This paper consists of the third milestone of the final project. In the first milestone, St. Jude's Children Research Hospital, was identified. The key features of the institution, such as the sub-industry, type of organization, financial background, were discussed. The second milestone was a policy research report which examined the economic factors that influence the healthcare industry. The third milestone involves drafting an organizational analysis report by applying economic principles. This paper aims to address several aspects such as organizational impact and recommendations, financials, markets, and demand, and lastly, economic, legislative changes.
Organizational Impact and Recommendations
St. Jude's Children Research Hospital is the main focus of the organizational analysis report. St. Jude's hospital is considered as a specialty research institution for children. Its main focus is to provide exceptional and quality care to patients with life-threatening diseases such as pediatric cancer. The primary mission of the hospital is to develop cures and prevention strategies for pediatric conditions through extensive research and treatment. The hospital engages in a wide spectrum of research to investigate disease pathogenesis, drug resistance, biobehavioral aspects, and therapeutic trials. The institution is considered as the largest pediatric cancer hospital globally due to its annual volume of patients.
The financial background of the hospital consists mainly of operation costs. According to Forbes, the financial statements of St. Jude's hospital indicate that the institution posted total revenues of $2.324 billion against total expenses of $1.567 billion (Forbes, 2020). The hospital's revenues are derived mainly from private donations and government support. The hospital incurs expenses mainly on charitable services, fundraisings, remunerations, and general management operations. Besides, the hospital has invested heavily in research projects that have revolutionized cancer treatment globally. An example of such projects includes the Pediatric Cancer Genome Project, which cost a hefty amount of $100 million (St. Jude Children's Research Hospital, 2018). St. Jude has a huge budget that caters to clinical trials, clinical care facilities, and the advancement of new technologies.
Non-Profit or For-Profit
St. Jude's hospital is a non-profit organization that funds its operations through donations and insurance credits. The hospital operates based on equal access to healthcare services for all regardless of their backgrounds, irrespective of their ability to afford the treatments. In essence, the hospital serves as a charitable organization since it covers treatment costs to patients who cannot afford it. In instances where patients have health insurance, the hospital bills the insurance provider, and still covers the initial health costs. The donations from donors and charities enable the hospital to pay for treatments, deductibles, co-insurance, and co-payments. St. Jude's operates on a non-profit model since its main focus is not to generate profits but rather to invest the revenues obtained to further research into the treatment of pediatric diseases (St. Jude Children's Research Hospital, 2019). Since the hospital is a non-profit entity, it files an exempt income tax form, and it does not pay state or federal income taxes. The nature of the hospital as a non-profit entity shields it from the undesired impact of economic policy changes.
Financials, Market, and Demand
Demand theory is reflected in the relationship between consumer need for goods and services and the prevailing prices in the marketplace. The demand for healthcare services is influenced by the desire of consumers to be healthy. In demand theory, the desire for a good or service must be backed by the ability and willingness to pay for it. However, the mechanisms of demand theory do not apply for non-profit healthcare institutions. St. Jude's hospital, a non-profit entity, does not consider the ability and willingness of patients to pay for treatments. St. Jude's acts as a national referral center, and thus the rate of demand for the hospital is extremely high, albeit the prevalent poverty levels. Since the hospital is a non-profit institution, the impact of the high demand is reflected in the financial statement of an organization. According to the hospital's website, the average cost of operation amounts to the excess of $1 billion annually, with the majority of the expenses being incurred on pediatric cancer treatments. The massive costs incurred in treating patients from poor backgrounds have a huge impact on the financial health of the institution.
Market Behavior Impact
Market behavior analyzes the awareness, preference, and engagement of consumers. Analysis of market behavior helps to generate appropriate marketing strategies to boosts sales revenue (Richards, 2016). For non-profit organizations, understanding market behavior is crucial in overcoming the failure to generate profits from its products. Healthcare organizations such as St. Jude's hospital use business principles to establish distinct consumer relationships. The hospital utilizes niche marketing that helps to develop the most effective advertising stimuli, taking into account the target demographics. The hospital relies on relationship marketing to capitalize on market behavior by building brand awareness and recognition. The hospital establishes a long-term relationship with its clients to ensure a high percentage of return visits and referrals. These unique marketing strategies strengthens the ability of St. Jude's hospital to acquire resources through funding and donations. The hospital is able to generate and sustain cash flows and thus maintain a strong financial position.
Economic Legislative Changes
The passage of legislation to repeal the Affordable Care Act (the ACA or more commonly referred to as "Obama care") is the main legislative change for non-profit care providers. The repeal and replacement of the ACA is of high priority in the current administration in the United States (National Council of Nonprofits, 2020). The abolition of the ACA will translate to the loss of health insurance for millions of citizens who cannot afford specialized treatments. Caps on Medicaid will limit the amount of funds that the states receive from the federal government. This will reduce the amount paid per recipient and thus increase the burden to patients. The elimination of insurance subsidies will increase the costs of medical services to lower-income individuals.
Policy Changes and Impact
The policy change will greatly impact healthcare organizations. The critical issues addressed in the legislation change will potentially affect the capacity of non-profits. The legislation change will have severe consequences for non-profit organizations that address the pressing healthcare needs of the needy population. The scrapping of the ACA will greatly increase the demands for the healthcare services offered by non-profit providers. Changes in healthcare policies could exacerbate the resource challenges for numerous non-profit institutions.
The legislative changes can have a profound impact on the financial statements of non-profit healthcare providers. The change in the healthcare policies will increase the operational costs for non-profits. The increase in expenses incurred by the hospitals will reduce their net cash flows. The capping of federal funding will significantly reduce the revenue generated by these institutions. The changes portend a negative impact on the financial position of these firms.
The healthcare environment is dynamic, and thus care providers need to evolve to cushion themselves against unpredictable impacts of the legislation change. Having diverse resources acquisition methods is a logical way of preventing the adverse effect of legislation changes. Non-profit organizations need to diversify their operations to ensure that they have constant and sustainable cash flows. A secure source of revenue will ensure that the provision of vital programs and services is not affected.
Forbes (2020). St. Jude Children's Research Hospital. Retrieved from https://www.forbes.com/companies/st-jude-children's-research-hospital/#18ff573697c1
National Council of Nonprofits. (2020). Health Care Reform. Retrieved from https://www.councilofnonprofits.org/trends-policy-issues/health-care-reform
Richards, L. (2016). Different Marketing Behaviors. Retrieved from https://smallbusiness.chron.com/different-marketing-behaviors-20430.html
St. Jude Children's Research Hospital. (2018). 2017 ALSAC/St. Jude Annual Report. Retrieved from https://www.stjude.org/content/dam/en_US/shared/www/about-st-jude/financial-information/alsac-stjude-annual-report-2017.pdf
St. Jude Children's Research Hospital. (2019). our unique operating model. Retrieved from https://www.stjude.org/about-st-jude/unique-operating-model.html
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