River community hospital case study solution

This is a sample of the instructor materials for Louis C. Gapenski and George H. Pink, Cases in Healthcare Finance, fifth edition. The complete materials include      case questions and solutions instructor Excel models PowerPoint slides for each case student spreadsheets a transition guide to the new edition This sample contains the following materials for Case 1:    questions and solutions PowerPoint slides instructor’s Excel model If you adopt this text, you will be given access to the complete materials. To obtain access, email your request to hapbooks@ache.org and include the following information in your message:       Book title Your name and institution name Title of the course for which the book was adopted and the season the course is taught Course level (graduate, undergraduate, or continuing education) and expected enrollment The use of the text (primary, supplemental, or recommended reading) A contact name and phone number/e-mail address we can use to verify your employment as an instructor You will receive an e-mail containing access information after we have verified your instructor status. Thank you for your interest in this text and the accompanying instructor resources. *** PLEASE NOTE: This book is also available in e-book format at CourseSmart, CafeScribe, and Kno. Rental access is available at CourseSmart and Kno for 50% off the print list price. Perpetual access is available at CafeScribe and Kno at list price. For more information, please visit one of these preferred partners or contact us at hapbooks@ache.org. Copyright 2014 Health Administration Press Cases in Healthcare Finance, 5th Edition Copyright © 2014 by FACHE CASE 1 QUESTIONS RIVER COMMUNITY HOSPITAL Assessing Hospital Performance 1. Examine the hospital’s statement of cash flows. What information do they provide regarding the hospital’s sources and uses of cash over the past two years? 2. List five or more financial strengths of the hospital? (Hint: Do not provide a list of ratios. Make a statement and then justify it with information from the financial statements and ratios.) 3. List five or more financial weaknesses of the hospital? (Hint: Do not provide a list of ratios. Make a statement and then justify it with information from the financial statements and ratios.) 4. The Board chair has asked management to develop some strategies to improve profitability and estimate the impact of the strategies on the hospital’s ROE. By how much would the 2013 ROE change from each of these strategies? a. Vacant land is sold and total assets decreases by $2.0 million. Net income would not be affected and the Board wants to maintain the 2013 debt ratio. b. Debt is substituted for equity and the debt ratio increases to 48 percent. Total assets would not be affected. Interest expense would increase but better cost controls would offset the higher interest expense and thus net income would not change. c. LEAN management is implemented and total expenses decrease by $0.5 million. Total revenue, total assets, and total liabilities & net assets would not change. d. Whatever strategy Melissa chooses, she is under pressure from the Board to increase return on equity to at least 10 percent. What total margin would be needed to achieve the 10% ROE, holding everything else constant? 5.