From a financial perspective, is River Community Hospital a well-managed organization? Explain in detail, and include several specific examples to support your statements.

Case 1: Riverview Community Hospital (A) Il +Quartile Median -Quartile EXHIBIT 1.7 2013 Selected Industry Operating Ratios (200-299 Beds) Profit Indicators Profit per discharge Profit per visit ($120.08) $89.04 $6.22 ($21.30) $0.66 ($7.01) $4,091 $2,815 $98 $201 Net Revenue Indicators Net revenue per discharge Net revenue per visita Medicare revenue percentage Bad debt/charity care percentage Contractual allowance percentage Outpatient revenue percentage 43.47% $3,411 $139 36.60% 4.76% 20.02% 21.03% 31.25% 2.97% 7.89% 25.27% 12.12% 17.44% 25.26% Volume Indicators 58.10% 47.84% Occupancy rate Average daily census 67.12% 173.23 144.73 114.39 Length-of-Stay Indicators Average length of stay (days) Adjusted length of stay 6.80 6.07 5.41 6.48 5.36 4.52 Intensity-of-Service Indicators Expense per discharge Adjusted expense per discharge Expense per visit All-payer case mix index $3,937 $3,417 $202.23 1.2795 $3,392 $2,924 $141.97 $2,972 $2,572 $111.53 1.0259 1.1756 Efficiency Indicators FTES per occupied bed Labor-hours per visit 4.59 4.15 3.77 4.68 5.84 8.66 $20,347 Unit Cost Indicators Salary per FTE Employee benefits percentaget Liability expense per discharge $24,447 19.58% $22,517 17.04% $42.05 15.18% $80.94 $18.31 10 Cases in Healthcare Finance +Quartile Median -Quartile EXHIBIT 1.6 2013 Selected Industry Financial Ratios (200-299 beds) 0.53% Profitability Ratios Total margin Return on assets Return on equity Deductible ratioa 5.58% 5.80% 15.66% 3.48% 3.10% 0.40% 6.01% 0.62% 0.34 0.26 0.18 Liquidity Ratios Current ratio Days cash on hand 2.53 1.99 1.48 32.35 15.89 6.24 62.90% 48.40% 35.20% Debt Management Ratios Debt ratio Debt to equity ratio Times interest earned Cash flow coverage 127.00% 64.70% 2.23 26.90% 1.14 4.29 5.32 3.22 1.76 Asset Management Ratios Fixed asset turnover 2.20 1.76 1.49 Total asset turnover 1.04 0.89 0.75 87.53 75.67 63.33 Days in patient accounts receivable Current asset turnoverb Average payment period (days) 3.94 3.38 2.88 71.24 56.52 45.84 Other Ratios Average age of plant (years) 8.86 7.39 6.14 Case 1: Riverview Community Hospital (A) 9 2011 2012 2013 EXHIBIT 1.4 River Community Hospital: Revenue and Expense Allocation (millions of dollars) $26.117 Operating revenue Gross inpatient service Gross outpatient service Gross patient service revenue $29.148 $9.130 $6.535 $32.652 $33.216 $11.912 $45.128 $38.278 $1.729 $5.196 Contractual allowances Bad debt and charity care Total revenue deductions $2.127 $2.506 $7.516 $3.030 $10.546 $3.856 $7.702 Net patient service revenue $28.796 $30.576 $34.582 $24.771 Operating expenses Inpatient service Outpatient service Total operating expenses $20.573 $6.831 $22.229 $8.098 $30.327 $9.187 $33.958 $27.404 2011 2012 2013 EXHIBIT 1.5 River Community Hospital: Selected Operating Data 2,721 2,860 8,318 32,878 210 8,784 32,285 210 193 Medicare discharges Total discharges Outpatient visits Licensed beds Staffed beds Patient days All-payer case mix index Full-time equivalents 2,741 8,576 36,796 210 197 178 44,085 1.2869 42,434 1.2993 625.8 40,062 1.3161 610.8 619.3 8 Cases in Healthcare Finance 2012 2013 EXHIBIT 1.3 River Community Hospital: Statements of Cash Flows (millions of dollars) $2.102 Cash Flows from Operating Activities Net income Depreciation and noncash expenses Change in accounts receivable Change in inventories Change in other current assets Change in accounts payable Change in accrued expenses Net cash flow from operations $2.633 ($1.315) ($0.091) ($0.395) $0.325 $0.043 $3.302 $2.458 $2.756 ($1.739) ($0.078) ($0.220) $0.507 ($0.327) $3.357 Flows from Investing Activities Investment in plant and equipment ($7.686) ($4.328) $3.549 ($1.427) Cash Flows from Financing Activities Change in long-term debt Change in current portion of long-term debt Net cash flow from financing $1.231 $0.124 ($1.303) $4.780 Net increase (decrease) in cash $0.396 ($2.274) Beginning cash $4.673 $5.069 Ending cash $5.069 $2.795 Note: "Depreciation and noncash expenses" and "Investment in plant and equipment" data