HCA 545 Financial Analysis Case Anarke LE Grandview Medical Center is a 210 bed, not for profit, acute care hospital with a long standing reputation for providing quality healthcare services to a growing service area Grandview Medical Center competes with three other hospitals in its metropolitan statistical area (MSA) two not for profit and one for profit It is the smallest of the four but has traditionally been ranked highest in patient satisfaction polls Hospitals are accredited by The Joint Commission, and independent, not for profit organization whose mission is to improve the safety and quality of healthcare provided to the public through accreditation and related services Although accreditation is optional for hospitals, it is generally required to qualify for governmental (Medicare and Medicaid) reimbursement, and hence most hospitals apply for accreditation Grandview Medical Center passed its latest Joint Commission survey with flying colors, receiving the Gold Seal of Approval from that accrediting body In recent years, competition among the four hospitals in Grandview's service area has been keen but friendly However, a large for profit chain recently purchased the for profit hospital, which has resulted in some anxiety among the managers of the other three hospitals because of the chain's reputation for aggressively increasing market share in the markets they serve Relevant financial and operating data for Grandview Medical Center are contained in Exhibits 1 1 through 1 5, and selected industry data are contained in Exhibits 1 6 and 1 7 In addition to the data in the exhibits, the following information was extracted from the notes section of Grandview's 2018 Annual Report 1 A significant portion of the hospital's net patient service revenue was generated by patients who are covered by Medicare, Medicaid, or other government programs or by various private plans, including managed care plans, that have contracts with the hospital that specify discounts from charges In general, the proportional amount of deductions is similar between inpatients and outpatients The gross and net patient service revenue and operating expenses breakdown for both inpatient and outpatient services is given in Exhibit 1 4 2 Grandview has a contributory money accumulation (defined contribution) pension plan that covers substantially all of its employees Participants can contribute up to 20 percent of earning to the pension plan The hospital matches, on a dollar for dollar basis, employee contributions of up to 2 percent of wages and pays 50 cents on the dollar for contribution over 2 percent and up to 4 percent Because the plan is defined contribution plan (as opposed to a defined benefit plan), Grandview bas no unfunded pension liabilities Pension expense was approximately $0 543 million in 2016 and $0 588 million in 2018 3 The hospital is a member of the State Hospital Trust Fund, under which it purchases professional liability insurance coverage for individual claims up to $1 million (subject to a deductible of $100 000 per claim) Grandview is self insured for amounts above $1 million but less than $5 million Any liability award in excess of $5 million is covered by a commercial liability policy for example, the policy pays $2 million on a $7 million award The hospital is currently involved in cight suits involving claims of various amounts that could ultimately be tried before juries Although it is impossible to determine the exact potential liability in these claims, management does not believe that the settlement of these cases would have a material effect on the hospital's financial position Assume that your management consulting group has been hired by Grandview Medical Center to perform a detailed analysis on the facility and then present your findings to the hospital board and the organization(when presenting to the entire organization, it cannot be assured that everyone is financially savvy as your consulting group and the C Level executives, so clear explanation and examples are needed) As your consulting group prepares for the presentation, several relevant factors come to light First, in reviewing the policy decisions made by Grandview's board of trustees over the past few years, in 2016 it was noted that the board made the decision to significantly expand the hospital's outpatient setting, and if Grandview Medical Center did not offer such services it would lose the patients to other providers Second, the board chair has great concern about the decline in profitability over the past few years and has not been assuaged by the recent modest upturn Perhaps because she is a CEO of a local company, the chair focuses on return on equity (ROE) as the key measure of profitability She has requested that management develop some strategies to improve profitability and estimate the impact of the strategies on the hospital's ROE Third, the hospital CEO meet with your group to inquire about also performing an economic value added analysis (EVA) on the hospital, The CEO stated that the overall cost of capital is 4 percent and requested that your group also discuss your findings, implications, and applicability of the EVA analysis to the hospital with the board and the entire organization 2 EXHIBIT 1 1 Grandview Hospital Statements of Operations (millions of dollars) 2016 Revenues $30 57 Net patient service revenue Other revenue $1 24 Total revenues $31 81 Expenses Salaries and $12 25 wages Fringe benefits $1 83 Interest expense $1 18 Depreciation $2 35 $0 62 Medical supplies and drugs Professional liability $0 14 Other $9 04 Total Expenses $27 40 4 401 Net Income 2017 $28 56 32 87 $31 44 $12 47 $2 41 $1 60 $2 66 $0 66 30 20 $10 34 $30 33 1 111 2018 342 65 $3 56 346 21 $35 00 $2 57 S1 78 S6 78 S0 78 SO 22 $11 85 $58 96 12 754 3 EXHIBIT 1 2 Grandview Hospital Balance Sheets (millions of dollars) 2016 Assets Cash and investments Accounts receivable (net) 4 359 Inventories 0 432 Other current assets 0 308 Total current assels $9 77 S47 79 Gross plant and equipment Accumulated depreciation 11 82 $35 97 $45 74 $0 93 1 46 0 11 $2 50 15 673 27 567 S45 74 Net plant and equipment Total assets Liabilities and Net Assets Accounts payable Accrued expenses Current portion of LT debt Long term debt Net assets Total current liabilities Total liabilities and not assets 2017 $5 07 5 674 0 523 0 703 $11 97 $55 33 14 338 $41 00 $52 96 $1 25 1 503 1 341 $4 10 19 222 29 645 $52 96 2018 S2 80 12,413 0 601 0 923 $16 73 370 55 17 009 $53 54 $70 28 $3 76 4 176 1 465 $9 40 29 39 31 51 $70 30 EXHIBIT 1 3 Grandview Hospital Statements of Cash Flows (millions of dollars) Cash Flows from Operating Activities Net income Depreciation and noncash expenses Change in accounts receivable Change in inventories Change in other current assels Change in accounts payable Change in accrued expenses Cash Flows from Investing Activition Cash Flows from Financing Activities Net increase (decrease) in cash Beginning cash Ending cash Net cash flow from operations Investment in plant and equipment Change in long term deht Change in current portion of long term debl Net cash flow from financing 2017 $1 1 2 633 1 315 0 091 0 395 0 325 0 043 $2 31 ($7 69) $3 55 $1 23 $4 78 ($0 60) $4 67 $4 08 2018 ($12 75) 2 756 4 739 0 178 0 22 0 507 0 327 ($5 12) ($15 33) $19 43 $2 12 $21 55 $1 10 $5 07 $6 17 EXHIBIT 1 4 Grandview Hospital Revenue and Expenses Allocation (millions of dollars) 2016 Operating Revenue $26 117 $6 535 $1 729 $2 127 $3 856 $28 796 $20 573 $6,831 $27 404 Gross