Establishing a Diabetes Treatment Center at St. Anne Hospital

St. Anne Hospital in Western Australia plans to establish a diabetes treatment center due to the high demand for such a facility in the surrounding areas. The report includes details on the market profile, financial analysis, and staffing needs. The total cost required for the project is $87,09,551. Desklib offers solved assignments, essays, and dissertations on this topic.

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Table of Contents
I. Executive summary.................................................................................................................2
II. Program Overview.................................................................................................................4
Location..................................................................................................................................4
Services..................................................................................................................................4
Other Professional offering....................................................................................................4
Staffing needs.........................................................................................................................5
Operational model..................................................................................................................5
III. Market Profile......................................................................................................................6
Market Overview...................................................................................................................6
Demand forecasting...............................................................................................................6
IV. Financial analysis.................................................................................................................7
Capital Requirements.............................................................................................................7
Reimbursement model...........................................................................................................8
Cost per patient visit...............................................................................................................8
V. Pro Forma..............................................................................................................................8
Patient Revenue......................................................................................................................8
Operating Expenses................................................................................................................9
Income from operation...........................................................................................................9
Total expenses......................................................................................................................10
Net Cash flow.......................................................................................................................10
Reference..................................................................................................................................12

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I. Executive summary
St. Anne Hospital is a non-profit organisation which is situated in western Australia.
The hospital consists of 205 beds, 8 operating theatres, 10 ICU chambers and 30 birthing
suites. Other services that the hospital provides are endoscopy, pathology, radiology and
ambulance service. The hospital offers other facilities regarding surgeries, diagnosis of
several diseases and other specialised care for its patients. The total number of the working
stuffs in the hospital is 168 including the medical and management teams. The operating
model of the hospital is divided into mainly two wings. The first one is the management wing
which deals with the financial and management prospects of the hospital and the medical
teams takes care of the other major issues like admission of a patient, diagnosis of the
disease, treatment of the patients and various other matters regarding the medical issue of the
clients.
According to the survey made by the management team of the hospital, it is stated that
there is a high rate of patients in the surrounding areas who are suffering from diabetes. The
people belongs from different regions and more than 50% of them are belonging under 200%
or more poverty level. The economic condition and the insufficiency of proper diabetes
treatment center lead the locality towards a high risk of being affected by diabetes. As a
result, the number of patients suffering from this disease is increasing day by day. Thus it is
very necessary to establish a diabetes treatment clinic as there is a high demand for such
clinic in the nearby localities.

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As far as the required capital in this project is concerned, the total cost that is required
in this project is $87,09,551 including the Construction Cost and the project cost. The
reimbursement model of the physicians and other nursing and support stuffs are being
calculated as a total of $625,000 per year. Regarding the amount of expected patients visit
that are stated in the budget, the average cost per patient is $438,70.
As far as the total revenue of the patients is stated in the budgetary planning the
revenue from the patients is expected as $15,37,830 with an growth rate of 0.3% for each
successive year. The operating expenses in this project is calculated as $244,385 in the first
year. After five years, the total amount of operating expenses is calculated as $14,71,059. The
total income from the operations is stated as $16,24,991 for five years of time period. This
income is excluded from the primary expenses which would be invested in the primary
project cost. The net cash flow regarding the project is being calculated by comparing the net
income with the total cost invested in this project. For this case, the expected return from the
project in the first years is expected as $2,76,385. The amount is expected to increase in
every year with a growth rate of 0.3%.
Thus from the details of the projects it is certain that the diabetes treatment center
which is very demanded among the diabetes patients is in a high demand. The report is made
with the purpose of presenting the authorised trustee of the hospital to indicate the probable
possibilities of the project and the estimated amount of the cost of the project and the
expected outcome of this project.

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II. Program Overview
Location
St. Anne Hospital is a non-profit hospital which is situated on Western Australia. It is
a city based hospital which was established in 1937. As a non-profit organisation, the main
motto of the hospital authority is to serve people regardless of the profit made by providing
service. The hospital is situated in Mount Lawley on the banks of the Swan River,
Services
The hospital has 205 beds, 8 operating theatres, 10 ICU chambers and 30 birthing
suites in the service of the patients. The hospital also provides the facilities of endoscopy,
pathology, radiology, a hydrotherapy pool and an on-site specialist medical centre. The
outdoor facility of the hospital is as good as the indoor facility (Scarborough, 2016). The
Hospital offers a great number of well qualified doctors and nurse in the service of the
patients. Apart from this, the hospital also provides the ambulance facility to help the
patient’s lives in the remote areas.
Other Professional offering
Like the facilities, the hospital also offers several services which is very helpful to
serve the patients. The hospital has its own obstetrics and gynaecology centre. The
rehabilitation department is also one of the major service which the hospital offers to its
patients. Other departments that should be mentioned in the list are the Orthopaedics

