Lets assume that leadership has given you authority to move forward with your selected service or programmatic enhancement This week, in Part 2 of your finance project, you will apply all you have been learning this term to write a capital budget. Be sure to review the budgets found in the MHS case study. Complete every component of the capital budget and ensure your proposed budget fits well within the MHS budget information provided. Capital Budget Process: 1. Identify the desired goal and alternatives. The desired goal is to move forward with the Ambulatory Services unit. 2. Estimate output, output prices, and revenues, including when cash will be received. 3. Identify the type and quantity of resources needed, input prices, and when expenses will be paid. 4. Select a discount rate and calculate the PV of future cash flows using an Excel spreadsheet. 5. Select an evaluation measure to assess cash flows. 6. Conduct sensitivity analysis using the same Excels spreadsheet. 7. Reintroduce the service/unit you are recommending in no more than 1-2 sentences. Then provide a 2-3 paragraph budget narrative to justify the budgeting decisions you made.

Balance Sheet

Assets Liabilities and Fund balance

Current Assets 1,150,000 Current Liabilities

Assets whose use is limited 825,000 Current maturities of long term debt 525,000

Patient accounts receivable 7,400,000 Accounts payable and accrued expenses 4,900,000

(Net of 1,300,000 allowance Bond interest payable 300,000

For bad debts)

Other receivables 150,000 Reimbursement settlement payable 100,000

Inventories 900,000

Prepaid expenses 200,000 Total current liabilities 5,825,000

Total current assets 10,625,000 Long term debt 6,000,000

Assets whose use is limited Less current portion of

Corporate funded Long term debt <525,000>

Depreciation 1,950,000 Net long term debt 5,475,000

Held by trustee under bond Total liabilities 11,300,000

Indenture Agreement 1,425,000 Fund balances

General fund 21,500,000

Total assets whose use is limited 3,375,000 Total fund balances 21,500,000

Less current portion <825,000> Total liabilities and fund

Net assets whose use is Balances $32,800,000

Limited 2,550,000

Property, plant,

And equipment net 19,300,000

Other assets 325,000

Total Assets $32,800,000

Statement of Revenue and expense

Revenue

Net patient service revenue 34,000,000

Other revenue 1,100,000

Total operating revenue 35,100,000

Expenses

Nursing services 5,025,000

Other professional services 13,100,000

General Services 3,200,000

Support services 8,300,000

Depreciation 1,900,000

Amortization 50,000

Interest 325,000

Provision for doubtful accounts 1,500,000

Total expenses 33,400,000

Income from operations 1,700,000

Nonoperating gains (loses)

Unrestricted gifts and memorials 20,000

Interest income 80,000

Nonoperating gains ,net 100,000

Revenue and gains in excess of expenses and loses 1,800,000

Statement of cash flows

Operating cash flows

Operating activities

Income from operations 1,700,000

Adjustments to reconcile income from operation to net cash flows from operating activities

Depreciation and amortization 1,950,000

Changes in asset and liability accounts

Patient accounts receivable 250,000

Other receivables <50,000>

Inventories <50,000>

Prepaid expenses and other assets <50,000>

Accounts payable and accrued expenses <400,000>

Reduction of bond interest payable <25,000>

Estimated third party payer settlements <75,000>

Interest income received 80,000

Unrestricted gifts and memorials received 20,000

Net cash flows from operating activities $3,350,000

Cash flows from investing activities

Purchase of assets whose use is limited <100,000>

Equipment purchases and building improvements <2,000,000>

Net increase (decrease) in cash and cash equivalents $750,000

Cash and cash equivalent beginning of the year 400,000

Cash and cash equivalents end of year 1,150,000

Schedule of property, plant, and equipment

Building and improvements 14,700,000

Land improvements 1,100,000

Equipment 28,900,000

Total 44,700,000

Less accumulated depreciation (26,100,000)

Net depreciation assets $18,600,000

Land 480,000

Construction in progress 220,000

Net property, plan, and equipment 19,300,000

Schedule of Patient Revenues

Patient Services revenue

Routine service 9,850,000

Laboratory 7,375,000

Radiology and ct scanner 5,825,000

OB nursery 450,000

Pharmacy 3,175,000

Emergency service 2,200,000\

Medical and surgical supplu and IV 5,050,000

Operating rooms 5,250,000

Anesthesiology 1,600,000

Respiratory therapy 900,000

Physical therapy 1,475,000

EKG and and EEG 1,050,000

Ambulance Service 900,000

Oxygen 575,000

Home health and hospice 1,675,000

Substance abuse 375,000

Other 775,000

Subtotal 48,500,000

Less allowance and charity care 14,500,000

Net patient service revenue 34,000,000

Schedule of operating expenses

Nursing services General services

Routine medical surgical 3,880,000 Dietary 1,055,000

Operating room 300,000 Maintenance 1,000,000

Intensive care unit 395,000 Laundry 295,000

OB nursery 150,000 Housekeeping 470,000

Other 300,000 Security 50,000

Total 5,025,000 Medical records 330,000

Total 3,200,000

Other professional services

Laboratory 2,375,000 Support services

Radiology and CT scanner 1,700,000 General 4,600,000

Pharmacy 1,375,000 Insurance 240,000

Emergency service 950,000 Payroll taxes 1,130,000

Medical and surgical supply 1,800,000 Employee Welfare 1,900,000

Operating rooms and Anesthesia 1,525,000 Other 430,000

Total 8,300,000

Respiratory therapy 525,000

Physical therapy 700,000 Depreciation 1,900,000

EKG and EEG 185,000 Amortization 50,000

Ambulance service 80,000

Substance abuse 460,000 Interest expense 325,000

Home health and hospice 1,295,000

Other 130,000 Provision for doubtful

Accounts 1,500,000

Total 13,100,000 Total operating expense s 33,400,000

Schedule of hospital statistics

Inpatient indicators Departmental volume indicators

Patient Days

Medical and surgical 13,650 Respiratory therapy treatments 51,480

Obstetrics 1,080 Physical therapy treatments 34,050

Skilled nursing unit 4,500 Lab workload units in thousands 2,750

Admissions EKGS 8,900

Adult care 3,610 CT scans 2,780

Newborn 315 MRI scans 910

Skilled nursing unit 445 Emergency room visits 11,820

Ambulance trips 2,320

Home health visits 14,950

Average length of stay in days 4.1 Approximate number of employees 510