inpatient service Gross outpatient service Gross patient service revenue Contractual allowances Bad debt and charity care Total revenue deductions Net patient service revenue Total operating expenses Operating Expenses Inpatient service Churpatient service 2017 $29 148 $9 130 $38 278 $5 196 $2 506 $7 702 $30 576 $22 229 $8 098 $30 327 2018 $33 216 $11 912 $45,128 $7 516 $3 030 $10 546 $34 582 $24 771 $9 187 $33 958 EXHIBIT 1 5 Grandview Hospital Selected Operating Data Medicare discharges Total discharges Outpatient visits Licensed beds Staffed beds Patient days All payer case mix index Full time equivalents 2016 2,721 8 784 32,285 210 193 44,085 1 2869 610 8 2017 2 860 8,318 32,878 210 197 42,434 1 2993 625,8 2018 3,741 8,576 36,796 210 178 40,062 1 3161 819 3 EXHIBIT 1 6 2018 Selected Industry Financial Ratios (200 299 beds) Profitability Ratios Total margin Return on assets Retum on equity Deductible ratio 2 Liquidity Ratios Quartile 3 48 0 53 3 10 0 40 6 01 0 62 0 26 0 18 Current Ratio 1 48 1 99 15 89 Days cash on hand 6 24 Debt Management Ratios Debt ratio 48 40 64 70 35 20 26 90 Debt to equity ratio Times interest earned Cash flow coverage 2,23 1,14 3 22 1 76 Asset Management Ratios Fixed asset turnover 1 76 1 49 Total asset turnover 0 89 0 75 Days in patient accounts receivables 75 67 63 33 Current asset turnover 3 38 2 88 Average payment period (days) 56 52 45 84 Average age of plant (year) 7 39 6 14 Deduction Gross patient service revenue b Total revenues Current assets Current liabilities (Total expenses Depreciation expense) 365 Notes 1 The upper quartile is based on the higher numerical value, regardless of whether a high value is good or bad The interpretation is left to the analyst 8 Other 5 58 5 80 15 66 0,34 2 53 32 35 Median 62 90 127 00 4 29 5 32 2 20 1 04 87 53 3 94 71 24 Quartile EXHIBIT 1 7 2018 Selected Industry Operating Ratios (200 299 beds) Quartile Profit Indicator Profit per discharge $89 04 S6 22 b Profit per visit Net Revenue Indicators Net revenue per discharge Net revenue per visit Medicare revenue percentage $4,091 $201 43 47 f 7 89 Bad debt charity care percentage Contractual allowance percentage 25 27 1 Outpatient revenue percentage 25 26 Volume Indicators i Occupancy rate 67 12 173 23 i Average daily census Length of Stay Indicators k Average length of stay (days) I Adjusted length of stay 6 80 6 48 $3,937 Intensity of Service Indicators Expense per discharge Adjusted expense per discharge Expense per visit $3,417 $202 23 PAll payer case mix index 1 2795 Efficiency Indicators FTEs per occupied bed 4 59 Labor hours per visit Unit Cost Indicators Salary per FTE $24,447 19 58 Employee benefits percentage Liability expense per discharge S80 94 (Net inpatient revenue Inpatient expenses) Total discharges (Net outpatient revenue Outpatient expenses) Total visits Median ($21 30) $0 66 $3,411 $139 36 6 4 76 20 02 21 03 58,10 144 73 6 07 5 36 $3,392 $2,924 $141 97 1 1756 4 15 5 84 $22,517 17 04 $42 05 Quartile ($120 08) (S7 01) $2,815 $98 31 25 2 97 12 12 17 44 47 84 114 39 5,41 4 52 $2,972 $2,572 $111 53 1 0259 3 77 8 66 $20,347 15,18 $18 31 Net inpatient revenue Total discharges Net outpatient revenue Total visits Medicare net patient revenue Total net patient revenue ( (Bed d d debt Charity care)Cross patient revenue Contractual allowances Cross patient revenue Net outpatient revenue Total net patient revenue Patient days (Staffed beds X 365) Patient days 365 Patient days Total discharges Average length of stay Case mix index Inpatient expenses Total discharges Expense per discharge Case mix index Outpatient expenses Total visits Sum of DRG weights Total discharges Inpatient FTEs Average daily census (Outpatient FTES X 2,080) Total visits Total salaries Total FTES Fringe benefit expense Total salaries Inpatient professional liability expense Total discharges DRG Diagnosis related group FTE full time equivalent Notes 1 The upper quartile is based on the higher numerical value for the ratio and the lower quartile on the lower numerical value, regardless of whether a high value is good or bad The interpretation is left to the analyst 10 Answer the Following Questions 1 Please perform a detailed summary by providing and discussing at least 10 important events mentioned in the case Please also discuss which five events you believe are the most influential Please number your events El E10 and ensure that the five most influential events are easily identified 2 Interpret the information from the hospital's financial statements income statement, balance shoot, and statement of cash flows Please list, briefly define, and explain 10 indicators In your explanation, ensure to discuss any trends or causes for concern Please number your indicators and use actual numbers in your submission field to support your argument 3 Using the financial ratios, perform a detailed financial analysis of Grandview Medical Center Please do the following use at least two raties per category, discuss why the calculated ratios were selected, and discuss any trends, causes for concern, of acknowledgments, which could be identified over the three year period (2016 2018) Include and organize response according to the following subtitles Profitability, Liquidity, Debt, and Asset Management 4 Using the Du Pont equation, please analyze and explain the hospital's financial position Please support your results with information from the financial statements Please ensure to include actual numbers in the submission field to support your argument 5 Using the operating ratios given in the lecture packet, please analyze the operational factors that belp explain the hospitals current financial condition Please list, briefly define, and explain five indicators In your explanation, ensure to discuss any trends, causes for concern, or acknowledgments Please ensure to include actual numbers in the submission field to support your argument 6 Based on your evaluation of questions 1 6, provide an evaluation summary of the hospitals financial condition Please ensure to present your views on the potential underlying economic and managerial factors that might have caused any problems that surfaced in the financial and operating analysis Please identify and explain at least 5 Cactors Please ensure to number your factors 7 Grandview's cast of capital is 4 percent, please calculate and explain the results of the economic value analysis (EVA) Please also discuss the applicability of the EVA analysis to organizations such as Grandview hospital Please ensure to include actual numbers in the submission field to support your argument 8 Given all of the information in the case (background information, financial analysis, operating analysis, and EVA analysis), perform a SWOT (strengths, weaknesses, opportunities, threats) analysis on Grandview Medical Center Please list and explain ar least two examples for each category in the analysis Please ensure that the information used in the SWOT analysis is derived from the case Please ensure to use the SWOT headings in your response 11 9 Please explain and rank (from most likely to implement to least likely to implement) at least five recommendations the hospital should follow to ensure financial soundness Please ensure that the recommendations are based upon the data in the case Please number your recommendations (1 most likely, 5 least likely) 12 HCA 545 Financial Analysis Case Anarke LE Grandview Medical Center is a 210 bed, not for profit, acute care hospital with a long standing reputation for providing