Case Introduction: You are the administrator of Riverside Memorial Hospital, a 100-bed facility not-for-profit facility in the southwest United States. It is January of 2012 and your hospital board members are expecting a report regarding the next 3-5 years of the facility (short-term strategic plan), which hopefully includes a large facility expansion project of the Womens Center wing of the hospital, among other growth initiatives. Below are the hospitals financial statements from the past two years:

Riverside Memorial Hospital Balance Sheets (December 31, 2010 and 2011) in thousands

2010 2011

Cash and equivalents $ 3,095 2,263

Short-term investments 2,000 4,000

A/R 20,738 21,840

Inventories 2,982 3,177

Total current assets 28,982 31,280

Gross property and equipment 140,865 145,158

Less accumulated depreciation 21,030 25,160

Net property and equipment 119,835 119,998

Total assets 148,650 151,278

A/P 5,145 4,707

Accrued expenses 5,421 5,650

Notes payable 6,237 2,975

Total current liabilities 16,803 13,332

Long-term debt 33,055 30,582

Net assets (equity) 98,792 107,364

Total liabilities and net assets 148,650 151,278

Riverside Memorial Hospital Statements of Operations (Years Ended December 31, 2010 and 2011) in thousands

2010 2011

Net patient service revenue $ 95,398 106,495

Premium revenue 4,622 5,232

Other revenue 6,014 3,644

Total revenues 106,034 115,371

Expenses: Nursing services 56,752 58,285

Dietary services 4,718 5,424

General services 11,655 13,198

Administrative services 11,585 11,427

Employee health and welfare 10,705 10,250

Provision for bad debts 3,469 3,328

Insurance expense 1,204 1,320

Depreciation 4,025 4,130

Interest expense 1,521 1,542

Total expenses 105,634 108,904

Operating income 400 6,467

Nonoperating income 1,995 2,105

Net income 2,395 8,572

Additional case details:

Riverside Memorial Hospital has experienced the following cash flows for the 2011 financial period (in thousands):

o Cash flows from operating activities: $11,196

o Cash flows from investing activities: ($6,293)

o Cash flows from financing activities: ($5,735)

The nursing department is requesting additional funding (estimated $10,000) for additional, hospital-based continuing education programs.

The Womens Center expansion project is estimated to cost roughly $1,000,000, and will require 4 years for build-out.

Due to the Patient Protection and Affordable Care Act (PPACA) of 2010, Medicare recoupments due to HCAHPS survey responses have consistently resulted in a reduction of patient service revenue and are estimated to increase by 1.5% annually for the next 3 years.

As a new, up-and-coming healthcare administrator, excited about graduating and landing a position of such great responsibility right out of college, you are eager to create and discuss an analysis of Riversides financial position and the proposed states of each requested/required service expansion request.

Case Analysis your job as the administrator is to provide a financial condition analysis of Riverside Memorial, given the information above. Specifically, please be sure to address the following questions in your response:

4. Do you recommend the funding of the Womens Center expansion project? How should this large project be financed?

5. For each of the above items, what additional information would you specifically request knowledge of, prior to a solid decision on each objective? Explain why this information is needed thoroughly