Healthcare Finance Homework

Please find below attached assignment. My part of this assignment is to do #1 listed below using the information found in this paper as well as the attached excel spreadsheet. It involves analyzing an excel spreadsheet and writting up an evaluation based on listed criteria. The paper is about 1 1/2 pages or 500 words top. It must be very excellent work prices in detail and evaluation. It is a graduate level course.

Group Assignment 6.3: Consultant Report Group Project


Please find below listed assignment. My part of this assignment is to do #1 listed below using the information found in this paper as well as the attached excel spreadsheet.

The Consultant Report provides an opportunity for the student (working in groups) to synthesize the topics learned in this course into a project. This project provides the group with a hypothetical organization with some financial, operational, and strategic assumptions and asks the group to prepare a report to the Organization’s Senior Management and Board of Directors with an assessment as to how the Organization is currently performing and what recommendations are important to implement in order for the Organization to succeed in the future.

This is a small group assignment (Group Assignment 6.3 Group X).

For this assignment, you will need to refer to the following set of financial data:

·

Creekside Community Hospital Data

(Please find attached excel spreadsheet)

Utilize the following information:

· Hospital Characteristics (see attached financials)

·

· Competitive environment, declining market share to competitors

· Moderate to substantial debt

· Facility and equipment that is fairly current, but will have future investments in capital

· Partial electronic medical record system

· Mediocre quality and patient satisfaction scores

· Few employed physicians/ no hospitalist program

· Split payer mix between public and private

· Overall not profitable from operations in most recent fiscal year

· Local Physician Practices Characteristics

· Small primary care and specialty practices (mixture of solo and small groups)

· Independent ownership

· Loose affiliation with hospital

· Combination of office and hospital practice

Both Hospital and Physician organizations have contract-only relationships with payers and suppliers and are currently not working with either in any strategic way financially.

Your group is hired as a financial consultant to prepare a financial strategy (or strategies) to the hospital as they transition from the current environment to the future environment that will be impacted by health care reform due to governmental intervention, as well as changes from within the industry itself.

Specifically, your strategy should consider more than one alternative (outcome). When formulating your response, consider addressing the following topics at a minimum (feel free to add other financial topics as well). Question #1 needs to be no more than 500 words or a 1 ½ pages long.

1. Based upon the following financials attached, assess the current liquidity, profitability, and capital structure and what your recommendations would be for improving these for the future.
Give 3-4 concrete financial recommendations based on this information
.

CASE1

-bed not-for-profit hospital. The case includes statement of cash flows analyses,

revenue

1

6

1

1.305

0

1

Other

8

0

(Millions of Dollars)

2001 2002 2003 2004 2005

3

3

0

0

6

1.341

$ 39.627 $ 43.241 $ 45.738 $ 52.964 $ 54.275

2001 2002 2003 2004 2005

Net patient service revenue $ 25.661 $ 27.236 $ 28.796 $ 30.576 $ 34.582

$ 23.896 $ 25.283 $ 27.404 $ 30.327 $ 33.958

(Millions of Dollars)
2001 2002 2003 2004 2005

210 210 210 210 210

196

61

(Millions of Dollars)

2002 2003 2004 2005

$ 3.214 $ 2.629 $ 2.102 $ 2.458

6

5)

0)

