Question

Cost-Benefit Analysis (1): Education of Hospital Nurse Staff to Reduce Stage 3 and 4 Pressue Ulcers Stage 3 and 4 pressure ulcers (i.e. severe bedsores) are serious adverse events that a patient in a hospital can experience if not properly monitored by nursing staff. It is estimated that, for a typical hospital, total cases of stage 3 and 4 pressure ulcers lead to about $250,000 in annual excess costs, costs for which the hospital cannot be reimbursed by insurance. However, specific educational programs for nurse staff on recognizing and preventing pressure ulcers can reduce the excess costs by 38 percent (i.e. 0.38). The annual cost of conducting one of these programs, which would have to be offered each year by the hospital due to regular staff turnover, is $85,000. Use the information above to answer the questions below. 1. Enter a formula to calculate what the typical hospital would be willing to pay for a pressure-ulcer prevention program. 2. Should the typical hospital offer such a program to its nursing staff? Briefly explain.

Answer 1

Solution to Part (1):

Amount that the typical hospital would be willing to pay for pressure-ulcer prevention program = Savings in excess costs due to specific educational programs for nurse staff.

Therefore, Amt. that the typical hospital would be willing to pay = $250000*0.38 = $95000.

Solution to Part (2):

The decision by typical hospital to offer specific educational programs to its nursing staff will be based on Cost-Benefit analysis of the proposal.

Cost- Benefit Analysis is as follows:

Incremental Benefits due to implementation of Specific Educational Programs = (Savings due to offering specific educational programs - Annual costs of conducting specific educational programs)

= ($25000*0.38 - $85000)

=$10000.

Since, Incremental benefit due to implementation of Specific Educational Programs is positive ($10000 annually), therefore, the Typical hospital should offer specific educational programs to its nursing staff.

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