7.5 Bay Pines Medical Center estimates that a capitated population of 50,000 wou

Question

                    7.5 Bay Pines Medical Center estimates that a capitated population of
                         50,000 would have the following base case utilization and total cost
                         characteristics:
                                                       Inpatient Days           Average Cost
                        Service Category             per 1,000 Enrollees          per Day
                        General                              150                    $1,500
                        Surgical                             125                     1,800
                        Psychiatric                           70                       700
                        Alcohol/Drug abuse                    38                       500
                        Maternity                             42                     1,500
                           Total                             440                    $1,374
                    

                    
                         In addition to medical costs, Bay Pines allocates 10 percent of the total
                         premium for administration/reserves.                                           
                                      

                    1. What would be the rate if a utilization management program would
                                          reduce utilization within each patient service category by 10 percent?
                                          By 20 percent?
                                                        

                    2. Return to the initial base case utilization assumption. What rate would
                                          be set if the average cost on each service were reduced by 10 percent?
                                                        

                                     3. Assume that both utilization and cost reductions were made. What
                                          would the premium be?

Please answer all questions if you want to get 5 stars. Thanks.

Explanation / Answer

In the professional services business, people are the assets. And like any asset, managers need to be concerned about the return their assets generate. In other words, professional service managers need to be monitoring each employee%u2019s utilization rate. Cloud based resource management software can help managers optimize and increate employee%u2019s utilization rate.

Increasing utilization is one of the simplest ways managers can increase revenue and profitability without incurring additional costs. For example, consider a service firm that has 50 billable employees on various projects. Each of these resources is billed at $100 an hour. If the firm has a 75% utilization rate and the month has 120 possible billable hours, it would earn $600,000 for the month. However, if the firm could identify a way to increase utilization rates by only 1%, it would earn an extra $8,000 a month in pure profit. Even a small increase in utilization rates can have a large impact on the bottom line.

Power of utilization rates

Courtesy of bi101.com

The trick to optimizing utilization is knowing what employees are available and matching them with projects where their skills and talents will be used. Unfortunately, most firms do not have the resources in place to increase utilization. Instead, they maintain separate task and resource management systems. These systems act as silos of information and do not easily provide the level of detail needed to manage optimization. The end result is overutilization of some employees, underutilization of others, and overall disappointing operational results.

If this describes your firm, don%u2019t despair. Top performing professional service firms are finding ways to optimize employee utilization by migrating to the best resource management software available. Surprisingly, this software is found in the cloud. Below are three reasons why your firm may want to consider cloud based software resource management software to help optimize your utilization rates:

Allows Management to Sell Projects Knowing Specific Resources Are Available %u2013 By migrating both task and resource management to a single cloud based platform, firms will have greater visibility over where their resources are deployed. They will be able to obtain real time information regarding resource utilization and point in time knowledge regarding when the resource will be available. This allows management to sell projects knowing when a specific resource will be available.

Increased Employee Satisfaction %u2013 The visibility that resource management software provides will help managers realize that one employee is overtasked and another is underutilized. By balancing these loads, both employee%u2019s will be more satisfied with their roles.

Optimize Skill Mix %u2013 Resource management software does not just provide details around when a resource is available, it also tracks the various skills and capabilities of each resource. As firms manage the talent of their employees, they will be able to forecast resource requirement and either hire or train your employee%u2019s as appropriate.

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