can any one work on this? Need help asap with the attached document below. Use the information in the table below for problems 33 to
can any one work on this?
Need help asap with the attached document below.
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
1.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?
2.What was the average subscriber revenue realized Per Member Per Month (PMPM) in both the current year and the previous year?
3.Why did investment income increase in the current year?
4.What was the average yield on cash and investments during the current year?
5.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?
6.Is ABC Healthcare more or less debt-financed than the average for health plans (refer to the textbook chapter for industry averages)?
7.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?
8.What is the main reason that ABC?s margins declined in the current year?
9.Physician service expense PMPM increased by what dollar amount in the current year?
Medical Careers Institute, School of Health Science of ECPI University HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Take Home Problems 2 SHORT ANSWER 1. List the five key dimensions along which organizations vary in regard to budgeting. Participation, Budget Model, Budget Detail, Budget Forecast, and Budget Modifications. 2. What are the major components of the planning/control cycle? Strategic planning, planning, implementation, and control 3. Discuss the role of strategic planning in the budgeting process? How does it differ from tactical and operational planning? Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. Tactical planning is short range planning emphasizing the current operations of various parts of the organization. Short Range is generally defined as a period of time extending about one year or less in the future. Operational planning is the process of linking strategic goals and objectives to tactical goals and objectives. It describes milestones, conditions for success and explains how, or what portion of, a strategic plan will be put into operation during a given operational period. 4. What happens to the present value factor as our discount rate or interest rate increases for a given time period? If the interest or discount rate increase, it will cause a decrease in present value factor. 5. Define an annuity. An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time 6. Explain the difference between a joint venture and a merger. A merger is the combination of two or more companies, with one continuing as a legal entity while all others cease to exist; the former company's assets and liabilities become part of the continuing company. Joint ventures involve the joining together of two or more firms in a project or even in a new company founded jointly by the Medical Careers Institute, School of Health Science of ECPI University HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 two companies. In these cases, equity participation and control are decided by mutual agreement in advance of the joint venture. 7. Explain the difference between a horizontal merger and a vertical merger. Horizontal mergers involve two firms operating in the same kind of business. Vertical mergers involve different stages of production and operations NUMERIC PROBLEMS Refer to Megatropolis Hospital's financial statements below for calculating the ratios requested in problems 8 to Megatropolis Hospital Statement of Operations For the Year Ended December 31, 2007 Revenues, Gains, Other Support Net patient service revenue $ Other revenue Total Revenue Expenses Nursing Services 1,500,000 200,000 1,700,000 1,200,000 Administrative Services 200,000 Depreciation Other Expenses 100,000 50,000 Total Expenses 1,550,000 Operating Income 150,000 Investment Income 50,000 Excess of revenues over expenses 200,000 Increase in Unrestricted Net Assets $ 200,000 Medical Careers Institute, School of Health Science of ECPI University HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Megatropolis Hospital Balance Sheet As of December 31, 2007 (2006 omitted) Assets Current Assets Cash and cash equivalents Net patient receivables Liabilities and Net Assets Current Liabilities Accounts Payable 200,000 Salaries Payable 50,000 Total Current Liabilities 250,000 $ 50,000 350,000 Total Current Assets Properties and Equipment Gross properties and equipment $ Less accumulated depreciation Net Properties and Equipment 400,000 Notes Payable 200,000 900,000 475,000 425,000 Unrestricted Net Assets 375,000 Total Liabilities and Net Assets Total Assets $ 825,000 $ 825,000 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 8. What is Megatropolis Hospital's operating margin? Operating Margin = Operating Income Revenue = 150000/1700000 = 0.0882 or 8.82% 9. What is Megatropolis Hospital's days in accounts receivable? 