quality healthcare services to a growing service area Grandview Medical Center competes with three other hospitals in its metropolitan statistical area (MSA) two not for profit and one for profit It is the smallest of the four but has traditionally been ranked highest in patient satisfaction polls Hospitals are accredited by The Joint Commission, and independent, not for profit organization whose mission is to improve the safety and quality of healthcare provided to the public through accreditation and related services Although accreditation is optional for hospitals, it is generally required to qualify for governmental (Medicare and Medicaid) reimbursement, and hence most hospitals apply for accreditation Grandview Medical Center passed its latest Joint Commission survey with flying colors, receiving the Gold Seal of Approval from that accrediting body In recent years, competition among the four hospitals in Grandview's service area has been keen but friendly However, a large for profit chain recently purchased the for profit hospital, which has resulted in some anxiety among the managers of the other three hospitals because of the chain's reputation for aggressively increasing market share in the markets they serve Relevant financial and operating data for Grandview Medical Center are contained in Exhibits 1 1 through 1 5, and selected industry data are contained in Exhibits 1 6 and 1 7 In addition to the data in the exhibits, the following information was extracted from the notes section of Grandview's 2018 Annual Report 1 A significant portion of the hospital's net patient service revenue was generated by patients who are covered by Medicare, Medicaid, or other government programs or by various private plans, including managed care plans, that have contracts with the hospital that specify discounts from charges In general, the proportional amount of deductions is similar between inpatients and outpatients The gross and net patient service revenue and operating expenses breakdown for both inpatient and outpatient services is given in Exhibit 1 4 2 Grandview has a contributory money accumulation (defined contribution) pension plan that covers substantially all of its employees Participants can contribute up to 20 percent of earning to the pension plan The hospital matches, on a dollar for dollar basis, employee contributions of up to 2 percent of wages and pays 50 cents on the dollar for contribution over 2 percent and up to 4 percent Because the plan is defined contribution plan (as opposed to a defined benefit plan), Grandview bas no unfunded pension liabilities Pension expense was approximately $0 543 million in 2016 and $0 588 million in 2018 3 The hospital is a member of the State Hospital Trust Fund, under which it purchases professional liability insurance coverage for individual claims up to $1 million (subject to a deductible of $100 000 per claim) Grandview is self insured for amounts above $1 million but less than $5 million Any liability award in excess of $5 million is covered by a commercial liability policy for example, the policy pays $2 million on a $7 million award The hospital is currently involved in cight suits involving claims of various amounts that could ultimately be tried before juries Although it is impossible to determine the exact potential liability in these claims, management does not believe that the settlement of these cases would have a material effect on the hospital's financial position Assume that your management consulting group has been hired by Grandview Medical Center to perform a detailed analysis on the facility and then present your findings to the hospital board and the organization(when presenting to the entire organization, it cannot be assured that everyone is financially savvy as your consulting group and the C Level executives, so clear explanation and examples are needed) As your consulting group prepares for the presentation, several relevant factors come to light First, in reviewing the policy decisions made by Grandview's board of trustees over the past few years, in 2016 it was noted that the board made the decision to significantly expand the hospital's outpatient setting, and if Grandview Medical Center did not offer such services it would lose the patients to other providers Second, the board chair has great concern about the decline in profitability over the past few years and has not been assuaged by the recent modest upturn Perhaps because she is a CEO of a local company, the chair focuses on return on equity (ROE) as the key measure of profitability She has requested that management develop some strategies to improve profitability and estimate the impact of the strategies on the hospital's ROE Third, the hospital CEO meet with your group to inquire about also performing an economic value added analysis (EVA) on the hospital, The CEO stated that the overall cost of capital is 4 percent and requested that your group also discuss your findings, implications, and applicability of the EVA analysis to the hospital with the board and the entire organization 2 EXHIBIT 1 1 Grandview Hospital Statements of Operations (millions of dollars) 2016 Revenues $30 57 Net patient service revenue Other revenue $1 24 Total revenues $31 81 Expenses Salaries and $12 25 wages Fringe benefits $1 83 Interest expense $1 18 Depreciation $2 35 $0 62 Medical supplies and drugs Professional liability $0 14 Other $9 04 Total Expenses $27 40 4 401 Net Income 2017 $28 56 32 87 $31 44 $12 47 $2 41 $1 60 $2 66 $0 66 30 20 $10 34 $30 33 1 111 2018 342 65 $3 56 346 21 $35 00 $2 57 S1 78 S6 78 S0 78 SO 22 $11 85 $58 96 12 754 3 EXHIBIT 1 2 Grandview Hospital Balance Sheets (millions of dollars) 2016 Assets Cash and investments Accounts receivable (net) 4 359 Inventories 0 432 Other current assets 0 308 Total current assels $9 77 S47 79 Gross plant and equipment Accumulated depreciation 11 82 $35 97 $45 74 $0 93 1 46 0 11 $2 50 15 673 27 567 S45 74 Net plant and equipment Total assets Liabilities and Net Assets Accounts payable Accrued expenses Current portion of LT debt Long term debt Net assets Total current liabilities Total liabilities and not assets 2017 $5 07 5 674 0 523 0 703 $11 97 $55 33 14 338 $41 00 $52 96 $1 25 1 503 1 341 $4 10 19 222 29 645 $52 96 2018 S2 80 12,413 0 601 0 923 $16 73 370 55 17 009 $53 54 $70 28 $3 76 4 176 1 465 $9 40 29 39 31 51 $70 30 EXHIBIT 1 3 Grandview Hospital Statements of Cash Flows (millions of dollars) Cash Flows from Operating Activities Net income Depreciation and noncash expenses Change in accounts receivable Change in inventories Change in other current assels Change in accounts payable Change in accrued expenses Cash Flows from Investing Activition Cash Flows from Financing Activities Net increase (decrease) in cash Beginning cash Ending cash Net cash flow from operations Investment in plant and equipment Change in long term deht Change in current portion of long term debl Net cash flow from financing 2017 $1 1 2 633 1 315 0 091 0 395 0 325 0 043 $2 31 ($7 69) $3 55 $1 23 $4 78 ($0 60) $4 67 $4 08 2018 ($12 75) 2 756 4 739 0 178 0 22 0 507 0 327 ($5 12) ($15 33) $19 43 $2 12 $21 55 $1 10 $5 07 $6 17 EXHIBIT 1 4 Grandview Hospital Revenue and Expenses Allocation (millions of dollars) 2016 Operating Revenue $26 117 $6 535 $1 729 $2 127 $3 856 $28 796 $20 573 $6,831 $27 404 Gross inpatient service Gross outpatient service Gross patient service revenue Contractual allowances Bad debt and charity care Total revenue deductions Net patient service