Financial Statement Analysis

Hospital Financial Analysis
Student’s Name
Institutional Affiliation
Instructor
Date

Hospital Financial Analysis
Introduction
Healthcare facilities are any locations where healthcare services are provided. When talking about a healthcare facility, many individuals usually think of a clinic or hospital. However, a look at the healthcare sector reveals that numerous options may not be on the top of our minds. With the increased number of people seeking cost-effective, quality, holistic, and accurate care, the healthcare industry is expanding its reach and opening new options. These options (healthcare facilities), just like any other businesses, create or put together their financial reports to track and review the amount of money they make (Makanji, & Jenis, 2017). For this research paper, I choose to analyze the Sisters of Mary Hospital.
Brief Description of Sisters of Mary Hospital
Sisters of Mary Hospital was founded in 1956 as a tuberculosis center by two Sisters of Mary. The hospital, which was born in a rental brick cottage with six beds, was started to help tuberculosis patients who were undergoing immense suffering at that time. In five years, it had become a real hospital housing 12 private rooms. The hospital has thrived over the years. However, there is still plenty of changes in healthcare in terms of technological advances provided, programs targeted at helping the community, and services provided.
The hospital currently has 262-bed capacity and records about 13,000 admissions, 8,600 inpatient surgeries, 2100 deliveries, and 40,000 emergency visits every year. Its current balance sheet quick ratio is above 0.76, indicating that the facility is able to meet its debt obligations without necessarily selling off inventory. Besides, its balance sheet current ratio is above 1, which suggests that the short-term liabilities do not exceed the long-term assets. Again, the facility is very aggressive, going by the balance-sheet debt-to-equity ratio. In general, the Sisters of Mary Hospital is in an excellent financial position.
Sisters of Mary is a non-profit facility with tax-exempt status that requires it to provide attention to every patient regardless of his/her financial situation and more community-based healthcare services and programs. The facility has an obligation to the community; to promote and provide smaller healthcare organizations like community health clinics, and give away a given amount of its services to the community. Moreover, the facility administers free stabilizing care to every patient seeking help and aims at ensuring that every patient is out of risk saving lives before asking for any compensation. The hospital provides that the lower healthcare costs charged do not come with corresponding drops in care quality (Cheng, & Liu, 2019).
The Budget Information for Sisters of Mary Hospital for the Year 2018
In providing the budget information of the facility, I collected the financial information of the facility to prepare a balance sheet, statement for cash flow, and income statement for the year ended Dec 31, 2018, as described in Liu, (2017). The balance sheet provides a snapshot of what the facility owes and owns at a specific time. At the same time, the income statement indicates the amount of revenue the facility earned for the year 2018. On the other hand, the report of cash flow provides aggregate data concerning all inflows of cash the facility received from its external investment sources and ongoing operations as well as the outflows of cash financing its investments and business activities during the year 2018.

Sisters of Mary Hospital
Balance Sheet -Comparative
(In Thousands of Dollars)
As at 31st Dec
2018 2017
Assets
Current Assets
Cash
Net patient account receivable
Other receivables
Prepaid expenses
Inventory
Total current assets

Trustee investment
Gross property & Equipment
Less: Accumulated Depression
Net property & equipment

Total Other Assets
Total Assets

10
37,000
2,650
2,460
1,510
41,170

5,000
75,060
(35,300)
39,760

10, 754
96,684

4
24,000
1,350
1,900
1,490
28,744

5,000
66,059
(31,055)
35,004

9,900
78,648

Shareholders’ Equity & Liability
Accounts payable
Accrued benefits
Accounts salary
Other payables
Accrued malpractice
Total Current Liabilities
Long-Term debts
Total Liabilities

8,074
2,800
7,066
120
520
18,580
20,600
39,180

6,006
1,400
4,300
130
640
12,476
23,800
36,276

Total Net Assets

Net Assets & Total Liabilities
57,504

96,684
42,372

78,648

Franklin, Graybeal, & Cooper (2018) asserts that assets are the resources which are used by a facility to generate revenue. In Sisters of Mary Hospital, the facility ended the year 2018 with a net asset worth $57,504,000. The facility is a complex organization, hence has dozens of assets, including cash, patient account receivable, other receivables, prepaid expenses, and inventory. Short-term assets are those that are typically sold, converted to cash, or used up within a year, while long-term assets refer to the assets that are not expected to be used up, sold, or turned into cash within a year.
Sisters of Mary Hospital
Income Statement for the Period Ending December 31, 2018
(In Thousands of dollars)
Revenue
Rental Income
Net revenue from patient services
Other revenues
Total Revenue
645
284,120
1,810
286,575
Expenses
Supplies
Benefits and salaries
Professional fees
Provision for bad debts
Amortization & Depreciation
Interests & Financial Costs
Total Expenses
41,000
90,254
47,600
7,400
5,564
3,990
195,808

