Capital Project Case Study – Jiranna Healthcare

Capital Project Case Study,
Part 1

This
case study considers the expected costs and benefits to a managed care
organization resulting from a decision to design a centralized nurse triage
line. This triage line would assist routine primary care patients to provide
self-care and/or seek urgent care in lieu of seeking more expensive care
after-hours in the emergency room.

Summary
Jiranna Healthcare owns and operates a
268-bed hospital in the San Jose area. The hospital is Jiranna Healthcare’s
main facility and is home to more than 80 on-site specialty and surgery
clinics, employing over 5,000 staff. In addition to the main hospital, Jiranna
Healthcare has 18 satellite clinics, containing primary care services such as
pediatrics, family medicine, and geriatric health. These facilities (hospital
plus outlying clinics) serve a total enrollee population of 97,000.
Currently, Jiranna Healthcare’s
centralized call center schedules primary care appointments and handles an
average of 1,500 to 2,000 calls daily with a staff of 20. Patients routinely
have difficulty obtaining access to urgent or acute care (primary care) in a
timely fashion. Additionally, the majority of Jiranna Healthcare’s primary care
centers are unable to meet access standards in three out of four cases. These
access issues have a secondary effect on the call center, which experiences a
much higher call rate because members have to call back multiple times to find
available appointments. The existing process leads to overutilization of
emergency departments for urgent care and primary care concerns. In addition,
patient satisfaction has steadily declined as a result of the continued lack of
appointment availability.
To
address this problem, there is a proposal to implement a centralized nurse triage
line, an off-site phone center that would be staffed by registered nurses with
a multitude of specialties (including ER nurses, critical care, surgical, and
even some nurse practitioners). These nurses are able to offer callers medical
advice encompassing the treatment of fevers, wound care, and emergent
conditions such as chest pain. The nurses are trained to triage conditions to
the appropriate level of care be that at home, at an urgent care center, or at
an emergency department.
The
major cost impact is the increased salary requirement for the phone center
staff, which will entail approximately 33 multi-discipline employees, based on
workload and enrollment data. Additional elements of the proposal include
hiring an IT specialist to manage the triage line’s computer system, and
facility renovations. The main benefit of this proposal is projected cost
reductions in patient care as a result of moving primary care out of the
expensive emergency-room setting.

Assignment
The
Capital Project Case Study, Part 2
spreadsheet provides cash flow data (costs and benefits) for the proposal.
Download
and save this Excel spreadsheet, and use the information provided to complete
the following:

1. Determine
the cash inflows and outflows for each year.
2. Evaluate
the capital project by calculating the following metrics:
a. net present
value (NPV)
b. internal
rate of return (IRR)
c. modified
internal rate of return (MIRR)
d. payback
period
e.
discounted payback period
3. Indicate
whether the project is acceptable, assuming Jiranna has a corporate policy of
not accepting projects that take more than 3.5 years to pay for themselves, and
assuming an 11% cost of capital.