revenue Total operating expenses Operating Expenses Inpatient service Churpatient service 2017 $29 148 $9 130 $38 278 $5 196 $2 506 $7 702 $30 576 $22 229 $8 098 $30 327 2018 $33 216 $11 912 $45,128 $7 516 $3 030 $10 546 $34 582 $24 771 $9 187 $33 958 EXHIBIT 1 5 Grandview Hospital Selected Operating Data Medicare discharges Total discharges Outpatient visits Licensed beds Staffed beds Patient days All payer case mix index Full time equivalents 2016 2,721 8 784 32,285 210 193 44,085 1 2869 610 8 2017 2 860 8,318 32,878 210 197 42,434 1 2993 625,8 2018 3,741 8,576 36,796 210 178 40,062 1 3161 819 3 EXHIBIT 1 6 2018 Selected Industry Financial Ratios (200 299 beds) Profitability Ratios Total margin Return on assets Retum on equity Deductible ratio 2 Liquidity Ratios Quartile 3 48 0 53 3 10 0 40 6 01 0 62 0 26 0 18 Current Ratio 1 48 1 99 15 89 Days cash on hand 6 24 Debt Management Ratios Debt ratio 48 40 64 70 35 20 26 90 Debt to equity ratio Times interest earned Cash flow coverage 2,23 1,14 3 22 1 76 Asset Management Ratios Fixed asset turnover 1 76 1 49 Total asset turnover 0 89 0 75 Days in patient accounts receivables 75 67 63 33 Current asset turnover 3 38 2 88 Average payment period (days) 56 52 45 84 Average age of plant (year) 7 39 6 14 Deduction Gross patient service revenue b Total revenues Current assets Current liabilities (Total expenses Depreciation expense) 365 Notes 1 The upper quartile is based on the higher numerical value, regardless of whether a high value is good or bad The interpretation is left to the analyst 8 Other 5 58 5 80 15 66 0,34 2 53 32 35 Median 62 90 127 00 4 29 5 32 2 20 1 04 87 53 3 94 71 24 Quartile EXHIBIT 1 7 2018 Selected Industry Operating Ratios (200 299 beds) Quartile Profit Indicator Profit per discharge $89 04 S6 22 b Profit per visit Net Revenue Indicators Net revenue per discharge Net revenue per visit Medicare revenue percentage $4,091 $201 43 47 f 7 89 Bad debt charity care percentage Contractual allowance percentage 25 27 1 Outpatient revenue percentage 25 26 Volume Indicators i Occupancy rate 67 12 173 23 i Average daily census Length of Stay Indicators k Average length of stay (days) I Adjusted length of stay 6 80 6 48 $3,937 Intensity of Service Indicators Expense per discharge Adjusted expense per discharge Expense per visit $3,417 $202 23 PAll payer case mix index 1 2795 Efficiency Indicators FTEs per occupied bed 4 59 Labor hours per visit Unit Cost Indicators Salary per FTE $24,447 19 58 Employee benefits percentage Liability expense per discharge S80 94 (Net inpatient revenue Inpatient expenses) Total discharges (Net outpatient revenue Outpatient expenses) Total visits Median ($21 30) $0 66 $3,411 $139 36 6 4 76 20 02 21 03 58,10 144 73 6 07 5 36 $3,392 $2,924 $141 97 1 1756 4 15 5 84 $22,517 17 04 $42 05 Quartile ($120 08) (S7 01) $2,815 $98 31 25 2 97 12 12 17 44 47 84 114 39 5,41 4 52 $2,972 $2,572 $111 53 1 0259 3 77 8 66 $20,347 15,18 $18 31 Net inpatient revenue Total discharges Net outpatient revenue Total visits Medicare net patient revenue Total net patient revenue ( (Bed d d debt Charity care)Cross patient revenue Contractual allowances Cross patient revenue Net outpatient revenue Total net patient revenue Patient days (Staffed beds X 365) Patient days 365 Patient days Total discharges Average length of stay Case mix index Inpatient expenses Total discharges Expense per discharge Case mix index Outpatient expenses Total visits Sum of DRG weights Total discharges Inpatient FTEs Average daily census (Outpatient FTES X 2,080) Total visits Total salaries Total FTES Fringe benefit expense Total salaries Inpatient professional liability expense Total discharges DRG Diagnosis related group FTE full time equivalent Notes 1 The upper quartile is based on the higher numerical value for the ratio and the lower quartile on the lower numerical value, regardless of whether a high value is good or bad The interpretation is left to the analyst 10 Answer the Following Questions 1 Please perform a detailed summary by providing and discussing at least 10 important events mentioned in the case Please also discuss which five events you believe are the most influential Please number your events El E10 and ensure that the five most influential events are easily identified 2 Interpret the information from the hospital's financial statements income statement, balance shoot, and statement of cash flows Please list, briefly define, and explain 10 indicators In your explanation, ensure to discuss any trends or causes for concern Please number your indicators and use actual numbers in your submission field to support your argument 3 Using the financial ratios, perform a detailed financial analysis of Grandview Medical Center Please do the following use at least two raties per category, discuss why the calculated ratios were selected, and discuss any trends, causes for concern, of acknowledgments, which could be identified over the three year period (2016 2018) Include and organize response according to the following subtitles Profitability, Liquidity, Debt, and Asset Management 4 Using the Du Pont equation, please analyze and explain the hospital's financial position Please support your results with information from the financial statements Please ensure to include actual numbers in the submission field to support your argument 5 Using the operating ratios given in the lecture packet, please analyze the operational factors that belp explain the hospitals current financial condition Please list, briefly define, and explain five indicators In your explanation, ensure to discuss any trends, causes for concern, or acknowledgments Please ensure to include actual numbers in the submission field to support your argument 6 Based on your evaluation of questions 1 6, provide an evaluation summary of the hospitals financial condition Please ensure to present your views on the potential underlying economic and managerial factors that might have caused any problems that surfaced in the financial and operating analysis Please identify and explain at least 5 Cactors Please ensure to number your factors 7 Grandview's cast of capital is 4 percent, please calculate and explain the results of the economic value analysis (EVA) Please also discuss the applicability of the EVA analysis to organizations such as Grandview hospital Please ensure to include actual numbers in the submission field to support your argument 8 Given all of the information in the case (background information, financial analysis, operating analysis, and EVA analysis), perform a SWOT (strengths, weaknesses, opportunities, threats) analysis on Grandview Medical Center Please list and explain ar least two examples for each category in the analysis Please ensure that the information used in the SWOT analysis is derived from the case Please ensure to use the SWOT headings in your response 11 9 Please explain and rank (from most likely to implement to least likely to implement) at least five recommendations the hospital should follow to ensure financial soundness Please ensure that the recommendations are based upon the data in the case Please number your recommendations (1 most likely, 5 least likely) 12

Question

