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BHA FPX 4008 Assessment 2 Attempt 1 Financial Statement Analysis

Introduction

BHA FPX 4008 Assessment 2 Attempt 1 Financial Statement Analysis

As a healthcare administrator, creating and understanding a budget in a healthcare facility is vital to ensuring the facility’s financial success. In this assessment, I will be analyzing St. Anthony Medical Center’s finances over three fiscal years including outlooks on assets, liabilities, revenues, and changes in financial position. The purpose of this analysis is to create an accurate representation of the financial trends for St. Anthony Medical Center, its current financial obligations, and how the upcoming fiscal year projects considering this information.

Financial Position

Assets and liabilities are two factors that contribute to an organization’s financial health. Assets are anything of value owned by an organization and liabilities are obligations and or debts owed to outside sources. Vila Health’s assets have been decreasing since 2019. There was a decline of 6% in 2015, and although there was a slight increase of 1.7% from 2020 to 2021, there is still an overall decline of 4.3% over 3 years. Liabilities have also shown an overall decrease. In 2020 showed a decrease of 9.5% in total liabilities. They increased by 3.7% from 2020 to 2021 but still reported an overall decrease of 1.2% from 2019 to 2021. The liabilities however report a higher number in total assets. The debt-to-asset ratio is commonly used by analysts, investors, and creditors to determine the overall risk of a company. Companies with higher ratios are more leveraged and are more of a risk. An organization with a ratio of one means the assets are equal to the liabilities which means the organization is highly leveraged. 

The CEO of villa health stated main concern is that the debt to assets ratio indicates a high level of leverage. They currently stand at 1.2, knowing that anything above 1 indicated financial risk. They have $231,341,925 in liabilities and $191,246,229 in assets. There has been a recent expansion that has caused a lot of this financial risk and is the reason why the CEO is requiring a 5% cut in operating expenses in the next fiscal year in order to improve the financial health of the organization. With the expansion of the bariatric practice and the hiring of new doctors including a plastic surgeon, the CEO is confident that the financial health of the organization will greatly improve. Mainly because of the new practice and the new patient revenue brought by the plastic surgeon.

BHA FPX 4008 Assessment 2 Attempt 1 Financial Statement Analysis

Compare Financial Position to Previous Years

The financial position of St. Anthony Medical Center for the fiscal year of 2020 reveals a decrease in assets and liabilities compared to the years 2019 and 2021. Last year the organization had the lowest amount of assets in the last three years, the organization retained a total of $187,972,799 in assets. The following year which is the current year the organization’s asset is at $191,246,229. although the total asset amount is higher than the year before it still isn’t as high as two years prior which was $199,889,346. The organization is down a total of $11,916,547 in total assets just from last year to the current year. The main reason for this dip was because they had fewer surgeries and deliveries here in the past fiscal year, because of the construction, the expansion of the hospital, renovations, new equipment, and the hiring of new doctors and staff. Simply put the income-to-debt ratio is putting the organization’s financial health at risk in the future if this trend continues. That’s why extreme measures were taken like the five percent cut in operating expenses for the current fiscal year in hopes of creating a cushion to get the organization back on track. The new bariatric surgical practice generally yields more revenue per patient than other practices, so I believe that the organization is going in the right direction with the new practice to generate more revenue for the hospital. 

Accounts Receivable Changes

Sometimes an organization charges for goods and services it provides, but it does not receive cash for those goods or services immediately. That is, the organization is providing the goods or services on credit, or on an account. The organization records an account receivable when it provides goods or services but does not immediately receive payment. Accounts receivable are assets that represent the right to collect the money owed for the purchases that have been made on the account. Just as a manager would not want to buy and pay for supplies too soon because it takes money out of the organization’s bank account, the manager does not want to wait too long to collect money that is owed to the organization. The sooner the organization collects all its receivables, the sooner it will have that cash available for its use.

