduction Disorders, Minor Complexity	1	4	4

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Ms Jones has applied her costing assumptions and determined that it is appropriate to use an
average cost of service. From looking at the budgets for Hospital Stays, Imaging, Pathology
and Pharmacy, she has determined that the average cost for any patient for each DRG is:

DRG	Description	Cost of Stay per Day ($)	Cost of each X Ray ($)	Cost of each Pathology Test ($)	Cost of each Script ($)
E62A	Respiratory Infections and Inflammations, Major Complexity	685	120	110	90
E62B	Respiratory Infections and Inflammations, Minor Complexity	685	100	90	80
E65A	Chronic Obstructive Airways Disease, Major Complexity	685	100	90	65
E65B	Chronic Obstructive Airways Disease, Minor Complexity	685	150	100	110
E66B	Major Chest Trauma, Minor Complexity	685	120	100	115
F42B	Circulatory Dsrds, Not Adm for AMI W Invasive Cardiac Inves Int, Minor Comp	685	140	180	80
F62B	Heart Failure and Shock, Minor Complexity	685	100	90	80
F73B	Syncope and Collapse, Minor Complexity	685	100	90	75
F74A	Chest Pain, Major Complexity	685	160	95	80
F74B	Chest Pain, Minor Complexity	685	100	85	95
F76B	Arrhythmia, Cardiac Arrest and Conduction Disorders, Minor Complexity	685	120	100	75

While the Division may have more patients than covered by these DRGs, Ms Jones has
determined that the tables above were sufficient to build a budget, and she could commence
the engagement process with the Clinical Director of the Division. Looking at the Division’s
costs for the current year, Ms Jones believed that the fixed costs for next year can be
apportioned across the Division’s activities. She estimated that the fixed costs relating to the
above work should be $2,750,000.
Ms Jones understood that the national efficient price is $5,597 and that the inlier weight was
used to determine how much funding the hospital will get for any patient for a given DRG. Ms
Jones was assured that all patients would stay within the inlier range at the Light Square
General Hospital.
Task 1
Prepare a budget for the Heart and Lung Division based on the material made available to Ms
Jones and her assumptions. Provide a narrative on the budget.
The budget does not need to be cash-flowed across the year but should be presented in a
manner that the Clinical Director will find easy to understand and helpful.
It should be prepared in Excel and use appropriate formulae wherever possible. (Note: you
can insert tables or graphs into a Word document for presentation purposes, but you should
still submit the Excel spreadsheet. This instruction applies to subsequent tasks in this
assignment that require computation).
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When Ms Jones met the Clinical Director to discuss the draft budget, the Director was highly
concerned. She believed Ms Jones’s patient number assumptions were unrealistic. Based on
the trend of actual patient activity over the last three years, the Clinical Director believed a
30% increase in Chest Pain patients (DRGs F74A and F74B) would likely occur next year.
Task 2
Update the budget to reflect the change in forecasted patient activity.
Explain how the increased activity would affect the bottom line of the Division’s budget.
Is it essential to engage clinical staff when preparing budgets? Describe your reasons.
Ms Jones believed she could convince the Clinical Director that there were means to reduce
costs and improve the bottom line. She felt that lowering the cost of stay per day (which
incorporated nursing, clinical staff and other stay costs) was possible.
Task 3
Create a series of budget outcomes based on a reduction of cost of stay per day of between
1% and 10% using the activity levels from Task 2.
Provide advice to the Clinical Director based on the outcomes you obtained.
Heart and Lung Division staff have already experienced many reforms over the last decade.
They believed the service is already at maximum efficiency, based on the changes they have
implemented and the cost of stay savings they have achieved in the past. The Clinical Director
would have to lead the change process if Ms Jones’ idea to reduce cost of stay per day was
implemented.
Task 4
Should the Clinical Director invest significant effort to engage a reform-weary staff to
implement the budget saving measure proposed in Task 3? Justify your answer.
(Hint: Should other opportunities for savings be considered? If so, present the possible options
and their impact using appropriate tables or graphs.)
The COO has found this new budget development process useful and was in favour of its
implemention across the entire hospital. He sought Ms Jones’ advice on the potential issues
he might face and the available strategies to resolve these issues.
Task 5
Discuss the potential issues of implementing change in the budgeting process.
Develop strategies the COO can adopt to minimise the consequences these issues will cause.
In an unexpected new development, through enterprise bargaining, staff salaries and benefits
were expected to rise in 2023, resulting in a modest increase in fixed costs to $2,800,000.
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Fortunately, the national efficient price for 2023, released almost simultaneously, has also
shown an increase to $5,797.
Task 6
Using the activity levels from Task 2 as a basis for your computations, revise the budget based
on the new developments.
Based on the updated budget, what advice should Ms Jones provide to the Clinical Director?
After Ms Jones had completed the final draft of her budget documentation, the COO was
about to travel overseas for a business meeting. Ms Jones was asked to submit a short, 5-
minute video report to accompany her documentation.
Task 7
You should submit this task as a recorded video. You can record the video with a smartphone,
iPad, laptop etc., and submit the file via learnonline. (Observe the file size limitations in
learnonline. You may need to record in Standard Definition to avoid exceeding the limit).
You have 5 minutes to present your findings concerning Tasks 1 – 6 to the COO.
You should appear in the video. You can use visual props and technology, such as a
whiteboard, Powerpoint slides, Zoom, MS Teams, to support your presentation.
Your video will be assessed on the following basis:
• Presentation and communication of your findings
• Judgement on the length of time to spend communicating different parts of your analysis
(some questions may require more explanation as the findings will be of a greater
importance in relation to decision making)
• Understanding of the critical issues the COO might need to consider
• Correctly presented analysis/calculations.
The key is to summarise and explain your findings in 5 minutes. Marks will be deducted for
videos exceeding the duration threshold.
Disclaimer: all characters, locations, revenue and costing figures used in this assignment are
fictitious.
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Assignment Guide
Remember to:
• Read the assignment requirements and plan your spreadsheet first before creating the
spreadsheet.
• List any assumptions that you make when preparing your budget documentation.
• You can paste the relevant spreadsheet outcomes into your Word document.
• If you need to construct a variety of spreadsheets to answer the questions, do so.
• Submit both the Excel and Word files on learnonline.
• Answers should be prepared as though you were submitting them in a business setting.
This means:
o The assignment should be well formatted
o Including a title page and a table of contents
o There should be no spelling mistakes
o You can use dot points but make sure you construct appropriate sentences. (You
should not answer the whole assignment as a series of dot points).
• Treat this assignment as an academic exercise. Use formal referencing where applicable.
• The word limit is an indication only. Answer the questions to the best of your ability. There
is no penalty for exceeding the word limit. However, unduly lengthy answers will be
penalised, as will answers that do not provide sufficient detail.