For this assessment, you will develop a 4-6 page analysis of St. Anthony Medical Center’s finances over three fiscal years. This analysis will include considerations such as assets, liabilities, revenues, and changes in financial position.

Introduction

NOTE: THIS ASSESSMENT USES VILA HEALTH: FINANCIAL STATEMENT ANALYSIS AS THE CONTEXT FOR DEVELOPING YOUR ANALYSIS. PLEASE MAKE SURE YOU HAVE REVIEWED THIS MULTIMEDIA BEFORE YOU COMPLETE YOUR ASSESSMENT SUBMISSION.

Costs are evaluated very closely by all levels of health care administrators. Costs are broken down into different categories, such as direct costs versus indirect costs, and fixed costs versus variable costs (Finkler, Smith, & Calabrese, 2020). You will examine these types of costs and learn analytical methods such as break-even analyses and cost allocation methodologies. These methodologies explore the relationship between volume and cost and demonstrate why volume plays an important role in the planning process.

For this assessment, you will research how costs are allocated from overhead departments to revenue-generating departments. You will conduct independent research on cost allocation methodologies in addition to using the materials provided in the text. You will also consider the steps involved in preparing a cost-benefit analysis (CBA) when deciding to purchase a capital item such as an MRI machine.

The balance sheet, activity statement (also known as an income statement), and statement of cash flows are three of the most common types of financial statements that organizations prepare. You can think of balance sheets as a picture of the financial position of an organization at a given period in time—for example, as of December 31, 20xx. On the other hand, an activity statement or income statement will show the financial position of an organization over a longer period of time—for example, an entire month, quarter, or year (Finkler, Smith, & Calabrese, 2020).

You will explore these types of statements and apply your new knowledge to the health care administration field. You will analyze specific financial statements and think about the financial health of an organization based on the statements provided. You will have several opportunities to practice your analytical skills within this assessment by exploring the concept of ratio analysis. Ratio analysis is one more way that both internal and external stakeholders can increase understanding of the financial position of an organization. Ratio analysis compares financial statement data to provide another view that may then be benchmarked or compared to other organizations. Some common ratio types include common size ratios, liquidity ratios, asset turnover ratios, and leverage or coverage ratios (Finkler, Smith, & Calabrese, 2020).

Additionally, it is important to support your analysis with reference to relevant literature. While it is appropriate to use your textbook as part of that support, your paper should reference at least three outside articles in addition to your textbook.

Demonstration of Proficiency

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

Competency 1: Explain the importance of reporting in health care.

Explain the financial position of St. Anthony Medical Center by comparing assets and liabilities.

Explain the financial position of St. Anthony Medical Center compared to previous years.

EXPLAIN HOW ACCOUNTS RECEIVABLE CHANGED FROM PREVIOUS YEARS.

Competency 2: Develop a departmental budget.

Analyze the financial obligations of St. Anthony Medical Center and their implications for the upcoming year.

• Analyze patient revenue compared to previous years and the implications for the financial health of St. Anthony Medical Center.

Competency 3: Communicate in a manner that is scholarly, professional, and respectful of the diversity, dignity, and integrity of others and consistent with the expectations for health care professionals.

• Adhere to the rules of grammar, usage, and mechanics.
• Apply APA formatting to in-text citations and references.
• Reference
• Finkler, S. A., Smith, D. L., & Calabrese, T. D. (2020). Financial management for public, health, and not-for-profit organizations (6th ed.). CQ Press.

Instructions

• This assessment has two main parts.
• Analysis of the Balance Sheet
• This part of the assessment will focus on analyzing the balance sheet for St. Anthony Medical Center. Relevant scoring guide criteria:

Explain the financial position of St. Anthony Medical Center by comparing assets and liabilities shown in the Financial Statement [XLSX].

• “Explain” means to make something (an idea, situation, or problem) clear to someone by describing it in more detail or revealing relevant facts or ideas.
• Explain the financial position of St. Anthony Medical Center compared to previous years.

Explain how accounts receivable changed from previous years.

Analyze the financial obligations of St. Anthony Medical Center and their implications for the upcoming year.

“Analyze” means to examine methodically and in detail the constitution or structure of something (especially information), typically for purposes of explanation and interpretation.

Adhere to the rules of grammar, usage, and mechanics.

“GRAMMAR” REFERS TO THE BASIC RULES FOR HOW SENTENCES ARE CONSTRUCTED AND HOW WORDS COMBINE TO MAKE SENTENCES (FOR EXAMPLE, WORD ORDER, CASE, AND TENSE).

“Usage” refers to correct word choice and phrasing, particularly with regard to the meanings of words and phrases.

“Mechanics” refers to correct use of capitalization, punctuation, and spelling.

Apply APA formatting to in-text citations and references.

Be sure to include a separate references page.

• Some questions to consider that may help you organize your analysis are:

Do assets exceed liabilities?

What does this tell you about the financial position of St. Anthony Medical Center?

• How has the financial position of St. Anthony Medical Center changed since last year?
• How has it changed since the year prior?
• How have the accounts receivable changed from previous years, and what does this tell you?
• Using the balance sheet, what financial obligations does St. Anthony Medical Center need to consider in the upcoming year?

The goal of this analysis is to create an accurate picture of the financial trends for St. Anthony Medical Center, its current financial obligations, and how the upcoming fiscal year projects in light of this information.

• Analysis of the Income Statement
• This part of the assessment will focus on analyzing the income statement for St. Anthony Medical Center. Relevant scoring guide criteria:

Analyze patient revenue compared to previous years and the implications for the financial health of St. Anthony Medical Center.