BHA FPX 4008 Assessment 2 Attempt 1 Financial Statement Analysis

 Typically receives payout on accounts receivable within the year. Currently, accounts receivable is at $32,410,207 which is lower than in the previous two years. Last year’s account receivable was at $39,102,464 and the year prior to that was $46,165,929. This decrease in accounts receivable has a negative impact on cash flow mainly because the fewer the accounts the less cash an organization will be reimbursed cash. On the other hand, more accounts receivable could lead to a loss of cash if there are errors on bills, missed follow-ups on overdue bills, writing off outstanding receivables as bad debt, and allocating payments incorrectly. It would be much easier for an organization to focus on cash budgeting.

Analyze the Financial Obligations

While increasing assets should be a priority, I believe that Vila Health should focus on decreasing the asset-to-debt ratio by eliminating debts and cutting some costs for the upcoming year. For example, accounts payable, operating expenses, and limiting contractual adjustments. if the organization can make minor adjustments to those then the financial health of the organization would be better. Limiting contractual adjustments and hospital errors would improve Vila Health a great deal and they can continue focusing on growing the organization and the salaries of the staff to ensure top quality of service. The financial obligations St. Anthony Medical Center needs to consider in the upcoming year are focusing on bringing in revenue to get back on track from the expansion and eliminate as much debt as possible.

Analyze Patient Revenue

In 2019 the total patient services revenue was $992,725,461 and increased the following year to $1,131,077,491. For the current year, patient services totaled $1,282,520,098. The total increase from two years ago is $289,794,637. From the data gathered we can imply that the financial health of the organization is healthy and continues to trend upwards. I believe that the staff expansion that comes from the new doctors and other staff in the bariatric practice, is producing more revenue as the CEO hoped would happen. Also, a portion of the revenue comes from a new plastic surgeon that was hired. She is also part of the per-surgery increase that made up for the lack of volume because she brought new patients with her. Those patients yielded the revenues the organization needed, without requiring the normal marketing expenditures for bringing in new patients. The increase in patient revenue services also helps balance the inflation of wages for all staff. I would say that the expansion was risky it was also a success.

Conclusion

As a healthcare administrator or manager creating and understanding a budget in healthcare is vital to the financial success of the organization. In this analysis, I created an accurate representation of the financial trends for St. Anthony Medical Center, its current financial obligations, and explained the balance sheet of the organization.  I also covered the financial position of St. Anthony Medical Center compared to the previous year and explained the financial obligations of St. Anthony Medical Center and their implications for the upcoming year. The financial management aspects of planning, implementing, and controlling activities are often referred to as managerial accounting. Any information generated is primarily for the use of managers in their efforts to optimize the results of the organization.

BHA FPX 4008 Assessment 2 Attempt 1 Financial Statement Analysis

References

Connor, Elizabeth,M.L.S., A.H.I.P. (2015). Healthcare finance and financial management: Essentials for advanced practice nurses and interdisciplinary care teams. Journal of the Medical Library Association, 103(2), 111. https://doi.org/10.3163/1536-5050.103.2.015

 Finkler, S. A., Smith, D. L., & Calabrese, T. D. (2018). Financial Management for Public, 

Health, and Not-for-Profit Organizations (6th Edition). SAGE Publications, Inc. (US). https://capella.vitalsource.com/books/9781506396804

Liesching, T. N., M.D. (2021). DISCUSSION ARTICLE THE BASICS OF HEALTHCARE ECONOMICS, FINANCE, AND BUDGETING FOR THE NEW PHYSICIAN LEADER. Physician Leadership Journal, 8(6), 38-44. http://library.capella.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fdiscussion-article-basics-healthcare-economics%2Fdocview%2F2655180976%2Fse-2%3Faccountid%3D27965

Singh, S. R., PhD., Wheeler, J., PhD., & Roden, Kirk,M.B.A., F.A.C.H.E. (2012). Hospital financial management: What is the link between revenue cycle management, profitability, and not-for-profit hospitals’ ability to grow equity? Journal of Healthcare Management, 57(5), 325-39; discussion 339-41. http://library.capella.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fhospital-financial-management-what-is-link%2Fdocview%2F1095776503%2Fse-2%3Faccountid%3D27965

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