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Pages:
3 pages/≈825 words
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3 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
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MS Word
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Topic:

Mechanisms for Evaluating Financial Health of Health Care Organizations

Coursework Instructions:

MECHANISMS FOR EVALUATING FINANCIAL HEALTH OF HEALTH CARE ORGANIZATIONS
Assignment Overview
Pearland Medical Center reported revenues of $1,500,000,000 in 2012 and $1,250,000,000 in 2013. The revenue streams comprised 25% patient self-pay revenue, 50% third-party payer’s revenue, and the remaining 25% was a combination of grants from the Grant Foundation and investments. The medical center spent $15,000,000 in marketing for each of the past two years. The average hospital daily patient census was 570 in 2012 and 470 patients in 2013; patient hospital days were 202,920 in 2012 and 171,500 in 2013. 
Pearland Medical Center reported operating expenses of $500,000,000 in 2012; but due to layoffs and reorganization, operating expenses decreased by $200,000,000 in 2013. Depreciation expense was $50,000,000 in both years. The medical center spent $20,000,000 on research and education each year. Executive administration anticipates little growth in patient population in the coming year and will likely need to invest in new equipment. The nonprofit facility pays no shareholder dividends or taxes.
Case Assignment
Create an income statement based on the scenario. Determine the financial health of Pearland Medical Center. What were Pearland Medical Center’s net income, cash flow, total profit margin, and total profit margin excluding grants and investments for each year?
Discuss your suggestions for Pearland Medical Center based on your interpretation of the income statement. Is the facility financially healthy? Should the Grant Foundation reconsider their grant? 

Coursework Sample Content Preview:

Healthcare Finance: Mechanisms for Evaluating Financial Health of Health Care Organizations
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Background
Hospitals and medical centers may either source for funds internally through revenue collected or externally through debts, donations, grants and gifts. The provision of grants tends to be competitive and funding may be limited while donations are unpredictable. Big hospitals tap into the long-term debts to access capital, but the credit characteristics of the organization influences the decision to choose debt-financing (Paterson & Telyukov, 2014). It is necessary to evaluate the need for financing to identify optimal financing options, with the leadership at Pearland Medical Center evaluating the capacity of the organization to use different funding options. Foundations look into the financial situation of medical centers focusing more on the income statements to determine how the revenue streams and expenses affect the net income levels. It is necessary for any organization to pay for expenses and costs while revenues signal the likelihood of profitability growth.
Income statement including grants and investments for each year
Period Ending20132012Operating Revenue Patient self-pay revenue$312,500,000 $375,000,000  Third-party payer’s $625,000,000 $750,000,000  Grant Foundation and investments$312,500,000 $375,000,000 Less Cost of Revenue ( marketing)$15,000,000 $15,000,000 Total Revenue$1,235,000,000 $1,485,000,000 Expenses Marketing Operating expenses $300,000,000 $500,000,000  Depreciation expense $50,000,000 $50,000,000  Research and education$20,000,000 $20,000,000 Total expenses$370,000,000 $570,000,000 Operating income$865,000,000 $915,000,000 Patients470570Patient hospital days171,500202,920
Income statement excluding grants and investments for each year
Period Ending20132012Operating Revenue Patient self-pay revenue$312,500,000 $375,000,000  Third-party payer’s $625,000,000 $750,000,000 Less Cost of Revenue (marketing)$15,000,000 $15,000,000 Total Revenue$922,500,000 $1,110,000,000 Expenses Operating expenses $300,000,000 $500,000,000  Depreciation expense $50,000,000 $50,000,000  Research and education$20,000,000 $20,000,000 Total expenses$370,000,000 $570,000,000 Operating income$552,500,000 $540,000,000 
Determine the financial health of Pearland Medical Center. What were Pearland Medical Center’s net income, cash flow, total profit margin, and total profit margin excluding grants and investments for each year?
2012
Net income = $915,000,000
Cash flow= Net income + depreciation = $915,000,000 + $50,000,000 = $965,000,000
Total profit margin= $$915,000,000 / $ 1, 500,000,000= 61%
Total profit margin excluding grants and investments= $540,000,000 / $1,125,000,000=48%
2013
Net income= $865,000,000
Cash flow = Net income + depreciation = $865,000,000 + $50,000,000 = $915,000,000
Total profit mar...
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