1.Listed below are the financial ratios for Calvin Community Clinic. Calvin improved its overall financial condition from 2007 to 2008. Identify these areas of improvement and attempt to explain how this improvement came about.

Calvin Community Clinic Financial Ratios

2008

2007

Current ratio

2.20

2.10

Acid test ratio

0.25

0.10

Days in accts receivable

45 days

60 days

Average payment period

43 days

45 days

Days cash on hand

15 days

5 days

Fixed asset turnover

3.58

2.54

Total asset turnover

1.10

1.04

Operating margin

0.10

0.03

Return on total assets

0.20

0.12

Long-term debt to net assets

1.10

2.18

Net assets to total asset

1

0

Debt service coverage

3.20

2.10

Age of plant

5.70

3.50

Use the information in the table below for problems 33 to 41. The financial information presented below for ABC Healthcare was filed with the Department of Insurance.

Current YearPrevious Year

Cash and Short-Term Investments$34,094,076$11,863,992

Receivables13,036,03715,112,834

Other Current Assets3,650,3746,306,384

Total Current Assets$50,780,487$33,283,210

Long-Term Investments$134,233,202$126,679,509

Property, Plant and Equipment1,108,3302,216,891

Total Assets$186,122,019$162,179,610

Current Liabilities$70,301,625$66,950,203

Other Liabilities4,017,7893,949,442

Net Worth111,802,60591,279,965

Total Liabilities and Net Worth$186,122,019$162,179,610

Member Months4,820,3514,721,314

Premium Revenue$512,600,104$515,079,684

Medicaid Revenue58,969,63263,979,870

Investment Income8,637,9156,640,969

Total$580,207,651$585,700,523

Physician Services157,313,074148,868,294

Other Professional23,733,16321,526,611

Inpatient110,813,471113,989,688

Incentive Pool1,834,5834,677,527

Outpatient103,981,20297,746,260

Pharmacy62,764,86667,567,497

Access Fees341,685402,285

Reinsurance2,321,5441,682,121

Coordination of Benefits(434,217)(80,097)

Total Medical & Hospital$462,669,371$456,380,186

Administration76,772,84676,807,222

Total Expenses$539,442,217$533,187,408

Income Before Tax40,765,43452,513,115

- Tax12,685,28517,682,052

Net Income$28,080,149$34,831,063

2.Information in the insurance filing shows that 101,909 hospital patient days of care were provided to members in the current year. How many patient days per 1,000 members were provided?

3.What was the average subscriber revenue realized Per Member Per Month (PMPM) in both the current year and the previous year?

4.Why did investment income increase in the current year?

5.What was the average yield on cash and investments during the current year?

6.Net Worth increased by $20,522,640 during the current year, but Net Income was $28,080,149. What might have accounted for this difference?

7.Is ABC Healthcare more or less debt-financed than the average for health plans (refer to the textbook chapter for industry averages)?

8.Calculate ABC's total Days Cash on Hand (ignore depreciation and other non-cash expenses). Does ABC have more or less cash than industry averages?

9.What is the main reason that ABC's margins declined in the current year?

10.Physician service expense PMPM increased by what dollar amount in the current year?

Use the following information for problems 41-43.

The following information summarizes charge and cost data for Dr. Jones during the last year:

Number of Cases100

Charges$700,000

Nursing Charges$350,000

Lab Charges$200,000

Pharmacy Charges$50,000

Radiology Charges$100,000

11.Assume that Dr. Jones' patients pay an average 80 percent of charges. Also assume cost to charge ratios of 0.90 in Nursing, 0.80 in Lab, 0.50 in Pharmacy, and 0.70 in Radiology. What is the total profit earned on Dr. Jones' patients?

12.Dr. Jones contends that her profit is not accurate. Circle all valid reasons why she could be correct:

A. Cost to charge ratios vary across departments

B. Cost to charge ratios vary within departments

C. Both A and B

D. Neither A nor B

13.Would you lose money if Dr. Jones decided to leave and take her patients to another hospital? Provide one reason why it is highly likely that a loss would result.

Use the following data to calculate the variances in problems 44-48.

Standard Cost Profile

Lab Treatment SU #12

Expected Treatments = 1,000

QuantityQuantityUnitVariableAverageAverage

ResourceVariableFixedCostCostFixed CostTotal Cost

Labor0.800.80$6.00$4.80$4.80$9.60

Supplies7.0001.107.7007.70

$12.50$4.80$17.30

Actual Month Cost

Lab Treatment SU #12

Actual Treatments = 1,100

QuantityUnitTotal

ResourceUsedCostCost

Labor1,600$6.25$10,000

Supplies7,5001.007,500

$17,500

Calculate the following variances:

14.Efficiency Variance - Labor

15.Efficiency Variance - Supplies

16.Price Variance - Labor

17.Price Variance - Supplies

18.Volume Variance

19. You wish to retire a $10,000,000 bond that can be called in 5 years for 110 percent of par value, or $11,000,000. You also need to make year-end interest payments of $700,000 per year in each of the next five years. If you can invest money at 8 percent, how much money must you set aside today to meet these obligations?