Capstone Sequence and Required Financial Components

The capstone workflow can be organized as a step-by-step financial sequence, using MHA/599 Capstone Project Calculations: Formulas and Worked Examples as the structural anchor. The document explains that the calculations support the community health program being developed for the Capstone Project, so the process begins with defining the program and then moves through staffing, cost, reimbursement, variable-cost adjustment, breakeven analysis, and proposal support.

1. Start with the community health program definition

Before calculations can be completed, the project must define the community health program being proposed. In MHA/599 Capstone Project Calculations: Formulas and Worked Examples, all later formulas depend on program choices such as:

• What service the program will provide
• What type of clinic or care setting is being developed
• What staff will be required
• What patient visit or procedure code will be used for reimbursement estimates

This means the program concept is the foundation for every later financial element.

2. Calculate direct staffing costs

The first required financial component is staff salary cost. According to MHA/599 Capstone Project Calculations: Formulas and Worked Examples, salary calculations are built from the number of personnel and the average salary for each group.

• Total Physician Salaries = Number of physicians × Average specialty salary
• Total Nurse Salaries = Number of nurses × Average nurse salary
• Total Support Staff Salaries = Number of support staff × Average salary of hospital staff
• Total Salaries = Physician salaries + nurse salaries + support staff salaries

This step translates the proposed program design into a measurable labor budget.

3. Add fringe benefits to determine total salary expense

After base salaries are calculated, fringe benefits must be included. MHA/599 Capstone Project Calculations: Formulas and Worked Examples states that, for the Capstone Project, fringe benefits are set at 25% of total salaries.

• Total salary expense = Total salaries + (0.25 × total salaries)

Fringe benefits include items such as health insurance, life insurance, and retirement plans. This step is important because salary alone does not represent the full labor cost of operating the program.

4. Add overhead and indirect costs

Next, the capstone sequence requires the addition of overhead, also described as indirect and fixed practice costs. In MHA/599 Capstone Project Calculations: Formulas and Worked Examples, these include costs such as electronic medical records, insurance, taxes, floor space, facility expense, administration, and general support functions.

For the Capstone Project, these expenses are set at 40% of total salary expense.

• Overhead costs = Total salary expense + (0.40 × total salary expense)
• Total clinic costs for salaries and overhead = Total salary expense + Overhead costs

This stage expands the budget from personnel expense to broader operating cost.

5. Determine reimbursement using RVUs and geographic adjustment

Once costs are established, the next major component is estimating revenue per visit. MHA/599 Capstone Project Calculations: Formulas and Worked Examples explains that physician reimbursement is based on relative value units (RVUs) assigned by the Centers for Medicare & Medicaid Services and adjusted by a geographic cost index.

The reimbursement sequence includes:

• Adjusted Work RVUs = Work RVUs × Work GCI
• Adjusted Practice RVUs = Practice RVUs × Practice GCI
• Adjusted Malpractice RVUs = Malpractice RVUs × Malpractice GCI
• Total RVUs = Adjusted Work RVUs + Adjusted Practice RVUs + Adjusted Malpractice RVUs
• Reimbursement per visit = Total RVUs × $34.89

This step connects the defined service to an expected payment level for each patient visit.

6. Support the reimbursement estimate with physician fee lookup data

The proposal must also show where the RVU and geographic data come from. MHA/599 Capstone Project Calculations: Formulas and Worked Examples includes a physician fee lookup procedure to support this part of the project.

The lookup process identifies:

• The HCPCS code for the service
• The Work RVU
• The Practice Expense RVU
• The Malpractice RVU
• The geographic practice cost index values for work, practice expense, and malpractice

These values provide documentation for the reimbursement assumptions used in the capstone proposal.

7. Adjust reimbursement for variable patient-care costs

The next required component is accounting for variable costs of treating each patient. MHA/599 Capstone Project Calculations: Formulas and Worked Examples explains that these are per-patient costs such as gloves, needles, syringes, gowns, and other supplies.

For the Capstone Project, the hospital system covers these costs by assigning 10% of total reimbursement from each patient visit.

• Net reimbursement per visit = Reimbursement per visit − (0.10 × reimbursement per patient)

This produces a more realistic estimate of what the program retains from each visit after variable treatment expense is recognized.

8. Complete the breakeven analysis

After total costs and net reimbursement per patient are known, the project can calculate breakeven volume. In MHA/599 Capstone Project Calculations: Formulas and Worked Examples, the breakeven analysis determines the number of patient visits required to cover all clinic costs.

• Number of patient visits needed to break even = Total costs ÷ Net reimbursement per patient

The guide also extends this into operational planning by converting annual visits into daily visit expectations:

• Annual visits divided by number of operating days per year = patient visits per day

This step is crucial because it shows whether the proposed program appears financially feasible at the expected service volume.

9. Use the calculations to support the final proposal

The financial components are not separate from the capstone proposal; they are evidence used to justify it. Based on MHA/599 Capstone Project Calculations: Formulas and Worked Examples, the final support elements include:

• A clearly defined program structure
• A staffing plan tied to salary calculations
• Fringe benefit estimates
• Overhead and indirect cost estimates
• Documented RVU-based reimbursement assumptions
• Variable-cost adjustment for each visit
• Breakeven volume in annual and daily terms

Together, these calculations create the financial logic of the capstone proposal. They show not only what the program is, but also what it costs, how it is reimbursed, and how much activity is needed for the program to sustain itself.

Capstone workflow summary

Using MHA/599 Capstone Project Calculations: Formulas and Worked Examples as the anchor, the capstone workflow follows this order:

1. Define the community health program and service model.
2. Identify required staff and calculate total salaries.
3. Add 25% fringe benefits to determine total salary expense.
4. Add 40% overhead to estimate total clinic costs.
5. Find RVUs and geographic indexes for the selected service.
6. Calculate reimbursement per visit.
7. Subtract the 10% variable-cost adjustment to find net reimbursement per visit.
8. Divide total costs by net reimbursement to find breakeven annual visits.
9. Convert annual breakeven visits into daily visit targets.
10. Use all results as supporting evidence in the capstone proposal.

This sequence helps ensure the project moves logically from program concept to financial justification.