Houston Dialysis Center is located in Houston General Hospital, which is a not-for-profit intensive care hospital with 25 beds. Although, most of the hospital facilities are for inpatient care and emergency services, there is a 100,000 square-foot section for outpatient services. 80 percent of this space is for the outpatient clinic while the remaining space is for the Dialysis Center. Houston Dialysis Center carries out hemodialysis and peritoneal dialysis; which are alternative processes for waste and excess water removal from the blood of patients with the end-stage kidney disease. These two processes are particularly crucial for the health of patients suffering from the end-stage kidney disease. However, there has been an increment in volume of the outpatient clinic, which has resulted to the suggestion of moving the Dialysis Center in order to create more space. The changes involved will, without doubt, affect the profitability of the Dialysis Center, a development that will fundamentally affect its financial state.
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Moving the Dialysis Center in order to create more space for the Outpatient Clinic is sensible. First of all, there is the need for the Outpatient Clinic to remain in its current position. This is because most of its patients require easy access to the other hospital departments; something that will be curtailed by moving it elsewhere. In addition, the Outpatient Clinic increasingly serves more patients than the Dialysis Center. This has made it require additional space; something that will be realized if the Dialysis Center forfeits its 25 percent space. In fact, the Dialysis Center will only be moved two blocks away from the hospital. Thus, it will not be too far to reach. Preliminary analysis indicates that the Dialysis Center will be more productive when moved to the proposed site than when left in its current position. This is because it may allow serving of more patients and offer more space for patient’s parking.
In the past, Houston General Hospital used to aggregate all facilities costs and, afterwards, allocate the total amount basing on square footage. However, there is a new proposition for allocation of funds to the proposed Dialysis Center. It is proposed that, allocation should bear the true facilities costs of the new space. The advantage of this is that funds allocation will take into account the facilities in place; a factor that will ensure justice. This means that allocations will be based on the worth of the facility, rather than on a blanket assumption of costs. Besides, the already established facilities in the hospital, for instance the Outpatient Clinic, will maximize profitability as their facilities cost will be based on historical costs. These costs are low, simply because, a facility built five years back relatively costs less than one built today. The cost of today’s facility will rise because of economic trends like inflation.
The point above on change of cost of facilities also brings to the fore the main disadvantage of the proposed change in the allocation of funds. The establishment of the new Dialysis Center will certainly cost more than most old buildings in the hospital. This is based on the current high cost of building. If funds allocation is based on the true facility cost, the Dialysis Center will receive less funding. In the long run, this will affect its growth and service delivery. Nevertheless, I support the new allocation scheme as, with time, it will ensure justice in fund allocation. On the same note, the proposed Dialysis Center should be shielded from further negative effects of the new allocation scheme by establishing a crisis fund.
If the hospital implements the new allocation method for facilities cost, the facilities allocation to the Dialysis Center in 20 years should be $300,000. The facilities cost for the Outpatient Clinic should be $1,600,000. It should be noted that the facilities cost for the Dialysis Center would reduce by $100,000, while that for the Outpatient Clinic would increase by the same amount. This is in order to offset the losses made by the Dialysis Center due to expansion of the Outpatient Clinic; and, hence, maintain the status quo.
The proposed Dialysis Center has the likelihood of attracting more patients. This is because the facility will have more parking space and, thus, easily accessible. The center will also be able to handle many patients at the same time due to the possibility of increased space. In addition, establishing a new facility offers the opportunity of coming up with a state of the art Dialysis Center. A modernized Dialysis Center will attract more patients due to efficiency in service delivery. Additional volume of patients in the Dialysis Center would increase the amount of revenue the facility contributes to the hospital. This will make the new Dialysis Center self-reliant and, thus, allow it to cease from depending on the Outpatient Clinic to offset its losses. As a result, the new facilities allocation method will have a positive impact on the whole hospital as facilities will be capable of sustaining themselves.
$800, 000 of drugs is used by the Dialysis Center annually. These drugs costs the hospital only $400,000 and, thus, a profit of $400, 000 is realized. However, this profit is accrued to the pharmacy, a practice that is not justifiable. This profit should be accrued to the Dialysis Center, as it is the one directly responsible for it. Alternatively, the Dialysis Center should establish its own pharmacy so that it can accrue this profit.
Before making decisions, the hospital should be wholly informed of the repercussions. This is because both the Outpatient Clinic and the Dialysis Center are crucial for the development of the hospital. Moving the Dialysis center to create room for the Outpatient Clinic will benefit the entire Houston General Hospital. Considering all issues discussed above, it is recommended that pharmacy revenues do not include the profits accrued from purchases by the Dialysis Center. This revenue should be transferred to the Dialysis Centre. As regards the final allocation amount, it should be based on the actual facility cost and also the total revenue remitted by a particular department. It is also recommended that the Outpatient Clinic should offset any losses incurred by the Dialysis Center in order to shield it from immediate negative effects. In addition, a crisis fund should be established to shield the hospital from unforeseen challenges.