Assignment 6 Financial Analysis: Trinity Health System's Board of Director's The increase in healthcare costs have required health care executives to develop strategic financial plans and improve their capital planning processes in order, to make efficient decisions within a timely manner. As a result, it is important that the health care executives manage the debt portfolio in order, to remain successful and competitive within the steadily changing healthcare industry. Therefore, the financial status of Trinity Health System located in Steubenville, Ohio was analyzed to determine any recommendations for financial improvements. The latest financial data available online was for fiscal year ending 2013, where Trinity Health System had …show more content…
$41 million of debt outstanding (Moody's, 2013). As a result, Trinity's rating dropped from stable to a negative A3 due to a decrease in operating performance for ten months of fiscal year 2013 compared to previous years (Moody's, 2013). However, there is some strength within Trinity's financial debt portfolio starting with Trinity's ability to maintain, "A healthy balance sheet with 180 days cash on hand" (Moody's, 2013). In addition, the cash-to-direct debt is 233% and the cash-to-comprehensive debt is 127% (Moody's, 2013). Therefore, taking a closer look into Trinity's financials the debt-to-operating revenues is low at 20% compared with other A3 ranking hospitals and a debt-to-cash flow at 2.5 times (Moody's, 2013). A few weaknesses found in Trinity Health System's financials is the hospital's expense growth of 5.1% exceeded its revenue growth of 1% with a 6.2% operating cash flow margin and a 0.6% operating margin (Moody's, 2013).
Overall, Trinity is located in an area where 53% of gross revenues are Medicare accounts, the unemployment rate is higher than the state and/or national averages, and income levels are below state and national averages (Moody's, 2012). Overall, Trinity has some strengths and weaknesses within its financial debt portfolio in order, for Trinity to improve its debt rating it will need to improve its operating margins and revenues (Moody's, 2013). Therefore, Trinity needs to improve and sustain its operating performance, improve its leverage and liquidity ratios, and increase its absolute liquidity (Moody's, 2013). As a result, if Trinity does not improve then a decrease in performance will increase its debt. Overall, the strengths in Trinity's debt ratios are outweighing its weaknesses for now however, the hospital needs some improvements. Consequently, if Trinity invests in new expensive capital that significantly increase its debt or a decline in liquidity without improvements in cash flows, than the hospital will encounter financial distress (Moody's, …show more content…
2013). Therefore, a few suggestions have been developed to consider for improving Trinity's debt portfolio.
First, it is important that the senior executives self-evaluate the hospital, update and communicate the strategic plan with all members, and improve the operating margins and optimize the cost structure (Davis & Robinson, 2010). Overall, labor and/or medical supplies are the items that drastically increase the healthcare organizations operating expenses therefore, it is important that these areas are analyzed for cost-saving options (Davis & Robinson, 2010). In addition, Trinity cannot afford to lose any of its liquidity therefore, it is important that the hospital monitor its liquidity closely (Davis & Robinson, 2010). As a result, Trinity should establish a cash-flow projection that is closely monitored and adhere to the projection for the entire fiscal year (Davis & Robinson, 2010). In addition, Trinity cannot afford to lose any revenue therefore, it important that the hospital is dedicated to providing high quality patient care and develop an integrated healthcare model (Davis & Robinson, 2010). Overall, it is important for the Board members to consider these suggestions in order, to improve the debt portfolio of Trinity Health
System.
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. ...
WellStar Health Systems is currently the preeminent and largest health care provider in Metro Atlanta. WellStar Health Systems is a not-for-profit institution that is composed of 5 hospitals and an abundance of physician groups. Physician specialty groups included within WellStar are: ENT, Psychiatry, Endocrinology, Pulmonary Medicine, Infectious Disease, General Surgery, Rehabilitation, Pathology, and Rheumatology. WellStar’s organizational design is composed of internal and external factors that define the organization’s size, organizational structure, and processes. Internal and external factors are the basis for influencing managerial conclusions in decision-making. These factors vary from organization to organization and are the rationale for understanding WellStar’s strengths, weaknesses, opportunities, and threats. Understanding these variables is a necessity for the sake of WellStar’s survival
You are the CEO of a large multi-specialty group practice and have financial problems, as well as conflicts over compensation between your primary care and specialty care physicians. There have been substantial changes over the years regarding payment structures, case mix, and capital costs. Now, the Patient Protection and Affordable Care Act (ACA) has added other potential changes into the mix and has raised the question as to whether your practice should become an ACO. Discuss what analyses you would undertake to evaluate the financial situation of and the conflicts within the group practice. Be able to justify the underlying rationale for the analyses and how you will use the results to address the financial concerns, the organizational conflicts and the potential changes facing the organization. This question response should explore organizational behaviors, financial and budgeting issues, personnel management and strategic planning.
The financial data for the company is convincingly good-to-great. Its revenues has been rising constantly since 1998 as can be seen on the exhibit. Net income for 2002 was the highest in 5 years ? $5,710 million, rising by 58% since 2001. Its total assets have increased by 13.6%.
