Case Study : Titus Lake Hospital

1024 Words3 Pages

General Practices Affiliates is considering an offer from Titus Lake Hospital to join under a provider leasing model. Under a provider leasing model, Titus Lake Hospital is purchasing General Practices Affiliates’ services. The practice will retain control of personnel, management, and practice policies. Titus Lake Hospital submitted financial reports to assure transparency during the lease agreement process. The following analysis will discuss whether Titus Lake hospital is a viable financial partner for General Practice Affiliates, possible implications of the lease, and recommendations. First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ... ... middle of paper ... ...ospital, later, pays General Practice Affiliates a fee. This fee must be carefully establish. Finally, General Practice Affiliates must ensure that all payments are done on time. To ensure timely payments, General Practice Affiliates will impose financial penalties to the hospital for late payments. General Practice Affiliates, due to its current financial situation, can benefit from a lease agreement with Titus Lake Hospital. Titus Lake Hospital is a financially stable business partner. General Practice Affiliates will retain management rights, but the volume of patients will increase. The downside for General Practice Affiliates is that a new electronical medical records system must be purchased. Financing for the new system should come from a variety of sources. Titus Lake Hospital must ensure a volume of referrals to make the agreement advisable.

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