please amend and add the numbers on the excel sheet according to the statements.
THE CRIMSON PRESS CURRICULUM CENTER THE CRIMSON GROUP, INC. Brookstone Ob-Gyn Associates (A) In January, Mark Amsted, MD., Chair of Obstetrics and Gynecology at Brookstone Medical School, Chief of ObGyn at Brookstone Medical Center, and President of Brookstone Ob-Gyn Associates (BOGA), was preparing to meet with the Harris National Bank. He planned to present a request for a $300,000 line of credit, the approval of which was critical to BOGA's continued op- erations. He had discussed the need for the line of credit with the Dean of the Medical School, and had obtained approval to make the request to the bank, but he was by no means certain that the bank would agree to the loan. A great deal depended upon the bank's reaction to the nancial informa- tion that he and his business manager, Randy Weber, planned to present. BACKGROUND BOGA was a faculty practice plan comprised of university faculty physicians in obstetrics and gynecology (Ob-Gym). All BOGA physicians were on the staff of Brookstone Medical Center (BMC), one of the city's major teaching hospitals. The hospital was afliated with the Brookstone Medical School, and all of BOGA's physicians held faculty appointments in the medical school. BOGA had been organized several years earlier as a nonprofit educational trust. Initially, its offices had been located in the hospital, and it had grown slowly. During its first few years of exis- tence, BOGA's physicians saw mainly Medicaid, Medicare, and self-pay (or uninsured) patients in the hospital's outpatient department. Several years ago, Brookstone Medical Center began to experience declining Ob-Gyn admis- sions due to competition from some nearby community hospitals. As a result, BMC offered to con- tribute $1 million to BOGA if it would open offices in a nearby building. The idea was to make BOGA's facilities more attractive to patients with private insurance, in the hope that these patients would use its services. If the idea worked, BMC would reverse the declining trend in its Ob-Gyn admissions, and would do so with fully insured patients. After discussing BMC's proposal with his colleagues, Dr. Amsted accepted the offer. Dr. Amsted supplemented the $1 million contribution from the medical center with a long-term note from the Harris National Bank. The funds were used to purchase new medical and office equipment, renovate the space, and furnish the offices in the new facility. The surrounding community responded positively to BOGA's move. The reputation of BOGA's physicians and the attractiveness of the new facilities led to increases in the number of private insurance patients treated. In each of the last two years, BOGA'S revenue had increased by about 20 percent over the previous year. PROBLEMS Despite the growth in revenues, BOGA's profitability was becoming an issue. Indeed, as he began to prepare for his meeting with the bank, Dr. Amsted was quite perplexed. He commented: It's crazy. Despite our rapid rate of growth, we're losing money, and I don't understand why. Our salaries are competitive and our physicians see as many patients per hour as Ob-Gyn physicians in other places. Our scheduling is good, so we don't have a lot of downtime. All our other costs seem quite reasonable. Yet, the gures speak for themselves. Last year, we lost $850,000! According to Randy, if we don't get the line of credit from the bank, we won't be able to meet some of our payroll and other expenses next month. Even if the bank gives us the loan, I'm sure they'll ask me to either cut expenses or increase our charges so we'll be profitable. The problem is that the charges are re stricted by our third parties, and [can see no place to cut expenses other than by laying people off. I'm re luctant to do that, though, since everyone seems overworked. This case was prepared by Professor David W. Young. It is intended as a basis for class discussion and not to illusv trate either effective or ineffective handling of an administrative situation. Copyright 2014 by The Crimson Group, Inc. To order copies or request permission to reproduce this document, contact Harvard Business Publications {http:ffhbspharvardedul). Under provisions of United States and interna' tional copyright laws, no part of this document may be reproduced. stored, or transmitted in any form or by any means without written permission from The Crimson Group (wwwthecrimsongrouporg) This document ls authorlzed for use only by Hua Dian In Accounting for Puhllc Aalre 2020 taught by Elizabeth Venuti, Columbia Unlverstty tram Sep 2020 to Jan 2021