4

Long-term debt

3.513 5.799 4.673 5.069

$ 2.795

2001 2002 2003 2004 2005

%

0.66

%

%

1.82 1.73

%

%

14.10% 12.88% 9.54% 7.09% 7.66%

2005 Ind Data (200-299 Beds)
2001 2002 2003 2004 2005 +Quartile Median -Quartile

0.14 0.13 0.12 0.20

0.34

0.18

Total margin 11.38% 11.28% 8.75% 6.48% 6.75% 5.58% 3.48% 0.53%

7.75% 7.43% 5.75% 3.97% 4.53% 5.80% 3.10% 0.40%

14.10% 12.88% 9.54% 7.09% 7.66% 15.66% 6.01% 0.62%

2.32

1.26 1.31

3.95

1.76

3.07

3.10

2.88

0.92 0.89

1.76 1.49

Total asset turnover 0.68 0.66 0.66 0.61 0.67 1.04 0.89 0.75

2005 Ind Data (200-299 Beds)
2001 2002 2003 2004 2005 +Quartile Median -Quartile

5.10 4.67

3.90

6.48

4.52

Case mix index 1.2531 1.2674 1.2869 1.2993

4.10 3.97

4.10

4.15

5.84 4.68

2001 2002 2003 2004 2005

CASE 1 Instructor Version Copyright 2006
7/7/05 by FACHE
CREEKSIDE COMMUNITY HOSPITAL (A)
Assessing Hospital Performance
Case 1 presents the opportunity to conduct an extensive financial statement and operating indicator
analysis on a

210
Du Pont analyses, ratio analyses, and economic value added analyses.
The INPUT DATA section of the model contains historical financial and operating data. The OUTPUT
DATA section contains all of the relevant analyses. Note that the model extends out to Column K.
The key to student success in this case lies in interpretation of the data presented rather
than number crunching. However, there is ample opportunity for students to extend the model to
include percentage change analysis and common size analysis, as well as to create graphs (charts)
as needed to present their findings.
Note that the industry data used in this case are for instructional use only, and do not
represent actual industry data for the time period of the case.
INPUT DATA:
Statements of Operations:
(Millions of Dollars)
REVENUES 2001 2002 2003 2004 2005
Net patient service revenue $ 25.661 $ 27.236 $ 28.796 $ 30.576 $ 34.582
Other 1.305 1.26 1.237 1.853 1.834
Total revenues $ 26.966 $ 28.497 $ 30.033 $ 32.429 $ 36.416
EXPENSES
Salaries and wages $ 10.829 $ 11.135 $ 12.245 $ 12.468 $ 13.994
Fringe benefits 1.49 1.73 1.830 2.408 2.568
Interest expense 1.341 1.181 1.598 1.776
Depreciation 1.708 1.977 2.350 2.658 2.778
Provision for bad debts 0.546 0.589 0.622 0.655 0.776
Professional liability 0.102 0.157 0.14 0.20 0.218
7.874 8.389 9.036 10.339 11.848
Total expenses $ 23.896 $ 25.283 $ 27.404 $ 30.327 $ 3

3.95
Excess of revenues over expenses $

3.07 $ 3.214 $ 2.629 $ 2.102 $ 2.458
Balance Sheets:
ASSETS
Cash and investments $

3.513 $

5.799 $

4.67 $

5.069 $ 2.795
Accounts receivable (net) 5.915 4.832 4.359 5.674 7.413
Inventories 0.338 0.403 0.432 0.523 0.601
Other current assets 0.693 0.294 0.308 0.703 0.92
Total current assets $ 10.459 $ 11.328 $ 9.772 $ 11.969 $ 11.732
Gross plant and equipment $ 37.999 $ 42.005 $ 47.786 $ 55.333 $ 59.552
Accumulated depreciation 8.831 10.092 1

1.82 14.338 17.009
Net plant and equipment $ 29.168 $ 31.913 $ 35.966 $ 40.995 $ 42.543
Total assets $ 39.627 $ 43.241 $ 45.738 $ 52.964 $ 54.275
LIABILITIES AND NET ASSETS
Accounts payable $ 1.068 $ 1.273 $ 0.928 $ 1.253 $