HCA 545 Financial Analysis Case Anarke LE Grandview Medical Center is a 210 bed, not for profit, acute care hospital with a long  standing reputation for providing quality healthcare services to a growing service area  Grandview Medical Center competes with three other hospitals in its metropolitan statistical area (MSA)   two not for profit and one for profit  It is the smallest of the four but has traditionally been ranked highest in patient satisfaction polls  Hospitals are accredited by The Joint Commission, and independent, not for profit organization whose mission is to improve the safety and quality of healthcare provided to the public through accreditation and related services  Although accreditation is optional for hospitals, it is generally required to qualify for governmental (Medicare and Medicaid) reimbursement, and hence most hospitals apply for accreditation  Grandview Medical Center passed its latest Joint Commission survey with  flying colors,  receiving the Gold Seal of Approval from that accrediting body  In recent years, competition among the four hospitals in Grandview's service area has been keen but friendly  However, a large for profit chain recently purchased the for profit hospital, which has resulted in some anxiety among the managers of the other three hospitals because of the chain's reputation for aggressively increasing market share in the markets they serve  Relevant financial and operating data for Grandview Medical Center are contained in Exhibits 1 1 through 1 5, and selected industry data are contained in Exhibits 1 6 and 1 7  In addition to the data in the exhibits, the following information was extracted from the notes section of Grandview's 2018 Annual Report  1  A significant portion of the hospital's net patient service revenue was generated by patients who are covered by Medicare, Medicaid, or other government programs or by various private plans, including managed care plans, that have contracts with the hospital that specify discounts from charges  In general, the proportional amount of deductions is similar between inpatients and outpatients  The gross and net patient service revenue and operating expenses breakdown for both inpatient and outpatient services is given in Exhibit 1 4  2  Grandview has a contributory money accumulation (defined contribution) pension plan that covers substantially all of its employees  Participants can contribute up to 20 percent of earning to the pension plan  The hospital matches, on a dollar for dollar basis, employee contributions of up to 2 percent of wages and pays 50 cents on the dollar for contribution over 2 percent and up to 4 percent  Because the plan is defined contribution plan (as opposed to a defined benefit plan), Grandview bas no unfunded pension liabilities  Pension expense was approximately $0 543 million in 2016 and $0 588 million in 2018  3  The hospital is a member of the State Hospital Trust Fund, under which it purchases professional liability insurance coverage for individual claims up to $1 million (subject to a deductible of $100 000 per claim)  Grandview is self insured for amounts above $1 million but less than $5 million  Any liability award in excess of $5 million is covered by a commercial liability policy  for example, the policy pays $2 million on a $7 million award  The hospital is currently involved in cight suits involving claims of various amounts that could ultimately be tried before juries  Although it is impossible to determine the exact potential liability in these claims, management does not believe that the settlement of these cases would have a material effect on the hospital's financial position  Assume that your management consulting group has been hired by Grandview Medical Center to perform a detailed analysis on the facility and then present your findings to the hospital board and the organization(when presenting to the entire organization, it cannot be assured that everyone is financially savvy as your consulting group and the C Level executives, so clear explanation and examples are needed)  As your consulting group prepares for the presentation, several relevant factors come to light  First, in reviewing the policy decisions made by Grandview's board of trustees over the past few years, in 2016 it was noted that the board made the decision to significantly expand the hospital's outpatient setting, and if Grandview Medical Center did not offer such services it would lose the patients to other providers  Second, the board chair has great concern about the decline in profitability over the past few years and has not been assuaged by the recent modest upturn  Perhaps because she is a CEO of a local company, the chair focuses on return on equity (ROE) as the key measure of profitability  She has requested that management develop some strategies to improve profitability and estimate the impact of the strategies on the hospital's ROE  Third, the hospital CEO meet with your group to inquire about also performing an economic value added analysis (EVA) on the hospital, The CEO stated that the overall cost of capital is 4 percent and requested that your group also discuss your findings, implications, and applicability of the EVA analysis to the hospital with the board and the entire organization  2 EXHIBIT 1 1 Grandview Hospital  Statements of Operations (millions of dollars) 2016 Revenues $30 57 Net patient service revenue Other revenue $1 24 Total revenues $31 81 Expenses Salaries and $12 25 wages Fringe benefits $1 83 Interest expense $1 18 Depreciation $2 35 $0 62 Medical supplies and drugs Professional liability $0 14 Other $9 04 Total Expenses $27 40 4 401 Net Income 2017 $28 56 32 87 $31 44 $12 47 $2 41 $1 60 $2 66 $0 66 30 20 $10 34 $30 33 1 111 2018 342 65 $3 56 346 21 $35 00 $2 57 S1 78 S6 78 S0 78 SO 22 $11 85 $58 96  12 754 3 EXHIBIT 1 2 Grandview Hospital  Balance Sheets (millions of dollars) 2016 Assets Cash and investments Accounts receivable (net) 4 359 Inventories 0 432 Other current assets 0 308 Total current assels $9 77 S47 79 Gross plant and equipment Accumulated depreciation  11 82 $35 97 $45 74 $0 93 1 46 0 11 $2 50 15 673 27 567 S45 74 Net plant and equipment Total assets Liabilities and Net Assets Accounts payable Accrued expenses Current portion of LT debt Long term debt Net assets Total current liabilities Total liabilities and not assets 2017 $5 07 5 674 0 523 0 703 $11 97 $55 33  14 338 $41 00 $52 96 $1 25 1 503 1 341 $4 10 19 222 29 645 $52 96 2018 S2 80 12,413 0 601 0 923 $16 73 370 55  17 009 $53 54 $70 28 $3 76 4 176 1 465 $9 40 29 39 31 51 $70 30 EXHIBIT 1 3 Grandview Hospital  Statements of Cash Flows (millions of dollars) Cash Flows from Operating Activities  Net income Depreciation and noncash expenses Change in accounts receivable Change in inventories Change in other current assels Change in accounts payable Change in accrued expenses Cash Flows from Investing Activition Cash Flows from Financing Activities Net increase (decrease) in cash Beginning cash Ending cash Net cash flow from operations Investment in plant and equipment Change in long term deht Change in current portion of long  term debl Net cash flow from financing 2017 $1 1 2 633  1 315  0 091  0 395 0 325 0 043 $2 31 ($7 69) $3 55 $1 23 $4 78 ($0 60) $4 67 $4 08 2018 ($12 75) 2 756 4 739 0 178  0 22 0 507  0 327 ($5 12) ($15 33) $19 43 $2 12 $21 55 $1 10 $5 07 $6 17 EXHIBIT 1 4 Grandview Hospital  Revenue and Expenses Allocation (millions of dollars) 2016 Operating Revenue $26 117 $6 535 $1 729 $2 127 $3 856 $28 796 $20 573 $6,831 $27 404 Gross inpatient service Gross outpatient service Gross patient service revenue Contractual allowances Bad debt and charity care Total revenue deductions Net patient service revenue Total operating expenses Operating Expenses Inpatient service Churpatient service 2017 $29 