in the statements of cash flows are somewhat different than they would be if calculated directly from the other financial statements because of asset revaluations. Case 1: Riverview Community Hospital (A) 7 2011 2012 2013 EXHIBIT 1.2 River Community Hospital: Balance Sheets (millions of dollars) $5.069 $5.674 $4.673 $4.359 $0.432 $0.308 $0.523 $0.703 Assets Cash and investments Accounts receivable (net) Inventories Other current assets Total current assets Gross plant and equipment Accumulated depreciation Net plant and equipment Total assets $2.795 $7.413 $0.601 $0.923 $11.732 $11.969 $55.333 $59.552 $9.772 $47.786 $11.820 $35.966 $45.738 $14.338 $17.009 $42.543 $40.995 $52.964 $54.275 $0.928 $1.253 $1.760 $1.460 $1.503 $1.176 $0.110 Liabilities and Net Assets Accounts payable Accrued expenses Current portion of LT debt Total current liabilities Long-term debt Net assets Total liabilities and net assets $2.498 $1.341 $4.097 $19.222 $1.465 $4.401 $17.795 $15.673 $27.567 $29.645 $32.079 $45.738 $52.964 $54.275 LT: long term 2011 2012 2013 EXHIBIT 1.1 River Community Hospital: Statements of Operations (millions of dollars) $28.796 $30.576 $34.582 Revenues Net patient service revenue Other revenue Total revenues $1.853 $1.834 $1.237 $30.033 $32.429 $36.416 $12.245 $12.468 $13.994 $1.830 $2.408 $2.568 $1.598 Expenses Salaries and wages Fringe benefits Interest expense Depreciation Medical supplies and drugs Professional liability Other $1.776 $2.778 $2.658 $0.655 $1.181 $2.350 $0.622 $0.140 $9.036 $27.404 $0.201 $0.776 $0.218 $11.848 $33.958 $10.339 $30.327 Total expenses Net income $2.629 $2.102 $2.458 5. Cost per visit Cost per visit = Total operating expense Total number of outpatient visits Particulars a).Total operating expense 2011 27.404 2012 30.327 2013 33.958 b). Outpatient visits (converted in terms of millions) Cost per visit = a/b 0.032285 848.82 0.03288 922.41 0.036796 922.87 2011 2012 2013 5.75% 4.26% 4.58% Summary S.No. Particulars 1 Return on Assets. 2 Days of cash on hand(in days) 3 Debt Ratio 4 Accounts receivable in days) 5 Cost per visit($) 68 67 33 34.51% 38.82% 35.49% 53 64 74 848.82 922.41 922.87 3. Debt ratio Total debt Debt Ratio = Particulars a). Long term debt b). Current portion of LT debt c). Total Debt = a +b d). Total Assets Debt ratio = c/d Total Assets 2011 15.673 0.11 15.783 45.738 34.51% 2012 19.222 1.341 20.563 52.964 38.82% 2013 17.795 1.465 19.26 54.275 35.49% 4. Days in accounts receivable Days in accounts receivable Accounts receivable Annual revenue *365 Particulars a). Accounts Receivable b). Anmal Revenue Days in Accounts receivable = (a/b) *365 2011 4.359 30.033 2012 2013 5.674 7.413 32.429 36.416 53 64 74 3. Debt ratio Total debt Debt Ratio = Particulars a). Long term debt b). Current portion of LT debt c). Total Debt = a +b d). Total Assets Debt ratio = c/d Total Assets 2011 15.673 0.11 15.783 45.738 34.51% 2012 19.222 1.341 20.563 52.964 38.82% 2013 17.795 1.465 19.26 54.275 35.49% 4. Days in accounts receivable Days in accounts receivable Accounts receivable Annual revenue *365 Particulars a). Accounts Receivable b). Anmal Revenue Days in Accounts receivable = (a/b) *365 2011 4.359 30.033 2012 2013 5.674 7.413 32.429 36.416 53 64 74 Calculating following ratios of Riverview Community Hospital 1. Return on Assets. Return on Assets = Net Income Average Assets Where Average Assets = (Total Assets at the beginning of the year + Total Assets at the end of the year)/2 Particulars 2011 2012 a).Net Income 2.629 2.102 b).Assets at the beginning of the year 45.739 45.738 c). Assets at the end of the year 45.738 52.964 d). Average Assets = [6)+(c )]/2 45.739 49.351 Return on assets (a)/(d)] 5.75% 4.26% Assets at the begiming of 2011 is absent and hence Assets at the end is taken as beginning value. 2013 2.458 52.964 54.275 53.620 4.58% 2. Days of cash on hand Days of cash on hand Cash & Cash equivalents Total operating expenses - Depreciation *365 Particulars a). Cash & Short term investments b). Total Operating Expenses c). Depreciation (b)-(c) Days of cash on hand = (a) (b)-(e)] *365 2011 4.673 27.404 2.35 25.054 68 2012 5.069 30.327 2.658 27.669 67 2013 2.795 33.958 2.778 31.18 33