1.76
Accruals 0.692 0.942 1.460 1.503 1.176
Current portion of LT debt 0.13 0.290 0.110 1.465
Total current liabilities $ 1.896 $ 2.505 $ 2.498 $ 4.097 $ 4.401
Long-term debt $ 15.959 $ 15.775 $ 15.673 $ 19.222 $ 17.795
Net assets (Equity) $ 21.772 $ 24.961 $ 27.567 $ 29.645 $ 32.079
Total liabilities and net assets
Revenue and Cost Breakdown:
Gross patient revenue
Inpatient $ 25.161 $ 25.275 $ 26.117 $ 29.148 $ 33.216
Outpatient 4.748 5.969 6.535 9.130 11.912
Total gross patient revenue $ 29.909 $ 31.244 $ 32.652 $ 38.278 $ 45.128
Revenue deductions
Contractual allowances $ 2.489 $ 2.053 $ 1.729 $ 5.

196 $ 7.516
Charity care 1.759 1.955 2.127 2.506 3.030
Total deductions $ 4.248 $ 4.008 $ 3.856 $ 7.702 $ 10.546
Inpatient operating costs $ 18.635 $ 19.221 $ 20.573 $ 22.229 $ 24.771
Outpatient operating costs 5.261 6.062 6.831 8.098 9.187
Total patient costs
Selected Operating Data:
Medicare discharges 3,008 2,960 2,721 2,860 2,741
Total discharges 9,680 9,311 8,784 8,318 8,576
Outpatient visits 30,754 31,960 32,285 32,878 36,796
Licensed beds
Staffed beds 192 193 197 178
Patient days 45,296 45,983 44,085 42,434 40,062
Case mix index 1.2531 1.2674 1.2869 1.2993 1.31
Employee FTEs 604.5 618.1 610.8 625.8 619.3
OUTPUT DATA:
Statements of Cash Flows:
CASH FLOWS FROM OPERATIONS
Income from operations
Noncash expenses 1.952 2.32 2.633 2.756
Change in accounts receivable 1.083 0.473 (1.315) (1.739)
Change in inventories (0.065) (0.029) (0.091) (0.078)
Change in other current assets 0.399 (0.014) (0.395) (0.220)
Change in accounts payable 0.205 (

0.34 0.325 0.507
Change in accruals 0.250 0.518 0.043 (0.327)
Change in current portion of LT debt 0.154 (

0.18 1.231 0.12
Net cash flow from operations $ 7.192 $ 5.378 $ 4.533 $ 3.481
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed asset acquisitions $ (4.722) $ (6.402) $ (7.686) $ (4.328)
CASH FLOWS FROM FINANCING ACTIVITIES
$ (0.184) $ (0.102) $ 3.549 $ (1.427)
Net increase (decrease) in cash $ 2.286 $ (1.126) $ 0.396 $ (2.274)
Beginning cash and investments
Ending cash and investments $ 5.799 $ 4.673 $ 5.069
Note: The noncash expenses and fixed asset acquisitions data in the statements of cash flows are somewhat different than
they would be if calculated directly from the other financial statements because of asset revaluations.
Financial Statement Analysis: Du Pont Analysis
2005 Ind Data (200-299 Beds)
+Quartile Median -Quartile
Total margin 11.38% 11.28% 8.75% 6.48 6.75% 5.58% 3.48% 0.53%
Total asset turnover 0.68 0.66 0.61 0.67 1.04 0.89 0.75
ROA = TM x TATO 7.75% 7.43% 5.75% 3.97 4.53% 5.80% 3.10 0.40%
Equity multiplier 1.66 1.79 1.69 2.70 1.94 1.54
ROE = ROA x Equity multiplier 1