148 $9 130 $38 278 $5 196 $2 506 $7 702 $30 576 $22 229 $8 098 $30 327 2018 $33 216 $11 912 $45,128 $7 516 $3 030 $10 546 $34 582 $24 771 $9 187 $33 958 EXHIBIT 1 5 Grandview Hospital  Selected Operating Data Medicare discharges Total discharges Outpatient visits Licensed beds Staffed beds Patient days All payer case mix index Full time equivalents 2016 2,721 8 784 32,285 210 193 44,085 1 2869 610 8 2017 2 860 8,318 32,878 210 197 42,434 1 2993 625,8 2018 3,741 8,576 36,796 210 178 40,062 1 3161 819 3     EXHIBIT 1 6 2018 Selected Industry Financial Ratios (200 299 beds) Profitability Ratios Total margin Return on assets Retum on equity Deductible ratio 2 Liquidity Ratios  Quartile 3 48  0 53  3 10  0 40  6 01  0 62  0 26 0 18 Current Ratio 1 48 1 99 15 89 Days cash on hand 6 24 Debt Management Ratios Debt ratio 48 40  64 70  35 20  26 90  Debt to equity ratio Times interest earned Cash flow coverage 2,23 1,14 3 22 1 76 Asset Management Ratios Fixed asset turnover 1 76 1 49 Total asset turnover 0 89 0 75 Days in patient accounts receivables 75 67 63 33 Current asset turnover 3 38 2 88 Average payment period (days) 56 52 45 84 Average age of plant (year) 7 39 6 14 Deduction Gross patient service revenue b Total revenues Current assets Current liabilities  (Total expenses   Depreciation expense) 365  Notes  1 The upper quartile is based on the higher numerical value, regardless of whether a high value is good or bad  The interpretation is left to the analyst  8 Other 5 58  5 80  15 66  0,34 2 53 32 35 Median 62 90  127 00  4 29 5 32 2 20 1 04 87 53 3 94 71 24  Quartile EXHIBIT 1 7 2018 Selected  Industry Operating Ratios (200 299 beds)  Quartile Profit Indicator Profit per discharge $89 04 S6 22 b Profit per visit Net Revenue Indicators   Net revenue per discharge Net revenue per visit  Medicare revenue percentage $4,091 $201 43 47  f 7 89  Bad debt charity care percentage Contractual allowance percentage 25 27  1 Outpatient revenue percentage 25 26  Volume Indicators i Occupancy rate 67 12  173 23  i Average daily census Length of Stay Indicators k Average length of stay (days) I Adjusted length of stay 6 80 6 48 $3,937 Intensity of Service Indicators  Expense per discharge Adjusted expense per discharge Expense per visit $3,417 $202 23 PAll payer case mix index 1 2795 Efficiency Indicators  FTEs per occupied bed 4 59   Labor hours per visit Unit Cost Indicators   Salary per FTE $24,447 19 58  Employee benefits percentage  Liability expense per discharge S80 94   (Net inpatient revenue   Inpatient expenses) Total discharges (Net outpatient revenue   Outpatient expenses) Total visits Median ($21 30) $0 66 $3,411 $139 36 6  4 76  20 02  21 03  58,10  144 73  6 07 5 36 $3,392 $2,924 $141 97 1 1756 4 15 5 84 $22,517 17 04  $42 05  Quartile ($120 08) (S7 01) $2,815 $98 31 25  2 97  12 12  17 44  47 84  114 39  5,41 4 52 $2,972 $2,572 $111 53 1 0259 3 77 8 66 $20,347 15,18   $18 31 Net inpatient revenue Total discharges Net outpatient revenue Total visits Medicare net patient revenue Total net patient revenue ( (Bed d d debt Charity care)Cross patient revenue   Contractual allowances Cross patient revenue  Net outpatient revenue Total net patient revenue Patient days (Staffed beds X 365) Patient days 365   Patient days Total discharges Average length of stay Case mix index Inpatient expenses Total discharges Expense per discharge Case mix index   Outpatient expenses Total visits Sum of DRG weights Total discharges Inpatient FTEs Average daily census (Outpatient FTES X 2,080) Total visits Total salaries Total FTES Fringe benefit expense Total salaries   Inpatient professional liability expense Total discharges DRG  Diagnosis related group  FTE  full time equivalent Notes  1 The upper quartile is based on the higher numerical value for the ratio and the lower quartile on the lower numerical value, regardless of whether a high value is good or bad  The interpretation is left to the analyst  10 Answer the Following Questions  1  Please perform a detailed summary by providing and discussing at least 10 important events mentioned in the case  Please also discuss which five events you believe are the most influential  Please number your events El E10 and ensure that the five most influential events are easily identified  2  Interpret the information from the hospital's financial statements  income statement, balance shoot, and statement of cash flows  Please list, briefly define, and explain 10 indicators  In your explanation, ensure to discuss any trends or causes for concern  Please number your indicators and use actual numbers in your submission field to support your argument  3  Using the financial ratios, perform a detailed financial analysis of Grandview Medical Center  Please do the following  use at least two raties per category, discuss why the calculated ratios were selected, and discuss any trends, causes for concern, of acknowledgments, which could be identified over the three year period (2016 2018)  Include and organize response according to the following subtitles  Profitability, Liquidity, Debt, and Asset Management  4  Using the Du Pont equation, please analyze and explain the hospital's financial position  Please support your results with information from the financial statements  Please ensure to include actual numbers in the submission field to support your argument  5  Using the operating ratios given in the lecture packet, please analyze the operational factors that belp explain the hospitals current financial condition  Please list, briefly define, and explain five indicators  In your explanation, ensure to discuss any trends, causes for concern, or acknowledgments  Please ensure to include actual numbers in the submission field to support your argument  6  Based on your evaluation of questions 1 6, provide an evaluation summary of the hospitals financial condition  Please ensure to present your views on the potential underlying economic and managerial factors that might have caused any problems that surfaced in the financial and operating analysis  Please identify and explain at least 5 Cactors  Please ensure to number your factors  7  Grandview's cast of capital is 4 percent, please calculate and explain the results of the economic value analysis (EVA)  Please also discuss the applicability of the EVA analysis to organizations such as Grandview hospital  Please ensure to include actual numbers in the submission field to support your argument  8  Given all of the information in the case (background information, financial analysis, operating analysis, and EVA analysis), perform a SWOT (strengths, weaknesses, opportunities, threats) analysis on Grandview Medical Center  Please list and explain ar least two examples for each category in the analysis  Please ensure that the information used in the SWOT analysis is derived from the case  Please ensure to use the SWOT headings in your response  11 9  Please explain and rank (from most likely to implement to least likely to implement) at least five recommendations the hospital should follow to ensure financial soundness  Please ensure that the recommendations are based upon the data in the case  Please number your recommendations (1 most likely, 5 least likely)  12 HCA 545 Financial Analysis Case Anarke LE Grandview Medical Center is a 210 bed, not for profit, acute care hospital with a long  standing reputation for providing quality healthcare services to a growing service area  Grandview Medical Center competes with three other hospitals in its metropolitan