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Key Topics
- “Healthcare Finance Project”
- A.Ratio analysis
- 1.Liquidity Ratio:
- Quick Ratio:
- Cash Ratio:
- 2.Solvency Ratio
- B.Comparison of financial strengths and weaknesses of hospital
- Financial Strength of Harris Memorial Hospital:
- Financial weakness of Harris Memorial Hospital:
- C.Overview of the financial Health of the hospital
- D.Explanation of Financial analysis
- E.Two strategies for improving the hospital financial position
- Two Strategies:
- Reference List
1. Discuss terms and concepts associated with techniques of financial control, cost control,
capital project management, and management control for health services administrators
2. Employ financial tools and methodologies used across the healthcare industry
3. Outline the financial structure and market forces at play in a healthcare system.
capital project management, and management control for health services administrators
2. Employ financial tools and methodologies used across the healthcare industry
3. Outline the financial structure and market forces at play in a healthcare system.
“Healthcare Finance Project”
A.Ratio analysis
1.Liquidity Ratio:
This includes current ratio, quick ratio and cash ratio for the year ended 2017 of Harris Memorial Hospital.
So, Current Ratio for the year 2017= Current Asset / Current Liabilities
= 194235/ 103522 = 1.876
Current Ratio for the year 2016 = Current asset /Current Liabilities
= 156381/ 96897 = 1.614
So, it has been seen from above result that current ratio is increasing and for that reason the asset earning is increasing for Harries Memorial Hospital from the year 2016 to 2017 (The American Association of Individual Investors, 2018).
So, Current Ratio for the year 2017= Current Asset / Current Liabilities
= 194235/ 103522 = 1.876
Current Ratio for the year 2016 = Current asset /Current Liabilities
= 156381/ 96897 = 1.614
So, it has been seen from above result that current ratio is increasing and for that reason the asset earning is increasing for Harries Memorial Hospital from the year 2016 to 2017 (The American Association of Individual Investors, 2018).
Quick Ratio:
This ratio can be calculated as follows:
Quick ratio= (Cash and Cash Equivalents + Short Term Investments + Current / account receivables)/ Current Liabilities
So, quick ratio for the year 2017= (82815+ 0+ 70025)/103522= 1.48
Quick ratio for the year 2016= (59696 + 0+ 59939)/ 96897=1.23
Quick ratio= (Cash and Cash Equivalents + Short Term Investments + Current / account receivables)/ Current Liabilities
So, quick ratio for the year 2017= (82815+ 0+ 70025)/103522= 1.48
Quick ratio for the year 2016= (59696 + 0+ 59939)/ 96897=1.23
So, from the above analysis it can be clearer that in both the year the Hospital has more than one quick ratio and that means liquidity position is better for both the year.
Cash Ratio:
This ratio can be calculated as follows:
Cash Ratio is defined as
Cash ratio= (Cash equivalents + Cash)/ current liabilities
Cash ratio for the year 2017= (82815/103522) = 0.799
Cash ratio for the year 2016= (59696/96897) =0.616
From the above ratio analysis, it can be concluded that Harris Memorial Hospital holds good amount of Cash which they can invest in other sector for better return or they can spread as dividend to the shareholders for goodwill.
Cash Ratio is defined as
Cash ratio= (Cash equivalents + Cash)/ current liabilities
Cash ratio for the year 2017= (82815/103522) = 0.799
Cash ratio for the year 2016= (59696/96897) =0.616
From the above ratio analysis, it can be concluded that Harris Memorial Hospital holds good amount of Cash which they can invest in other sector for better return or they can spread as dividend to the shareholders for goodwill.
2.Solvency Ratio
This ratio is calculated for examining the ability of the business to meet the long-term obligations. This ratio is mostly used for current as well as prospective lenders. This ratio has compared the cash flows with liabilities.
The ratio is given by (Net after-tax income + Non-cash expenses)/ (Short-term liabilities + Long-term liabilities).
So, Solvency ratio for the year 2017= (800209/103522) = 7.73
Solvency ratio for the year 2016 = (746021/103522) = 7.67
So, it can be concluded from above calculation that there is a moderate solvency ratio for which risk can be covered as it is a new business (Lane, 2018).