8.516 days 10. What is Megatropolis Hospital's long-term debt to net assets ratio? .053 11. What is Megatropolis Hospital's age of plant? 4.75 years 12. What is Megatropolis Hospital's fixed asset turnover ratio? 4 13. What is Megatropolis Hospital's days of cash on hand? 12.586 days Listed below are the balance sheet and statement of operations for Wynn Memorial Nursing Home for 2007 and 2008. HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Use the following information for questions 14, 15 and 16. Your hospital has been approached by a major HMO to perform all their DRG 209 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for DRG 209 during the last year and found the following profile: Average Charge $15,000 Average LOS 5 Days Cost/Charge Routine Charge Variable Cost % $3,600 0.80 60 2,657 0.80 80 293 0.80 80 1,035 0.70 30 345 0.75 50 Medical Supplies 4,524 0.50 90 Pharmacy 1,230 0.50 90 Other Ancillary 1,316 0.80 60 $11,400 0.75 50 Operating Room Anesthesiology Lab Radiology Total Ancillary 14. In the above data set, assume that the hospital's cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information, what would the average cost of DRG 209 be? 12,000 15. Estimate the variable cost per DRG 209 using the departmental cost/charge ratios and variable cost percentages. Routine 3600 * .80*.60= $1728 Operating Rm 2657 *.80* .60= 1700 Anesthesiology 293 *.80* .60= 187.52 Lab 1035 X .70 X .30=217.35 Radiology 345 X .75 X .50= 129.37 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Medical Supplies 4524 X .50 X .90 =2035.80 Pharmacy 1230 X .50 X .90 =553.50 Other Ancillary 1316 X .80 X.60 =631.68 16. The HMO in the above example has indicated that their doctors use less expensive joint implants. If this less expensive implant is used, your medical supply charges would be reduced by $2,000. What is the estimated reduction in variable cost? $900 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 17. Compute Wynn Memorial Nursing Home's current ratio. Current ratio = Current Assets/Current Liabilities = 405/295 = 1.37 18. Compute Wynn Memorial Nursing Home's acid (or acid-test) ratio. (cash + marketable securities)/current liabilities = 1.1875 19. Compute Wynn Memorial Nursing Home's days in accounts receivable. Days in accounts receivable = 365/Receivable turnover ratio where, Receivable turnover ratio = Net Credit Sales/Average Accounts receivable Receivable turnover ratio = 1600/ ((295+235)/2) Receivable turnover ratio = 6.0377 Days in accounts receivable = 365/6.0377 Days in accounts receivable = 60.45 20. Compute Wynn Memorial Nursing Home's average payment period. 21. Compute Wynn Memorial Nursing Home's long-term debt to net assets ratio. Long-term debt to net assets = total long term liabilities/Net Assets = 20/355 =.06 22. Compute Wynn Memorial Nursing Home's net assets to total assets ratio. Net assets to total assets ratio 0.56 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 23. Compute Wynn Memorial Nursing Home's total asset turnover ratio. Total Asset turnover ratio = Total Revenue/Total Assets = 1,400/615 = 2.28 24. Compute Wynn Memorial Nursing Home's fixed asset turnover ratio. Fixed asset turnover ratio = Net sales/Average fixed assets Fixed asset turnover ratio = 1600/((483+250)/2) Fixed asset turnover ratio = 4.37 25. Compute Wynn Memorial Nursing Home's return on total assets. Return on total assets 0.1126 26. Compute Wynn Memorial Nursing Home's operating margin. Operating Margin 0.0625 Listed below are the industry standards of the above ratios for Wynn Memorial's peer group. Use this information as you answer problems 28 to 32. Nursing Home Financial Ratios-Industry Median Current ratio 1.98 Acid test ratio 0.20 Days in accts receivable 67.19 Average payment period 56.13 Total asset turnover 1.02 Fixed asset turnover 2.20 Operating margin 0.02 Return on total assets 0.04 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Long-term debt to net assets 0.62 Net assets to total assets 0.53 27. Comment on Wynn Memorial's liquidity. Cite at least one meaningful ratio to support your observations. Current ratio is a liquidity ratio. For 2008, the current ratio for is 1.52 (Current ratio=Current assets/Current Liabilities=365/240=1.52. The industry average is 1.98, while Wynn is lower as compared to the industry ratio. 28. Comment on Wynn Memorial's efficiency in its use of assets. Cite at least one meaningful ratio to support your observations. For 2008, the total asset turnover for Wynn is (Total Asset turnover ratio= Total revenue/total assets= 1,400/615= 2.28 29. Comment on Wynn Memorial's profitability. Cite at least one meaningful ratio to support your observations. In present case Profitability ratio of Wynn Memorial nursing home (Operating margin and return on total assets) is almost three time of the industry standard which shows that Wynn Memorial is earning three times of profit as what industry is earning. 