statistical area (MSA)   two not for profit and one for profit  It is the smallest of the four but has traditionally been ranked highest in patient satisfaction polls  Hospitals are accredited by The Joint Commission, and independent, not for profit organization whose mission is to improve the safety and quality of healthcare provided to the public through accreditation and related services  Although accreditation is optional for hospitals, it is generally required to qualify for governmental (Medicare and Medicaid) reimbursement, and hence most hospitals apply for accreditation  Grandview Medical Center passed its latest Joint Commission survey with  flying colors,  receiving the Gold Seal of Approval from that accrediting body  In recent years, competition among the four hospitals in Grandview's service area has been keen but friendly  However, a large for profit chain recently purchased the for profit hospital, which has resulted in some anxiety among the managers of the other three hospitals because of the chain's reputation for aggressively increasing market share in the markets they serve  Relevant financial and operating data for Grandview Medical Center are contained in Exhibits 1 1 through 1 5, and selected industry data are contained in Exhibits 1 6 and 1 7  In addition to the data in the exhibits, the following information was extracted from the notes section of Grandview's 2018 Annual Report  1  A significant portion of the hospital's net patient service revenue was generated by patients who are covered by Medicare, Medicaid, or other government programs or by various private plans, including managed care plans, that have contracts with the hospital that specify discounts from charges  In general, the proportional amount of deductions is similar between inpatients and outpatients  The gross and net patient service revenue and operating expenses breakdown for both inpatient and outpatient services is given in Exhibit 1 4  2  Grandview has a contributory money accumulation (defined contribution) pension plan that covers substantially all of its employees  Participants can contribute up to 20 percent of earning to the pension plan  The hospital matches, on a dollar for dollar basis, employee contributions of up to 2 percent of wages and pays 50 cents on the dollar for contribution over 2 percent and up to 4 percent  Because the plan is defined contribution plan (as opposed to a defined benefit plan), Grandview bas no unfunded pension liabilities  Pension expense was approximately $0 543 million in 2016 and $0 588 million in 2018  3  The hospital is a member of the State Hospital Trust Fund, under which it purchases professional liability insurance coverage for individual claims up to $1 million (subject to a deductible of $100 000 per claim)  Grandview is self insured for amounts above $1 million but less than $5 million  Any liability award in excess of $5 million is covered by a commercial liability policy  for example, the policy pays $2 million on a $7 million award  The hospital is currently involved in cight suits involving claims of various amounts that could ultimately be tried before juries  Although it is impossible to determine the exact potential liability in these claims, management does not believe that the settlement of these cases would have a material effect on the hospital's financial position  Assume that your management consulting group has been hired by Grandview Medical Center to perform a detailed analysis on the facility and then present your findings to the hospital board and the organization(when presenting to the entire organization, it cannot be assured that everyone is financially savvy as your consulting group and the C Level executives, so clear explanation and examples are needed)  As your consulting group prepares for the presentation, several relevant factors come to light  First, in reviewing the policy decisions made by Grandview's board of trustees over the past few years, in 2016 it was noted that the board made the decision to significantly expand the hospital's outpatient setting, and if Grandview Medical Center did not offer such services it would lose the patients to other providers  Second, the board chair has great concern about the decline in profitability over the past few years and has not been assuaged by the recent modest upturn  Perhaps because she is a CEO of a local company, the chair focuses on return on equity (ROE) as the key measure of profitability  She has requested that management develop some strategies to improve profitability and estimate the impact of the strategies on the hospital's ROE  Third, the hospital CEO meet with your group to inquire about also performing an economic value added analysis (EVA) on the hospital, The CEO stated that the overall cost of capital is 4 percent and requested that your group also discuss your findings, implications, and applicability of the EVA analysis to the hospital with the board and the entire organization  2 EXHIBIT 1 1 Grandview Hospital  Statements of Operations (millions of dollars) 2016 Revenues $30 57 Net patient service revenue Other revenue $1 24 Total revenues $31 81 Expenses Salaries and $12 25 wages Fringe benefits $1 83 Interest expense $1 18 Depreciation $2 35 $0 62 Medical supplies and drugs Professional liability $0 14 Other $9 04 Total Expenses $27 40 4 401 Net Income 2017 $28 56 32 87 $31 44 $12 47 $2 41 $1 60 $2 66 $0 66 30 20 $10 34 $30 33 1 111 2018 342 65 $3 56 346 21 $35 00 $2 57 S1 78 S6 78 S0 78 SO 22 $11 85 $58 96  12 754 3 EXHIBIT 1 2 Grandview Hospital  Balance Sheets (millions of dollars) 2016 Assets Cash and investments Accounts receivable (net) 4 359 Inventories 0 432 Other current assets 0 308 Total current assels $9 77 S47 79 Gross plant and equipment Accumulated depreciation  11 82 $35 97 $45 74 $0 93 1 46 0 11 $2 50 15 673 27 567 S45 74 Net plant and equipment Total assets Liabilities and Net Assets Accounts payable Accrued expenses Current portion of LT debt Long term debt Net assets Total current liabilities Total liabilities and not assets 2017 $5 07 5 674 0 523 0 703 $11 97 $55 33  14 338 $41 00 $52 96 $1 25 1 503 1 341 $4 10 19 222 29 645 $52 96 2018 S2 80 12,413 0 601 0 923 $16 73 370 55  17 009 $53 54 $70 28 $3 76 4 176 1 465 $9 40 29 39 31 51 $70 30 EXHIBIT 1 3 Grandview Hospital  Statements of Cash Flows (millions of dollars) Cash Flows from Operating Activities  Net income Depreciation and noncash expenses Change in accounts receivable Change in inventories Change in other current assels Change in accounts payable Change in accrued expenses Cash Flows from Investing Activition Cash Flows from Financing Activities Net increase (decrease) in cash Beginning cash Ending cash Net cash flow from operations Investment in plant and equipment Change in long term deht Change in current portion of long  term debl Net cash flow from financing 2017 $1 1 2 633  1 315  0 091  0 395 0 325 0 043 $2 31 ($7 69) $3 55 $1 23 $4 78 ($0 60) $4 67 $4 08 2018 ($12 75) 2 756 4 739 0 178  0 22 0 507  0 327 ($5 12) ($15 33) $19 43 $2 12 $21 55 $1 10 $5 07 $6 17 EXHIBIT 1 4 Grandview Hospital  Revenue and Expenses Allocation (millions of dollars) 2016 Operating Revenue $26 117 $6 535 $1 729 $2 127 $3 856 $28 796 $20 573 $6,831 $27 404 Gross inpatient service Gross outpatient service Gross patient service revenue Contractual allowances Bad debt and charity care Total revenue deductions Net patient service revenue Total operating expenses Operating Expenses Inpatient service Churpatient