Question
Case Study 2: Financial Statements Income Statement - End of Year Operating Revenue Net Patient Service Revenue $ 1,265,000 Other Revenue 275,700 Total Operating Revenue
Case Study 2: Financial Statements
Income Statement - End of Year
Operating Revenue Net Patient Service Revenue $ 1,265,000
Other Revenue 275,700
Total Operating Revenue 1,540,700
Operating Expenses
Salary, Wages, & Fringe Benefits 1,550,400
Provision for Bad Debts 65,000
Depreciation 8,000
Other Expenses 60,000
Total Operating Expenses 1,683,400
Income (loss) from operation $ (142,700)
Non-Operating Gains (losses)
Total Non-operating Gains (losses) 35,000
Net Income / (Loss) $ (107,700)
Balance Sheet - End of Year
Assets:
Cash and cash equivalents $ 450,000
Patient Accounts Receivable 210,800
Prepaid Expenses 5,000
Total Current Assets 665,800
Property, Plant & Equipment 32,000
Total Non- Current Assets 32,000
Total Assets $ 697,800
Liabilities and Equity:
Accounts Payable and accrued expenses 42,800
Total Current Liabilities 42,800
Long-term Debt 90,000
Total Non-Current Liabilities 90,000
Unrestricted net assets 565,000
Total Equity 565,000
Total Liabilities and Equity $ 697,800
Financial Indicators:
Working Capital $ 623,000
Current Ratio 15.6
Days in Patient A/R 60.8
Days Cash on Hand 98.0
Other Metrics:
Unbilled A/R $ 31,600
% in A/R more than 90 days 23%
For case study number 2, a non-profit community health center's balance sheet is shown above. The
board has to make some strategic decisions related to recruiting an additional physician. It is
estimated that the cost would be $300,000 for salary (benefits and two new medical assistants to
support the doctor) and generally the A/R for the new physician would take about 6 months due to
getting the new provider credentialed (e.g., Medicare Provider number, added to managed care
contracts, etc.). The revenue associated with the new provider is estimated to be $200,000 (net) in
months 7-12; after that, the net revenue should be about $450,000 (net) per year.
Questions
Summarize CS #2
Are there items treated as expenses in the income statement but do not require any
expenditure of cash in the present period?
What could the practice do with the extra cash?
What are the implications in relation to that decision?
If you were the administrator of the practice, do you have any recommendations or do you
feel financial management is going well?
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Small Business Management Entrepreneurship and Beyond
Authors: Timothy s. Hatten
5th edition
538453141, 978-0538453141