30. Comment on Wynn Memorial's capital structure. Cite at least one meaningful ratio to support your observations. In present case capital structure ratio of Wynn Memorial nursing home (Long-term debt to total assets) is 1/3rd of the industry standard, it denotes that Wynn Memorial Nursing home uses its internal funds to carry out its operations and does not have excessive dependency on external source of income. lower debt to asset ratio also shows less burden on the company's coffer to pay back the interest. 31. 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 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 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 1 0 Debt service coverage 3.20 2.10 Age of plant 5.70 3.50 Net assets to total asset HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 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 Year Cash and Short-Term Investments Receivables Other Current Assets Total Current Assets Previous Year $34,094,076 13,036,037 3,650,374 $50,780,487 $11,863,992 15,112,834 6,306,384 $33,283,210 Long-Term Investments Property, Plant and Equipment Total Assets $134,233,202 1,108,330 $186,122,019 $126,679,509 2,216,891 $162,179,610 Current Liabilities Other Liabilities Net Worth Total Liabilities and Net Worth $70,301,625 4,017,789 111,802,605 $186,122,019 $66,950,203 3,949,442 91,279,965 $162,179,610 4,820,351 4,721,314 Premium Revenue Medicaid Revenue Investment Income Total $512,600,104 58,969,632 8,637,915 $515,079,684 63,979,870 6,640,969 $580,207,651 Physician Services Other Professional Inpatient Incentive Pool Outpatient Pharmacy Access Fees Reinsurance Coordination of Benefits Total Medical & Hospital 157,313,074 23,733,163 110,813,471 1,834,583 103,981,202 62,764,866 341,685 2,321,544 (434,217) $462,669,371 148,868,294 21,526,611 113,989,688 4,677,527 97,746,260 67,567,497 402,285 1,682,121 (80,097) $456,380,186 Administration Total Expenses 76,772,846 $539,442,217 76,807,222 $533,187,408 40,765,434 52,513,115 12,685,285 $34,831,063 Member Months Income Before Tax - Tax Net Income $28,080,149 $585,700,523 17,682,052 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 32. 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? 33. What was the average subscriber revenue realized Per Member Per Month (PMPM) in both the current year and the previous year? 34. Why did investment income increase in the current year? 35. What was the average yield on cash and investments during the current year? 36. 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? 37. Is ABC Healthcare more or less debt-financed than the average for health plans (refer to the textbook chapter for industry averages)? 38. 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? 39. What is the main reason that ABC's margins declined in the current year? 40. 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 Cases 100 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Charges $700,000 Nursing Charges $350,000 Lab Charges $200,000 Pharmacy Charges $50,000 Radiology Charges $100,000 41. 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? 42. Dr. Jones contends that her profit is not accurate. Circle all valid reasons why she could be correct: A. B. C. D. Cost to charge ratios vary across departments Cost to charge ratios vary within departments Both A and B Neither A nor B 43. 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 HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 Expected Treatments = 1,000 Quantity Quantity Unit Variable Average Average Variable Fixed Cost Cost Fixed Cost Total Cost Labor 0.80 0.80 $6.00 $4.80 $4.80 $9.60 Supplies 7.00 0 1.10 7.70 0 7.70 $12.50 $4.80 $17.30 Resource Actual Month Cost Lab Treatment SU #12 Actual Treatments = 1,100 Quantity Unit Total Resource Used Cost Cost Labor 1,600 $6.25 $10,000 Supplies 7,500 1.00 7,500 $17,500 Calculate the following variances: 44. Efficiency Variance - Labor 45. Efficiency Variance - Supplies 46. Price Variance - Labor 47. Price Variance - Supplies HCA 430 Financial Management & Managed Care in Health Care Organizations Take Home Problems 2 48. Volume Variance 49. If a nurse deposits $1,000 today in a bank account and the interest is compounded annually at 12%, what will be the value of this investment: a) five years from now? FV = $1,762.34 b) ten years from now? FV = $3,105.85 c) fifteen years from now? FV = $5,473.57 d) twenty years from now? FV = $9,646.29 50. 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