service 2017 $29 148 $9 130 $38 278 $5 196 $2 506 $7 702 $30 576 $22 229 $8 098 $30 327 2018 $33 216 $11 912 $45,128 $7 516 $3 030 $10 546 $34 582 $24 771 $9 187 $33 958 EXHIBIT 1 5 Grandview Hospital  Selected Operating Data Medicare discharges Total discharges Outpatient visits Licensed beds Staffed beds Patient days All payer case mix index Full time equivalents 2016 2,721 8 784 32,285 210 193 44,085 1 2869 610 8 2017 2 860 8,318 32,878 210 197 42,434 1 2993 625,8 2018 3,741 8,576 36,796 210 178 40,062 1 3161 819 3     EXHIBIT 1 6 2018 Selected Industry Financial Ratios (200 299 beds) Profitability Ratios Total margin Return on assets Retum on equity Deductible ratio 2 Liquidity Ratios  Quartile 3 48  0 53  3 10  0 40  6 01  0 62  0 26 0 18 Current Ratio 1 48 1 99 15 89 Days cash on hand 6 24 Debt Management Ratios Debt ratio 48 40  64 70  35 20  26 90  Debt to equity ratio Times interest earned Cash flow coverage 2,23 1,14 3 22 1 76 Asset Management Ratios Fixed asset turnover 1 76 1 49 Total asset turnover 0 89 0 75 Days in patient accounts receivables 75 67 63 33 Current asset turnover 3 38 2 88 Average payment period (days) 56 52 45 84 Average age of plant (year) 7 39 6 14 Deduction Gross patient service revenue b Total revenues Current assets Current liabilities  (Total expenses   Depreciation expense) 365  Notes  1 The upper quartile is based on the higher numerical value, regardless of whether a high value is good or bad  The interpretation is left to the analyst  8 Other 5 58  5 80  15 66  0,34 2 53 32 35 Median 62 90  127 00  4 29 5 32 2 20 1 04 87 53 3 94 71 24  Quartile EXHIBIT 1 7 2018 Selected  Industry Operating Ratios (200 299 beds)  Quartile Profit Indicator Profit per discharge $89 04 S6 22 b Profit per visit Net Revenue Indicators   Net revenue per discharge Net revenue per visit  Medicare revenue percentage $4,091 $201 43 47  f 7 89  Bad debt charity care percentage Contractual allowance percentage 25 27  1 Outpatient revenue percentage 25 26  Volume Indicators i Occupancy rate 67 12  173 23  i Average daily census Length of Stay Indicators k Average length of stay (days) I Adjusted length of stay 6 80 6 48 $3,937 Intensity of Service Indicators  Expense per discharge Adjusted expense per discharge Expense per visit $3,417 $202 23 PAll payer case mix index 1 2795 Efficiency Indicators  FTEs per occupied bed 4 59   Labor hours per visit Unit Cost Indicators   Salary per FTE $24,447 19 58  Employee benefits percentage  Liability expense per discharge S80 94   (Net inpatient revenue   Inpatient expenses) Total discharges (Net outpatient revenue   Outpatient expenses) Total visits Median ($21 30) $0 66 $3,411 $139 36 6  4 76  20 02  21 03  58,10  144 73  6 07 5 36 $3,392 $2,924 $141 97 1 1756 4 15 5 84 $22,517 17 04  $42 05  Quartile ($120 08) (S7 01) $2,815 $98 31 25  2 97  12 12  17 44  47 84  114 39  5,41 4 52 $2,972 $2,572 $111 53 1 0259 3 77 8 66 $20,347 15,18   $18 31 Net inpatient revenue Total discharges Net outpatient revenue Total visits Medicare net patient revenue Total net patient revenue ( (Bed d d debt Charity care)Cross patient revenue   Contractual allowances Cross patient revenue  Net outpatient revenue Total net patient revenue Patient days (Staffed beds X 365) Patient days 365   Patient days Total discharges Average length of stay Case mix index Inpatient expenses Total discharges Expense per discharge Case mix index   Outpatient expenses Total visits Sum of DRG weights Total discharges Inpatient FTEs Average daily census (Outpatient FTES X 2,080) Total visits Total salaries Total FTES Fringe benefit expense Total salaries   Inpatient professional liability expense Total discharges DRG  Diagnosis related group  FTE  full time equivalent Notes  1 The upper quartile is based on the higher numerical value for the ratio and the lower quartile on the lower numerical value, regardless of whether a high value is good or bad  The interpretation is left to the analyst  10 Answer the Following Questions  1  Please perform a detailed summary by providing and discussing at least 10 important events mentioned in the case  Please also discuss which five events you believe are the most influential  Please number your events El E10 and ensure that the five most influential events are easily identified  2  Interpret the information from the hospital's financial statements  income statement, balance shoot, and statement of cash flows  Please list, briefly define, and explain 10 indicators  In your explanation, ensure to discuss any trends or causes for concern  Please number your indicators and use actual numbers in your submission field to support your argument  3  Using the financial ratios, perform a detailed financial analysis of Grandview Medical Center  Please do the following  use at least two raties per category, discuss why the calculated ratios were selected, and discuss any trends, causes for concern, of acknowledgments, which could be identified over the three year period (2016 2018)  Include and organize response according to the following subtitles  Profitability, Liquidity, Debt, and Asset Management  4  Using the Du Pont equation, please analyze and explain the hospital's financial position  Please support your results with information from the financial statements  Please ensure to include actual numbers in the submission field to support your argument  5  Using the operating ratios given in the lecture packet, please analyze the operational factors that belp explain the hospitals current financial condition  Please list, briefly define, and explain five indicators  In your explanation, ensure to discuss any trends, causes for concern, or acknowledgments  Please ensure to include actual numbers in the submission field to support your argument  6  Based on your evaluation of questions 1 6, provide an evaluation summary of the hospitals financial condition  Please ensure to present your views on the potential underlying economic and managerial factors that might have caused any problems that surfaced in the financial and operating analysis  Please identify and explain at least 5 Cactors  Please ensure to number your factors  7  Grandview's cast of capital is 4 percent, please calculate and explain the results of the economic value analysis (EVA)  Please also discuss the applicability of the EVA analysis to organizations such as Grandview hospital  Please ensure to include actual numbers in the submission field to support your argument  8  Given all of the information in the case (background information, financial analysis, operating analysis, and EVA analysis), perform a SWOT (strengths, weaknesses, opportunities, threats) analysis on Grandview Medical Center  Please list and explain ar least two examples for each category in the analysis  Please ensure that the information used in the SWOT analysis is derived from the case  Please ensure to use the SWOT headings in your response  11 9  Please explain and rank (from most likely to implement to least likely to implement) at least five recommendations the hospital should follow to ensure financial soundness  Please ensure that the recommendations are based upon the data in the case  Please number your recommendations (1 most likely, 5 least likely)  12

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HCA 545 Financial Analysis Case Anarke LE Grandview Medical Center is a 210-bed, not-for-profit, acute care hospital with a long- standing reputation for providing quality

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