RIVERVIEW COMMUNITY HOSPITAL (A) ASSESSING HOSPITAL PERFORMANCE

1. interpret the hospital's statements of cash flows.

2. Present an overview of the hospital's financial position using the Du Pont equation as a guide.

3. Use ratio analysis to identify the hospital's specific financial strengths and weaknesses. But, she warned, the board is not going to appreciate a lengthy dialogue with too many individual ratios. Focus on key findings and one or two ratios per category dont' put them to sleep! Also, use graphs or other techniques to summarize the data.

4. Use operating indicator analysis to identify the operational factors that explain the hospital's current financial condition.

5. Summarize your evaluation of the hospital's financial condition. However, don't just rehash the numbers; rather, present your views on the potential underly-nig economic and managerial factors that might have caused any problems that surfaced in the financial and operating analysis.

6. Make any recommendations that you believe the hospital should follow to ensure future financially soundness.

Balance Sheet 3 4 5 6 7 8 10 12 14 15 15 16 17 19 21 23 24 26 28 28 29 30 32 33 34 35 36 37 38 39 40 \begin{tabular}{l} 41 \\ \hline 42 \end{tabular} 43 44 \begin{tabular}{l} 45 \\ \hline 46 \end{tabular} 46 > Statement Cash Flows Income Statement Balance Sheet Exhibit 1.4 Op Data Exhibit 1.5 Ind Fin Data Exhibit 1.6 Ind Op Data Riverview Community Hospital Selected Operating Data \begin{tabular}{|l|r|r|r|r|r|r|} \hline Medicare Discharges & 3,008 & 2,960 & 2,721 & 2,860 & 2,741 \\ \hline Total Discharges & 9,680 & 9,311 & 8,784 & 8,318 & 8,576 \\ \hline Outpatient Visits & 30,754 & 31,960 & 32,285 & 32,878 & 36,796 \\ \hline Licensed Beds & 210 & 210 & 210 & 210 & 210 \\ \hline Staffed Beds & 192 & 196 & 193 & 197 & 178 \\ \hline Patient Days & 45,296 & 45,983 & 44,085 & 42,434 & 40,062 \\ \hline Case Mix Index & 1.2531 & 1.2674 & 1.2869 & 1.2993 & 1.3161 \\ \hline Full-Time Equivalents & 604.50 & 618.10 & 610.80 & 625.80 & 619.30 \\ \hline \end{tabular} Debt Management Ratios Debt Ratio Long Term Debt to Equity Times Interest Earned Fixed Charge Coverage Cash Flow Coverage Asset Management Ratios Inventory Turnover Current Asset Turnover Fixed Asset Turnover Total Asset Turnover Average Collection Period (Days) Average Payment Period (Days) Other Ratios Average Age of Plant (Years) +Quartile Median 0.34 5.58% 5.80% 15.66% Liquidity Ratios Current Ratio Days Cash on Han 2.53 1.99 1.48 5.52 4.52 3.91 2.92 2.67 Current Assets / Current Liabilities 32.35 15.89 6.24 11% 7.75% 11% \begin{tabular}{rr} 9% \\ \hline 75% \\ \hline \end{tabular} 6% 7% 7.66% 7.09% 62.90% 48.40% 35.20% 39.73% 44.03% 40.90% 55.47% Total Liabilities / Total Assets Long Term Debt / Equity 4.29 64.70% 45.06% 42.27% 64.84% 2.18 2.23 73.30% 56.85% 3.22 1.76 43.99 2.88 1.49 0.75 63.33 2.71 3.07 0.79 3.10 45.84 67.73 0.67 Total Revenues / Total Current Assets Total Revenues / Total Fixed Assets Total Revenues / Total Assets Total Accounts Receivable/(Total Revenue/365 days) Total Accounts Receivable/(Total Revenue/365 days) Exhibit 1.5 Ind Fin Data Exhibit 1.6 Ind Op Data Riverview Community Hospital Statements of Cash Flows (millions of dollars) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 41 41 Cash Flows from Operating Activities Income from Operations Noncash Expenses Change in Accounts Receivable Change in Inventories Change in Other Current Assets Change in Accounts Payable Change in Accruals Change in Current portion of Long Term Debt Net Cash Flow from Operations Cash Flows from Investing Activities Fixed Asset Acquisitions Cash Flows from Financing Activities Increase (Decrease) in Long Term Debt Net Increase (Decrease) in Cash Beginning Cash and Investments Ending Cash and Investments Days Cash on Hand Industry Avg 2006 2007 $3.214 $ 2.629 2.326 0.473 (0.029) (0.014) (0.345) 0.518 (0.180) 1.23144.533 \begin{tabular}{|r|r|} & 0.124 \\ \hline$3.481 \end{tabular} \begin{tabular}{l|l|l|l|} $(4.722) & $(6.402) & $(7.686) & $(4.328) \end{tabular} $(0.184) $(0.102) $3.549$(1.427) $(1.126) $0.396 \begin{tabular}{rr} $(2.274) \\ \hline \hline$ & \\ & \\ $ & \\ $ & 2.0695 \\ \hline \hline \end{tabular} 68.07875 66.86852 32.71889 Cash and Investments/((Expenses-Depreciation)/365) Cash and Investments/((Expenses-Depreciation)/365) Excess of Revenues over Expenses on Income Statement (Row 27) Depreciation Expense on Income Statement (Row 18), not perfect fit due to asset revaluations *note on Stmt Cashflows Difference between 2005 and 2006 Accounts Rec entry on Balance Sheet (cell G10-I10) Difference between 2005 and 2006 Inventories entry on Balance Sheet (cell G11-I11) Difference between 2005 and 2006 Other Current Assets entry on Balance Sheet (cell G12-I12) Difference between 2005 and 2006 Accounts Payable entry on Balance Sheet (cell I24-G24) Difference between 2005 and 2006 Accruals entry on Balance Sheet (cell I25-G25) Difference between 2005 and 2006 Current Long Term Debt entry on Balance Sheet (cell I26-G26) $2.286 $5.799 $4.673 90.81932 $4.673 $5.069 Cell I24+Cell I26 22.6 days Difference between 2005 and 2006 Fixed Asset Acquisition entry on Balance Sheet (cell G15-I15), not perfect fit see notes on Stmt Cashflow Difference between 2005 and 2006 Long Term Debt entry on Balance Sheet (cell I29-G29) Cell 116+19+22 > Statement Cash Flows Income Statement Balance Sheet Exhibit 1.4 Op Data Exhibit 1.5 Ind Fin Data Exhibit 1.6 Ind Op Data +