4.10 1

2.88 9.54% 7.09% 7.66% 15.66% 6.01% 0.62%
Check ROE (Excess/Funds) Note: The quartile values are based on the upper and
lower numerical values regardless of whether that
value is good or bad. The interpretation is
left to the analyst.
Financial Statement Analysis: Ratios
Profitability Ratios:
Deductible ratio 0.23 0.26
Return on assets
Return on equity
Liquidity Ratios:
Current ratio 5.52 4.52 3.91 2.92 2.67 2.53 1.99 1.48
Days cash on hand 57.79 90.82 68.08 66.87 32.72 32.35 15.89 6.24
Debt Management Ratios:
Debt ratio 45.06% 42.27% 39.73% 44.03% 40.90% 62.90% 48.40% 35.20%
LT debt to equity 73.30% 63.20% 56.85% 64.84% 55.47% 127.00% 64.70% 26.90%
Times interest earned 3.29 3.46 3.23 2.38 4.29 2.23 1.14
Fixed charge coverage 2.99 2.83 2.95 2.18 1.35 1.02
Cash flow coverage 4.56 4.98 5.22 3.98 5.32 3.22
Asset Management Ratios:
Inventory turnover 79.78 70.71 69.52 62.01 60.59 98.68 63.95 43.99
Current asset turnover 2.58 2.52 2.71 3.94 3.38
Fixed asset turnover 0.84 0.79 0.86 2.20
Avgerage collection period 84.13 64.76 55.25 67.73 78.24 87.53 75.67 63.33
Average payment period 31.19 39.23 36.39 54.05 51.52 71.24 56.52 4

5.84
Other Ratios:
Average age of plant (years) 5.17 5.10 5.03 5.39 6.12 8.86 7.39 6.14
Operating Indicator Analysis:
Profit Indicators:
Profit per inpatient discharge $305.00 $301.98 $280.03 $126.72 $79.61 $89.04 ($21.30) ($120.08)
Profit per outpatient visit ($38.61) ($26.87) ($33.07) ($24.49) ($1.60) $6.22 $0.66 ($7.01)
Net Price Indicators:
Net price per discharge $2,230 $2,366 $2,622 $2,799 $2,968 $4,091 $3,411 $2,815
Net price per visit $132 $163 $179 $222 $248 $201 $139 $98
Medicare payment % 31.07% 31.79% 30.98% 34.38% 31.96% 43.47% 36.60% 31.25%
Bad debt/charity % 5.88% 6.26% 6.51% 6.55% 6.71% 7.89% 4.76% 2.97%
Contractual allowance % 8.32% 6.57% 5.30% 13.57% 16.65% 25.27% 20.02% 12.12%
Outpatient revenue % 15.87% 19.10% 20.01% 23.85% 26.40% 25.26% 21.03% 17.44%
Volume Indicators:
Occupancy rate 64.63% 64.28% 62.58% 59.01% 61.66% 67.12% 58.10% 47.84%
Average daily census 124.10 125.98 120.78 116.26 109.76 173.23 144.73 114.39
Length of Stay Indicators:
Length of stay (days) 4.68 4.94 5.02 6.80 6.07 5.41
Adj length of stay 3.73 3.90 3.93 3.55 5.36
Intensity of Service Indicators:
Cost per discharge $1,925 $2,064 $2,342 $2,672 $2,888 $3,937 $3,392 $2,972
Adjusted cost per discharge $1,536 $1,629 $1,820 $2,057 $2,195 $3,417 $2,924 $2,572
Cost per visit $171 $190 $212 $246 $250 $202.23 $141.97 $111.53
1.3161 1.2795 1.1756 1.0259
Efficiency Indicators:
FTEs per occupied bed 4.04 4.15 4.59 3.77
Outpat manhours/visit 6.49 7.69 7.88 9.44 9.24 8.66
Unit Cost Indicators:
Salary per FTE $17,914 $18,015 $20,047 $19,923 $22,596 $24,447 $22,517 $20,347
Employee benefits % 13.81% 15.55% 14.94% 19.31% 18.35% 19.58% 17.04% 15.18%
Liability costs/disc $10.54 $16.86 $15.94 $24.16 $25.42 $80.94 $42.05 $18.31
EVA Analysis:
Cost of capital input 10.0%
Economic value added (EVA) $ 0.4 $ 0.2 $ (0.8) $ (1.6) $ (1.2)
END

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