• Adhere to the rules of grammar, usage, and mechanics.
• Apply APA formatting to in-text citations and references.
• Some questions to consider that may help you organize your analysis are:
• Has patient revenue increased or decreased from previous years?

What could this indicate about the financial position of St. Anthony Medical Center?

• The goal of this analysis is to create an accurate picture of trends tied to the overall financial health of St. Anthony Medical Center.

Financial Statement Analysis

Introduction

• Your Office
• Board Meeting
• Conclusion

Introduction

• Financial statements are much more than numbers. If you know how to read them, a financial statement illustrates the financial health of an entire organization – even an organization as complex as a hospital. It also can serve as a road map to guide decisions about upcoming choices.
• After completing the activity, you should be able to:
• Understand what financial statements say about St. Anthony Medical Center’s financial position.

Understand how to analyze a financial statement in categories such as accounts receivable, asset-liability ratios, and others.

Your Office

You continue in your role as the administrator of the Medical-Surgical Department at St. Anthony Medical Center, the third largest hospital in the Twin Cities metro area. It’s been six months since the mid-year budget meeting, and the fiscal year is over. Owen Welch, the hospital’s CFO, is going to be reviewing the financials with the hospital’s board, and you’ll use what he explains to inform your own financial analysis.

You have an email from Owen Welch, CFO.

• Email
• From: Owen Welch, CFO
• Subject: End-of-year financials

I’m presenting the end-of-fiscal-year numbers to the board tomorrow morning at 9:00. If you can be there to help field their questions, that will really help me out. I saved the final financials in your folder.

See you tomorrow!
Owen

• St. Anthony Medical Center Financial Statements

Please download the Excel file for financial data.

• Board Meeting

Owen Welch meets with the St. Anthony Medical Center board to talk about the end-of-year financials for the hospital.

Budget Meeting Conversation

Owen Welch, CFO: Hi, everyone. As you know, we’re going to go over the financials for the fiscal year just past and the outlook for the current fiscal year. Did everyone get the end-of-year statements and the budget data for the past three years? [pause] Okay, good. Let’s get started.

• One of my primary concerns right now is the negative balance in our cash account. We do not have the cash reserves that we should have to run the hospital. Now, our accounts receivable team has been working hard to reduce the days in accounts receivable, and they’ve been more aggressive with collections to bring money in the door. But despite all this, we’ve been overdrawing our accounts to make payroll.

I don’t need to tell you that this needs to be addressed immediately. Now, some of this is timing. We’ve got significant expenditures and construction costs for the new buildings in our expansion. At the same time, we haven’t recognized the increase in revenue yet to cover these additional costs.

• Now, our debt to assets ratio indicates a high level of leverage. We currently stand at 1.2, with $231,341,925 in liabilities and $191,246,229 in assets. Now, as we know, anything above 1 indicates financial risk. Again, our recent expansion has caused a lot of this, but simply knowing why doesn’t solve the problem. That’s why we need to tighten our belts this next year.

Raman Gupta, Board Member: Owen, I talked to Geoffrey about this. I’m a little confused about the disconnect between what you’re saying and what we’re seeing in the patient revenue numbers. Shouldn’t we be celebrating, not worrying?

• Owen Welch: You’re right about the disconnect, Raman. Let me explain. Our inpatient revenue is definitely up, and that makes it look like we’re doing just fine. But what you can’t see from the numbers I gave you is that our inpatient volume is actually down.

We had fewer surgeries and deliveries here in the past fiscal year, because of the construction. But the decline in the number of surgeries was offset by the revenue from each surgery.

• Our new bariatric surgical practice generally yields more revenue per patient than other practices – which is one reason why we pursued it. But obviously, we can’t subsidize the other practices long-term, and that’s why there’s the concern even if the financials don’t reflect it. We hope those inpatient volumes will return to the levels we’re used to this year, but we may need to take a more proactive stance on getting that volume up again.

Jennifer Nash, Board Member: So what would you say is our position as we move forward with the strategic plan? Are we in good shape or do we need to look at a different time line with implementation?

Owen Welch: Keep in mind that back in January, we required a 5 percent cut in operating expenses for the current fiscal year. So with those cuts, we’ve developed a cushion that will keep us on track — we hope.

We didn’t want to have to do that, but when it came down to it, as you remember, we decided that we would proactively find some efficiencies rather than hope for increased growth. It’s my belief that we can continue implementing on the established schedule, but we’ll obviously be revisiting that at mid-year to make sure the variance isn’t going in the wrong direction.

Paul Darnell, Board Member: Are we comfortable with what we’re seeing in those wage and benefit numbers?

Owen Welch: I certainly am. The changes reflect two factors: One is the normal wage inflation, and the other is expanded staff.

Most of that staff expansion comes from the new doctors and other staff in the bariatric practice, which as we’ve discussed is already generating the ROI we were hoping for. But a portion of it comes from a single new plastic surgeon we hired. She is also part of that per-surgery increase that made up for our lack of volume, because she brought new patients with her. Those patients yielded revenues we needed, without requiring the normal marketing expenditures for bringing in new patients.

Thanks for coming, everyone! Questions?

• Conclusion
• You have completed the Vila Health: Financial Statement Analysis activity.

In this activity, you learned how the year turned out for St. Anthony Medical Center, and how budget numbers don’t always tell the whole story. They must be analyzed and given context so that they can be used to make financial decisions.