The ratio is given by (Net after-tax income + Non-cash expenses)/ (Short-term liabilities + Long-term liabilities).
So, Solvency ratio for the year 2017= (800209/103522) = 7.73
Solvency ratio for the year 2016 = (746021/103522) = 7.67
So, it can be concluded from above calculation that there is a moderate solvency ratio for which risk can be covered as it is a new business (Lane, 2018).
B.Comparison of financial strengths and weaknesses of hospital
Financial Strength of Harris Memorial Hospital:
1.There are outstanding medical staff
2.Strong commitment to the staff and community
3.Higher level of organizational efficiency
4.Outstanding healthcare quality
5.Strong growth
6.High liquid cash investments
7.Good earning from charity project
8.Planned Health Insurance program
9.Fair chance of excess revenue generation (Foster, 2004).
2.Strong commitment to the staff and community
3.Higher level of organizational efficiency
4.Outstanding healthcare quality
5.Strong growth
6.High liquid cash investments
7.Good earning from charity project
8.Planned Health Insurance program
9.Fair chance of excess revenue generation (Foster, 2004).
Financial weakness of Harris Memorial Hospital:
1.Lack of adequate resources as it is a new business. Good number of stuff is needed to recruit.
2.Shortage of critical stuff.
3.Lack of Primary care Network
4.Lack of adequate support when needed as number of donor is not increasing.
5.Gifts and long lived assets has explicit restrictions
6.Donor trust liabilities are also included and the net unrealized loss is expected as high as $9,183,000 (Devaraj & Kohli, 2003).
2.Shortage of critical stuff.
3.Lack of Primary care Network
4.Lack of adequate support when needed as number of donor is not increasing.
5.Gifts and long lived assets has explicit restrictions
6.Donor trust liabilities are also included and the net unrealized loss is expected as high as $9,183,000 (Devaraj & Kohli, 2003).
C.Overview of the financial Health of the hospital
As there is a high operating expenses as high as $764,776 there is high operating loss of $1.85 million. It is very clear to the people of Harris community there is a good promise of fund healthcare for the indigent as well as the medically needs patients in the country.
There is a strong growth in the liquidity position in the year 2017 from the other year 2016. There are altogether 27 skilled Nurse who are tremendously working day and night for the patients. The approximate construction contract is $7,360,000 which can be repayment by additional revenue generation through Harris Health Plan project (Cleverley & Cleverley, 2018).
The accounts receivable is up to 20% rising whereas it is 29% from the health plan project. As per the agreements it is restricted to use the asset and only 20% can be reinvesting for better return. This concludes not much investment possible from the cash or revenue generation.
However, the property and other equipment have long life and are considered as depreciable after 40 years. For that scenario, hospital is no need to extra high cost to implement in other physical resources.
So, the overall financial health condition can be considered as good and ongoing for the new health project, Harris Memorial Hospital (Richter & Muhlestein, 2017).
There is a strong growth in the liquidity position in the year 2017 from the other year 2016. There are altogether 27 skilled Nurse who are tremendously working day and night for the patients. The approximate construction contract is $7,360,000 which can be repayment by additional revenue generation through Harris Health Plan project (Cleverley & Cleverley, 2018).
The accounts receivable is up to 20% rising whereas it is 29% from the health plan project. As per the agreements it is restricted to use the asset and only 20% can be reinvesting for better return. This concludes not much investment possible from the cash or revenue generation.
However, the property and other equipment have long life and are considered as depreciable after 40 years. For that scenario, hospital is no need to extra high cost to implement in other physical resources.
So, the overall financial health condition can be considered as good and ongoing for the new health project, Harris Memorial Hospital (Richter & Muhlestein, 2017).