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department, Urology department, Gastroenterology department etc. Among the services
related to surgery, the hospital is capable to conduct general surgery, Bariatric surgery, plastic
surgery, Paediatric surgery, faciomaxillary surgery etc. Other services like general medical,
gerontology, mental health treatment of older adult, ENT are also available within the roof of
the hospital (Schaper et al. 2014).
Staffing needs
As of the staff capacity of the hospital is concerned, there are 42 specialist doctors, 70
nurses and 56 miscellaneous staffs currently employed in the hospital. There is at least one
specialist doctor available in each service that the hospital offers. In the most demanded
cases, the hospital ensures that there is adequate number of doctors available in the service of
the patients. The total number of nurses is also enough to serve the patient admitted in the
hospital. The other stuffs are also efficient enough to fulfil all the non-medical needs of the
hospital (Barry, 2017). As the demand of the service in the hospital is increasing gradually,
the hospital management is trying to increase the number of medical and non-medical stuffs
of the hospital to ensure that the service of the patients is not hampered.
Operational model
The main operating model of the hospital is divided into two parts. The first one is
management department, the other is medical department. The management department is
mainly divided in to two parts. The first sub-department deals with the planning, finances,
relationship with the patient and the family members and other executive works. The other
sub department of the management team takes care of the maintenance and development of
the hospital. The medical unit of the hospital has two major units. The primary unit deals with
the registration, admission and the emergency care. The secondary unit has two divisions for
operating the major services offered by the hospital. First unit takes care of the services like

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surgery, medicine, emergency care and other treatment provided in the hospital. Second unit
is associated with the diagnosis and several medical tests of the patients (Gattorna, 2015).
III. Market Profile
Market Overview
Apart from the other services that St. Anne Hospital provides, the management team
of St. Anne Hospital wants to open a new wing of the hospital. This wing will be none other
than a new diabetes treatment center (DTC). The hospital authority has noticed that there is a
growing demand in the surrounding locality for the need of proper diabetes care and
treatment. This need is growing years after year and the hospital management cannot provide
sufficient treatment as the hospital is suffering from lack of infrastructure (Foster et al.,
2016). The Hospital is seriously in need of a special diabetes treatment center within the roof
of the main wing. This can only be possible when the hospital authority can be able to
manage enough capital from Board of Trustees of the hospital. The authority is expecting to
get enough funds to expand the service to a wider extend as the people living in nearby
locality is suffering from this disease and the number of the patients are increasing day by
day.
Demand forecasting
A survey of the nearby locality reveals that 34% adult people over 30 years of age is
suffering from diabetes. The percentage becomes 62% when the minimum age limit is
extended to above 50 years old. There are several reasons for such growing rate of this
disease such as lack of awareness, proper diagnosis, proper treatment and the poverty level.
According to another survey, it can be seen that among the people living in surrounding
areas, 50% of them is Hispanics, 25% is Caucasians, 12% of the population has recently
immigrated from Northern Africa. Among the population that lives in the surrounding areas

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and are the primary service taker from the hospital, over 50% of them lives under 200% or
below the poverty level (Swift & Piff, 2014). So the economy of the surrounding areas is an
issue as the need of proper treatment which is affordable and within the reach of the poor
people is essential and mandatory. As St. Anne Hospital is a non profit organisation, it is the
duty of the hospital to serve the people in accordance with their economic condition,
regardless of the profit made by then. As far as the expenses made by the trustee are
concerned, the board of trustee is expected to recover the capital which will be invested in the
new diabetes treatment center in not more than 9 years. The new DTC is expected to increase
the percentage of patients that seeks for treatment in the hospital to 13% in the upcoming
year. The growth is expected to expand by 17% in the next five years (Wood et al., 2015).
IV. Financial analysis
Capital Requirements
To start any project, it is required to collect enough funds for the upcoming project to
fill each and every necessity. For a huge project like Building a diabetes care center, it is
mandatory to get sufficient budget to make the project successful. As for the diabetes
treatment center, there are certain goals to fulfil. As far as the capital requirement of the
hospital is concerned, a new building should have to be build and some other equipment
should be bought in order to make the DTC function. The area allocated for the diabetes
treatment center is 4175 square feet. In order to build a new building there, the estimated cost
of the construction is $777.63 per square feet which in total is $32,46,605.25. This amount is
needed only for the construction of the building. To complete the project, some other
equipments should be bought to serve the patients. The estimated cost of the project per
square feet is assumed as $1,308.49 per square feet in the budget of the DTC. The total
estimated cost of this project is calculated as $87,09,551 only for the construction of the
building excluding the charges of Physicians, nurses and other support stuffs (Jeston, 2014).

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Reimbursement model
There is a need to recruit more doctors, nurses and support stuffs. There should be at
least one specialist physician is needed to be recruited in the hospital for diabetes care and
treatment. The salary of the physician is expected to be $2, 00,000 per year. Apart from that,
there should be at least two nurse practitioners and two trained nurses in the hospital whose
salary is expected as $1, 70,000 and $1, 20,000 respectively. There should be one dialysis
expert and one assistant in the hospital whose salary is expected to be $45,000 and $30,000
respectively. The total cost of the reimbursement model is expected as $6, 25,000 as far as
the budget for the new diabetes treatment centre is concerned.
Cost per patient visit
As far as the cost per patient visit is concerned, in the first year after starting the
service, it is assumed to be $1,912.03 per patient if we divide the total expected expenses
with the total expected number of patients. But there is the cost of the project included in the
average cost per patient visit (Pfeifer et al., 2016). If the project cost is not being considered
in the short term calculation of the cost per patient visit, the cost decreases to $128.02 per
patients. As far as the revenue per visit of the patients is concerned, it is quite lower than the
expected revenue per visit. If we consider the total visits of the expected patients for the next
5 years, the cost per patients visit is calculated as $438.70, which is considerably lower than
the expected average revenue from the visits of the patients.
V. Pro Forma
Patient Revenue
The expected visits of the patients are expected to be 4882 in the 1st year as far as the
survey data is concerned. The number of the patients is expected to grow in 5% increment in
every year. The expected visits of the patients in the diabetes treatment center are

