Creekside Community Hospital Financial Analysis

The following document is the financial analysis with financial proposals to move Creekside Community Hospital into a strong economic future. To determine the best financial practices for Creekside Community Hospital, many factors were considered. This analysis starts with an evaluation of current capital structure and the organization’s liquidity and profitability ratios while offering recommendations to improve Creekside Community Hospital’s current financial standing.
Looking at Creekside Community Hospital’s debt ratio, its current standing of 40.90 percent is below the industry median of 48.40 percent (Appendix). This indicates Creekside Community Hospital’s investments are falling short of the industry median. Fortunately for Creekside Community Hospital there are several ways of improving the debt ratio.
In anticipation of a decrease in payments by government and insurance agencies, Creekside Community Hospital may want to consider merging with another healthcare organization to increase investment and funding opportunities. In merging with another organization, Creekside Community Hospital can become more competitive with other larger organizations by having shared resources (Jarvis, 2013). Shared resources will not only increase the investment

market, but also increase the quality of care discussed later in this analysis.
Due to fluctuating government administration, changes to debt refinancing are occurring.

Once change is that advance refunding is no longer available. Advance refunding allowed organizations to refinance a debt before a standard set period without penalties (Arduino, n.d.). For Creekside Community Hospital to improve its debt ratio, it will need to find ways of remaining flexible. In making investments, Creekside Community Hospital will want to look for funding with the language indicating the organization has flexibility at the time of interest rate reset. In doing so, this will allow the organization and lender to make mutual changes, such as interest rate set and negotiates the interest rate (Arduino,

n.d.).
Looking at the liquidity ratio, Creekside Community Hospital is currently at $2.67 with the industry median at $1.99. The liquidity ratio is above the industry median; this means that for every dollar amount of current assets, Creekside Community Hospital has $2.67 available to pay against liabilities due (Gapenski & Reiter, 2016). Creekside Community Hospital is in good standing for laudability. To maintain this ratio, the organization should continue to develop sound investments at a faster pace than adding debt (HFM, 2014).
To determine Creekside Community Hospital’s ability to control expenses while using assets to generate additional revenue, the return of total assets (ROA) is reviewed (Gapenski & Reiter, 2016). The organization’s current ROA is 4.53% compared to industry median of 3.10% (Appendix). This ratio indicates that Creekside Community Hospital is maintaining control of the expenses with increasing revenue. Creekside Community Hospital must consider the amount of assets it will acquire if they intend to merge with another organization. For the ROA to remain at a strong rate, the number of assets held must remain highly productive in comparison to services offered. If an asset is not being utilized to create revenue, it will decrease the profit margin (Gapenski & Reiter, 2016).
A strong operating and capital budget should align with the strategic goals of Creekside Community Hospital, as well as ensure operational efficiencies and financial longevity. Planning capital purchases continually and for future years will allow Creekside to be competitive, which is a crucial factor in capital budgeting (Gapenski & Reiter, 2016). Vianueva (2011) suggests an inadequate capital budget process leads to a key problem area for hospitals. Cost allocation is a vital component of the capital budget process. Costs must be allocated to the appropriate departments or areas where they are incurred, as well as where revenues are generated. With Creekside Community Hospital exhibiting higher inpatient costs than outpatient costs, the hospital leadership should ensure accuracy so that managers have the information necessary to make sound, financial decisions currently and in the future related to staff support, equipment and supply purchase to name a few.