Module 4: Introduction to the Capital Analysis Tool powered by Kaufman Hall
Key Model Input Parameters Continued
Other Operating Revenues and Other Revenue Deductions
Projected Other Revenues - This section takes into account any additional projected revenues related to your capital project that impacts net revenues. Examples would include dollars from the sale of old equipment, or sales of film to an external source. You may add additional revenue sources by clicking the "add other revenues source" button.
Other Deductions - The percent of charity care and bad debt can be obtained from your Finance department. Charity care is a deduction against projected net revenues. Bad debt is an operating expense.
Gross Charge Inflation – This is the rate at which you increase your standard charges each year and will impact gross revenue increases. However, if you’ve previously indicated your reimbursement inflation as increasing, this could offset any increases your standard charge increase might net your department.
Equipment Maintenance Cost – This is an assumption of how much it will cost to maintain your equipment, expressed as a percentage of the total cost. To estimate this, go back to Step 2, and determine your cost as a percentage of this. You can also look at historical costs or ask your GEHFS representative for an estimate.
Add Salaries/Job Codes
Number of Employees (fixed vs. variable) – Determining the number of fixed employees required to support this project will help to calculate fixed costs, apart from equipment. A variable number of employees are usually needed in the beginning of the project’s operation, where volume is related to their workload. Variable labor costs increase as your procedures increase. As procedures increase, you may decide to convert this variable labor cost to a fixed, FTE employee, for example. Remember: Both fixed and variable labor costs impact the expense portion of the income statement.
Note: You are not limited to this screen. You can categorize each group of employees by type (i.e.: Drs., Nurses, Technologists, etc.) by completing a new screen for each group, or salary class.
Inflation % – This is the annual wage inflation for this job type. If you don’t know this rate, ask your Finance or Human Resources department.
Assumed Productivity % – This is the annual productivity you assume for this job type. It affects variable costs and could make a big difference in the profitability of your project, depending on the assumptions you use.
Add Other Costs
Variable or Fixed Expenses - The last input screen is for you to identify other operating expenses related to your project. Again, for each cost identified, you will complete a separate screen by clicking “add another cost”. If it’s a fixed cost, you must input annual expense in dollars spent on this product or service (eg: cryogens for a MRI scanner). For variable costs, you will input the dollar amount for each procedure that is performed, on average, across procedures (e.g.: film cost). Remember: As with labor costs, both of these costs will impact the expense portion of the income statement.
Inflation % - As with labor costs, you must take into consideration the impact of inflation on products and services. Again, if you don’t know this rate, ask your Finance department.
Click results and you’re now ready for the Capital Analysis Tool powered by Kaufman Hall to calculate and produce the statement of projected revenue and expenses, cash flow analysis, and NPV computations based on your inputs!
By using our site or downloading materials from the site, you agree to our Privacy Policy and Terms of Use. Click above to review those policies. If you do not agree, do not use the site or download any materials from it.