At the end of 2006, HCA Holdings Inc. had a net income of $1.036 billion dollars which included reduction on professional liability, gains on investments, and gains on facility sales among other things (Sources of Revenue, 2016). Facility admissions, inpatient, and outpatient surgeries increased in 2006 in comparison to what was recorded for 2005 (Sources of Revenue, 2016). When analyzing the data over the life span of the company, it is easy to notice the growth and development that the firm has
Risk in a health care organization is the main focus of the health care organization through frugal search of solvency ratios. The purpose of solvency ratios is to take a long-term view. Additionally, it is to help determine if the organization has overextended itself throughout use of financial leverage. At times, these ratios can be referred to as leverage or capital structure ratios. Three common types of solvency ratios consist of “interest coverage ratio, debt service coverage ratio and “long-term debt to net assets ratio”. They all each compare one item to another and to determine if any risk involved. Nevertheless, has helpful the solvency ratios are the carefulness should be advised for improvement. From the creditor’s and organization’s standpoint, it varies if the organization needs improvement on risk and profits. If charity care helps expenses, but hurts profits the overall interest coverage ratio would be lesser. The debt service ratio coverage is to build interest coverage ratio and give broader complete look at the organizations ability to pay its long-term debt. The process requires to pull information from statement of operations and st...
The increase in debt ratio has attracted the attention of rating agencies who have clearly stated that in order for HCA to maintain their A bond rating, HCA must return to their 60-40 capital structure. Now the question arises as to whether the A rating should be sought or should HCA move to a less conservative position. Some investors believe that a more aggressive use of leverage would present greater opportunities in the future. Others feel that with changes in the Medicare/Medicaid reimbursement structure on the horizon, HCA should remain conservative. In order to decrease the debt ratio, HCA would have to 1) decrease the growth rate (inadvertently decreasing ROE) or 2) decrease debt/increase equity.
The unhealthy hospital case is about a hospital named Blake Memorial that has been in very bad shape, lacks in providing the best quality of care, is in debt, and financially imbalanced. It is important for a health care set up to maintain an equal balance in the financial system so the stakeholders, the organizations who run the hospitals and customers who are the patients, their interests are met. If the hospital is lacking in providing the best quality of care for its community and the community is in higher need of the care than the CEO’s of the hospital need to make a change. The patients (customers) look for getting the best services and better results from a hospital and the stakeholder’s look for better profitable gain from their business by running the hospitals.
A continuous and appropriate financial management is highly essential to sustain and integrated a healthcare program. To build a sustainable integrated program cost calculation and pro formas are necessary to create monthly metrics, program accountability and fiscal sustainability this
For several decades health care has been tied to the economy and with the current downturn we see continued efforts to control and reduce over-head costs. Health care organizations in their effort to become more efficient and address changes in the industry have altered their strategic business plans. Lee & Alexander (1999) researched organizational change in hospitals and their survival, in this paper I hope to discuss their findings and add other examples to validate their conclusions.
Financial viability is categorized by patients and nonpatients. Patients consist of patients who pay all themselves and use insurance companies like Blue Cross and Blue Shield, Medicaid and Medicare. Nonpatients are when patients pay using tax support, grants, and other contributions (Cleverley, Cleverley, & Song, 2011). Financial viability is used as financial indicators to see if the hospital is improving it care by increasing the number of patients seen. To achieve financial viability hospitals, need sound financial management practices to effectively and efficiently reach their goals (Suarez, Lesneski, & Denison, 2011). Financial viability is a vital part of the health care
There are many companies that use financial accounting statements to maintain a financially sound organization. Bookkeepers are able to give a report of the company’s financial health through these statements. These statements are reports that contain information pertaining to the organization’s financial position and results of their activities. (Finkler, et, al., 2013). The purpose of Management's discussion and analysis (MD&A), is to provides an overview of previous operations to develop a framework to meet the goals for the next year (Finkler, et, al., 2013). These outcomes can highlight areas of positive and negative managerial styles and decision making. It offers a breakdown of the overall financial position and results of operations to assist users in assessing whether that financial position has improved or deteriorated as a result of the year’s activities. (Finkler, et, al., 2013).
Financing decision is made to raise funds to buy the assets that are necessary to support the organization operations. To support the organization growth they will have to make Capital investment decisions, to expand their business in order to keep up with competition. They would have to invest in purchasing new equipment and technology to stay abreast with the ever evolving healthcare field. They would have to acquire new office to enroll new patients into their healthcare system, which will increase the organization revenues to secure a stable financial
Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations (7th ed.). San Francisco, CA: Jossey-Bass.
Financial executives in the healthcare industry rely heavily on cash budgets to help facilitate in the forecasting of cash flows and decision making on any additional financing that may be needed (Cleverley, Cleverley, & Song, 2012). Of course the budgets are not a guarantee that the forecasted plans will go accordingly as they were planned, but with close monitoring, management will be able to make any adjustments as needed for business needs. Businesses can choose to utilize a fixed budget or decide to go with a rolling budget period. A fixed budget is more traditional annual forecast for most firms and a rolling budget differs from the traditional way in regards to its timeframe and more comprehensive analysis (Hill, 2016). The traditional