Income
Operating Income
Investment Income
Total Income

15,220
1,200
16,420
Net Revenue 107,187

According to Kaplan, Jellinek, & Haas, (2018), this is the first financial statement that would be prepared for the hospital to indicate its financial performance for the period beginning 1st January 2018 and ending 31st December 2018. Upon checking the account of Sisters of Mary Hospital on 31st August 2018, a total of $ 107,187 would be found. The hospital is responsible for paying for supplies, benefits and salaries, professional fees, provision for bad debts, amortization and depreciation, and interest and financial costs. The facility draws its revenue from patient services, operating activities, and investment activities. The facility expects to grow its patients to grow its checking account balance.
The revenue is the value that the facility received in exchange for the services it delivered to clients, most of whom were patients. The expenses are the costs associated with providing the services to the clients. The net income/revenue is determined by comparing the expenses and revenues. For the year 2018, the facility recorded a net income as its revenues were higher than its expenses; otherwise, it could have recorded a net loss.
Sisters of Mary Hospital
Statement of Cash Flows
Increase in net assets for 2018 $ 15,132,000
Net Cash provided by Operating activities 15,220,000
Cash flows utilized for Investing Activities 2,743,600
Cash flows from investing Activities 1,200,000
Net Increase in Cash $ 6,000
Beginning Cash $ 4,0000
Ending Cash $ 10,000

Listing of three out of the 5 Sources Used in the Research
1. Cheng, J., & Liu, Y. (2019, December). Research on Hospital Cost Management based on Responsibility Cost Budget. In 2nd International Symposium on Social Science and Management Innovation (SSMI 2019). Atlantis Press. https://dx.doi.org/10.2991/ssmi-19.2019.50
According to this source, there is complexity in the management of medical costs. Thus, the cost management of hospitals has a weak foundation and short development time. Final accounts and budget management play a fundamental task in controlling hospital expenditure and planning adjustment. Still, hospitals, during the implementation process, usually have problems like adding more benefits than accounts and giving less attention to spending and more care to income.
2. Franklin, M., Graybeal, P., & Cooper, D. (2018). Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate. Principles of Accounting, Volume 1: Financial Accounting.
This article focuses on the four primary financial statements, including the balance sheet, cash flows statement, income statement, as well as owner’s equity statement. These statements provide stakeholders with the necessary financial information for decision making.
3. Makanji, H. S., & Jenis, L. G. (2017). Understanding Financial Statements in Clinical Practice: A Primer. Clinical spine surgery, 30(4), 167-168. doi: 10.1097/BSD.0000000000000537
This source describes the various types of financial statements along with the information contained in them. It notes that such statements are essential in directing tactical decisions for executives and physicians. They present fairly the financial position of an organization. Notably, the owner’s equity statement indicates the changes in the net worth of an organization within a specified period.

References
Cheng, J., & Liu, Y. (2019, December). Research on Hospital Cost Management based on Responsibility Cost Budget. In 2nd International Symposium on Social Science and Management Innovation (SSMI 2019). Atlantis Press. https://dx.doi.org/10.2991/ssmi-19.2019.50
Franklin, M., Graybeal, P., & Cooper, D. (2018). Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate. Principles of Accounting, Volume 1: Financial Accounting.
Kaplan, R. S., Jellinek, M. S., & Haas, D. A. (2018). Hospital Budget Systems are Holding Back Innovation. Retrieved from https://www.hbs.edu/faculty/Pages/item.aspx?num=56265
Liu, Z. M. (2017). The Application of Performance Budget in Public Hospital Management. Chinese Health Economics, 36(9), 81-82. Doi: 10.7664/CHE20170920
Makanji, H. S., & Jenis, L. G. (2017). Understanding Financial Statements in Clinical Practice: A Primer. Clinical spine surgery, 30(4), 167-168. doi: 10.1097/BSD.0000000000000537