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D.Explanation of Financial analysis
The long term debt is measured and the revenue bonds is totaling as high as $15,700,000. There are advance refunds of $31,280,000. The revenue bonds as well as other interest can generate above 50% ($439,597) of the operating expenses which is $ 764,776 for the year ended 2017. It is thus recommended to invest more amounts in bonds profile as well as the short term equities. As total income from Healthcare services ($619,596) is not enough to cover up the expenses. So, for higher revenue generation, Harris memorial hospital has only way of capital investment and other projects of research where they will be offered extra investments. Interest rate swap agreements have a good amount of return which is basically based upon the market rates. So, for the risk coverage Harris Memorial Hospital should invest 40% of their revenue to Health insurance plan which will be supportive to their tax benefit as well. The book value for the medical building is approximately $10,900,000 which in turn can be a stable income provision and for that reason there is a good profit. But this cannot cover the expenses made by goods and services which is approximately $1, 37,400,000. So company has to go for borrowings. The Charitable Foundation thus has a good imitative and works collaborate with Harris Memorial hospital (Harris Health System, 2016).
E.Two strategies for improving the hospital financial position
Two Strategies:
1.To implement an orphanage home from child and other medical support for critical care of child, for that MEDSURE program is subjected to implement for insurance purpose. According to the World and U.S news this kind pf program is necessary for accessing the more opportunities in case of health and care organizations. These programs also provide a better understanding for creation of compelling narratives which will foster the greater understanding for the shared challenges as well as the greater support with people-centered policies.
2.To implement cancer and aids recovery research program which is needed to be developed under community foundation. This initiative will increase the financial revenues by accumulating such projects from WHO or UNICEF. Through this kind of program, it is very important to modify the patient care as good as possible. There is a positive impact has been observed towards the healthcare association which having the benefits of urgent care and cure. Also the research opportunities are found to be enhanced within this kind of program which is also tremendously helpful for the improvement of financial position of the healthcare associations (Pollitt & Bouckaert, 2017).
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Cleverley, W., & Cleverley, J. (2018). Essentials of Healthcare Finance. Retrieved from http://samples.jbpub.com: http://samples.jbpub.com/9781284094633/FrontMatter.pdf
Devaraj, S., & Kohli, R. (2003). Performance impacts of information technology: Is actual usage the missing link?. . Management science, 273-289.
Foster, G. (2004). Financial Statement Analysis,. New York: Pearson Education India.
Harris Health System. (2016). Harris Health Annual Report. Retrieved from https://www.harrishealth.org: https://www.harrishealth.org/SiteCollectionDocuments/annual-reports/annual-report-2016.pdf
Lane, M. (2018). Ratio Analysis. Retrieved from http://www.zenwealth.com: http://www.zenwealth.com/BusinessFinanceOnline/RA/RatioAnalysis.html
Pollitt, C., & Bouckaert, G. (2017). Public Management Reform: A Comparative Analysis-Into the Age of Austerity. . London: Oxford University Press.
Richter, J. P., & Muhlestein, D. B. (2017). Patient experience and hospital profitability: Is there a link? Health care management review, 247-257.
The American Association of Individual Investors. (2018). 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses. Retrieved from http://www.aaii.com: http://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a-companys-strengths-and-weaknesses.touch
Devaraj, S., & Kohli, R. (2003). Performance impacts of information technology: Is actual usage the missing link?. . Management science, 273-289.
Foster, G. (2004). Financial Statement Analysis,. New York: Pearson Education India.
Harris Health System. (2016). Harris Health Annual Report. Retrieved from https://www.harrishealth.org: https://www.harrishealth.org/SiteCollectionDocuments/annual-reports/annual-report-2016.pdf
Lane, M. (2018). Ratio Analysis. Retrieved from http://www.zenwealth.com: http://www.zenwealth.com/BusinessFinanceOnline/RA/RatioAnalysis.html
Pollitt, C., & Bouckaert, G. (2017). Public Management Reform: A Comparative Analysis-Into the Age of Austerity. . London: Oxford University Press.
Richter, J. P., & Muhlestein, D. B. (2017). Patient experience and hospital profitability: Is there a link? Health care management review, 247-257.
The American Association of Individual Investors. (2018). 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses. Retrieved from http://www.aaii.com: http://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a-companys-strengths-and-weaknesses.touch
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