Introduction
Major Forces Affecting the Delivery of Healthcare Today
Various factors influence the delivery of health care. One of the major forces is the cost of healthcare in the current economic environment. The influence of costs in the delivery of care is shown by the increase in the managed care plans, the reduction in the hospitalization periods, and the outpatient treatment (White, Duncan & Baumle, 2010). The other force that influences health care is access to care. Access has a dual element. In addition to the physical access where the health care facilities are physically inaccessible, there is the economic access where people find health care services inaccessible because of a lack of insurance and low income (White, Duncan & Baumle, 2010). This third force is the quality of care. Estimate show that 30 to 40% of both the diagnostic tests and medical procedures are not necessary. This amounts to a wastage of resources and also contributes to driving up the cost of care (White, Duncan & Baumle, 2010).
Impact of Forces
The forces discussed above influence health care in different ways. There are different opportunities and challenges that result from the influence of these forces. One of the opportunities is the reduction in the high cost of accessing health care services. Another opportunity that exists as a result of the forces above is the improvement in the quality of care delivered to the citizens (Mason, Leavitt & Chaffee, 2014). These opportunities are best exploited at the policy level because the effects at this level are felt throughout the industry. The challenges in existence include the disillusionment of the public over the ability of the medical providers to effect changes in healthcare, the changes in the settings where medical practitioners practices, and the ethical issues surrounding the delivery of care (Mason, Leavitt & Chaffee, 2014).
Opportunities
The organization of choice in this paper is GlaxoSmithKline. There are opportunities that GlaxoSmithKline can exploit in the current context to contribute to the improvement in the quality and access to health care. One of the opportunities is to explore methods that lead to a reduction in the cost of producing its pharmaceutical products. This will improve the economic access to the drugs. Additionally, GlaxoSmithKline can contribute by manufacturing quality products. The quality of the pharmaceuticals in the health care facilities is a big part of quality health care in general.
Proposal
The proposal for GlaxoSmithKline is the channeling of more money to research and development. However, the proposal will seek for the organization to refocus their efforts on research and development to drugs that are required by ordinary citizens. One particular drug that will be highlighted in the proposal is the heat-stable oxytocin. This is a drug that is needed to control hemorrhage among mothers during child birth. The research and development of this drug will help reduce the use of cold chains procedures during child birth. Among other benefits, this will reduce the cost by eliminating unnecessary procedures during child birth.
Financial and Budgetary Considerations
Financial Statements
The financial statements of the company provide information that will be important in making the proposal to GlaxoSmithKline. One of the financial statements to be used is the development of the proposal is the balance sheet. The balance sheet of GlaxoSmithKline contains information on the assets and liabilities of the company. Pitching a proposal for increased investment in the research and development of drug should only be done when there is information about the availability of finances. The balance sheet will give information about the current and long-term assets of GlaxoSmithKline as well as its current and long-term liabilities of the organization. The preparation of the proposal will also use the report on the amount of money that was committed to research and development and the proportion of that money when compared to the turnover of the company.
Proposal Impact
If the proposal is ratified by GlaxoSmithKline, it will lead to an increase in the amount of money that is invested in research and development at the organization. This has an effect on the financial statements of the company. For instance, the ratification of the proposal by GlaxoSmithKline will increase the capital expenditures of the company. This is because increased capacity will be required for the research and development. Additionally, new equipment might be required to facilitate the research and development of heat stable oxytocin. The ratification of the proposal will also lead to an increase in the recurrent expenditures. The recurrent expenditure contains the expenses that are required periodically due to the increased investment in the research and development of heat stable oxytocin.
Flexed versus Fixed
Flexed budgets are different from fixed budgets for a number of reasons. Firstly, fixed budgets do not change in response to changes in the level of activities (Shim, 2016). Unlike the fixed budget, the design of the flexed budgets is done to facilitate change in response to changes in the level of activities. Flexed budgets are flexible in that they can be modified in the light of an increase in the level of activities whereas fixed budgets are rigid to change even in the context of change in the other variables (Shim, Siegel & Shim, 2012). If the organization used a fixed budget, then a large contingency and miscellaneous amount would be required in order to cater for any eventualities in the activity level. It is more favorable if the organization used a flexed budget. This is because the research and development process might result in a high level of activity.
Proposal Justification
Ratio Selection
The preparation of the capital budget proposal will use the profitability ratios, and the proportion of turnover that is reinvested in the research and development presently. The use of the profitability ratios is necessary show the rate at which the operational activities of the organization generate money for GlaxoSmithKline. The use of the profitability ratios the rate at which the organization uses its assets to make operational profit. The proportion of the turnover that is committed to research and development will also be used in the preparation of the capital budget. This ratio gives information on the amount of money the organization commits to both the capital expenditure and the recurrent expenditure.
Ratio Results
Gross margin = gross profit/net sales
95122.96/423400
= 0.22 * 100
22%. This shows that for each dollar made in sales, the company made a profit of 22 cents and incurred 78 cents in costs.
Operating Margin = operating profits /net sales
8,89,14.30/423400
= 0.21
This shows that for every dollar that the company generated in sales, 21 cents did not have any direct relationship with the core production activities.
Percentage of Turnover
In 2014, the capital expenditure on research and development was 73.4 million. The figure reduced significantly to 9.11 million in 2015. However, the recurring expenditure for research and development in 2015 increased significantly to 5246.88 million from the 4697.46 million that was committed for research and development in the previous year (GlaxoSmithKline, 2015). In total, the organization used 1% of the turnover for research and development in 2014. Due to the increases in the recurring expenditure in 2015, the percentage of turnover that was committed to research and development increased to 1.2% (GlaxoSmithKline, 2015).
Short-and-Long-Term Impact
In the short-term the profits of the organization will reduce because a larger share of the company turnover will be committed to research and development. The balance sheet of the company will also be affected in the short-term. This is because the company will have more assets. These are the assets that are acquired to facilitate the research and development efforts. In the long-term, the new drug will be put in the market. This will help recoup the costs that were incurred in its research and eventual development. The sale of the drug in the market will also bring in revenue that will increase the turnover of the company.
Closing Statement/Conclusion
Added Value
The capital budget proposal offers the organization an opportunity to meet a prevailing need in the health care industry while also participating in the improvement in the quality of care. By developing the heat stable oxytocin, GlaxoSmithKline contributes to the ability of medical practitioners
Justification of Proposal
The financial analysis of the company shows that the capital budget is appropriate for the financial situation of GlaxoSmithKline. The fact that the research and development department is already funded is an added advantage.
References
GlaxoSmithKline (2015). Annual report for the year ended March 31, 2015. Retrieved from http://www.gsk-ch.in/downloads/GSK_Annual_Report_1415.pdf
Mason, D. J., Leavitt, J. K., & Chaffee, M. W. (2014). Policy & politics in nursing and health care. St. Louis, Missouri : Elsevier/Saunders
Shim, J. (2016). Accounting and Finance for the NonFinancial Executive: An Integrated Resource Management Guide for the 21st Century. Boca Raton. CRC Press.
Shim, J. K., Siegel, J. G., & Shim, A. I. (2012). Budgeting basics and beyond. Hoboken, N.J: Wiley.
White, L., Duncan, G., and Baumle, W. (2010). Foundations of Basic Nursing. Boston. Cengage Learning.