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respectively 4882, 5126, 5382, 5652 and 5834 per year. The expected revenue per visit is
assumed as $450. Thus the gross patients revenue generated by the diabetes treatment center
is $21,96,900, $23,06,745, $25,22,082, $25.43,186 and $26,70,346 respectively for the next
five years. The deduction from the revenue gained from the patients is calculated as
$658,070, $692,024, $726,625, $762,956 and $801,104 respectively for the upcoming five
years. In total, the net revenue gained from the patients in the upcoming five years is $84,
97,482.
Operating Expenses
There is a significant hike in the operating expenses also. As far as the salaries and
wages of the employees are calculated, the total expenses in this is expected to be $33,
18,210 in the next five year. The total expenses regarding the employees benefits for the next
five years is calculated as a total of $8, 29,552. Expenses regarding the utilities is $11, 08,282
in total for the next five years. Repairing and maintenance expenses for the upcoming five
years is calculated as $2, 15,020. The Housekeeping charges for the next five years have been
shown as $106,183 in the budget. The total expenses regarding the telephone service is
regarded as $89,225 for the next five year. The expense for depreciation is being accounted
as $169,892 for the upcoming 5 years (Piperopoulos & Dimov, 2015). The reserve for
malpractice is provisioned as $265,457 as a total for next five year. The miscellaneous
expenses for the next five years has been assumed as $106,183. Other expenses like variable
medical supply costs has been calculated as $506,213. As a total, the amount of operating
expenses is being considered of an amount of $70, 63,402.
Income from operation
As far as the income from expenses is concerned, the diabetes treatment center can
provide a decent amount of excess over the operating expenses. As far as the plan made by

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the management team stated, the cumulative income from the operations expenses are
summed as $14, 71,059.
Total expenses
The total expenses of the project has been measured by adding the operating expenses
with the required capital. As for this project, the total expenses is calculated as $1, 57,
72,953. In this metric, the amount of fixed assets has also been added.
Net Cash flow
The cash flow of the business shows how the business is getting back the amount
invested from the business. In that case, the expected return from this project is estimated as
$2, 76,385 in the first year with a successive growth rate of 0.3% per year.

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Pro forma Income Statement for DTC
Pro Forma Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5
Visits 4,882 5,126 5,382 5,652 5,934
Revenue Per Visit $450 $450 $450 $450 $450
Gross Revenue
Patient Revenue
$2,196,9
00
$2,306,7
45
$2,422,0
82
$2,543,1
86
$2,670,3
46
Gross Patient Revenue
$2,196,9
00
$2,306,7
45
$2,422,0
82
$2,543,1
86
$2,670,3
46
Deductions from Patient Revenue
Contractual $659,070 $692,024 $726,625 $762,956 $801,104
Total Deductions from Revenue $659,070 $692,024 $726,625 $762,956 $801,104
Net Patient Revenue
$1,537,8
30
$1,614,7
22
$1,695,4
58
$1,780,2
30
$1,869,2
42
Operating Expenses
Salaries and Wages $625,000 $643,750 $663,063 $682,954 $703,443
Employee Benefits $156,250 $160,938 $165,766 $170,739 $175,861
Utilities $208,750 $215,013 $221,463 $228,107 $234,950
Repair/Maintenance $40,500 $41,715 $42,966 $44,255 $45,583
Housekeeping $20,000 $20,600 $21,218 $21,855 $22,510
Telephone Service $16,806 $17,310 $17,829 $18,364 $18,915
Depreciation $32,000 $32,960 $33,949 $34,967 $36,016
Malpractice $50,000 $51,500 $53,045 $54,636 $56,275
Miscellaneous/Other $20,000 $20,600 $21,218 $21,855 $22,510
Variable Medical Supply Costs $65,767 $67,740 $69,772 $71,865 $74,021
Other Non-Personnel Costs $95,351 $98,212 $101,158 $104,193 $107,318
Total Operating Expenses
$1,330,4
24
$1,370,3
37
$1,411,4
47
$1,453,7
90
$1,497,4
04
Excess of Rev over Exp. From
Operations $207,406 $244,385 $284,011 $326,440 $371,838
Cumulative Income $207,406 $244,385 $284,011 $326,440 $371,838
Net Cash from Excess Rev (excel
Depreciation) $32,000 $32,960 $33,949 $34,967 $36,016
cumulative Income Net Cash $239,406 $277,345 $317,960 $361,407 $407,854

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Reference
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