Premium Essay

Healthcare Finance Chapter 17

In: Business and Management

Submitted By rnb5031
Words 2338
Pages 10
Health Services Finance I

Problem 17.4: a. Perform a Du Pont Analysis on BestCare.
ROE = (Total Margin)*(Total Asset Turnover)*(Equity Multiplier)
(Net Income/Total Equity) = (Net Income/Total Revenue)*(Total Revenue/Total Assets)*(Total Assets/ Total Equity)
($1,218,000/$2,118,000) = ($1,218,000/$28,613,000)*($28,613,000/$9,869,000)*($9,869,000/$2,118,000) BestCare HMO ROE = 4.25% * 2.9 * 4.66 = 12.3% * 4.7 ~ 57.8% Industry Average ROE = 3.8% * 2.1 * 3.2 = 7.98% * 3.2 ~ 25.5%
According to the Du Point equation, BestCare HMO performs above average on all aspects of the business compared to the industry average. For instance, Bestcare HMO manages operating expenses well, maintains a timely asset turnover, and has more assets working per each dollar of equity compared to the rest of the industry. Due to BestCare’s exceptional performance on these three measures, BestCare’s ROE is over twice that of the industry average.

b. Calculate and interpret the following ratios for BestCare: Financial Ratio | BestCare | Industry Average | Interpretation | Return on Assets (ROA)Net Income/Total Assets$1,218,000/$9,869,000 = 12.3% | 12.3% | 8% | BestCare generated 12.3 cents in profit for every $1 of assets it owns. This is an index of profitability. BestCare is approximately 30% better at managing assets than other companies in the HMO industry. | Current RatioCurrent Assets / Current Liabilities$3,945,000/$3,456,000 = 1.1 | 1.1 | 1.3 | BestCare is slightly less liquid than the industry average. This means that BestCare has fewer assets to cover...

Similar Documents

Premium Essay

Healthcare Finance Chapter 17 Problems

...Financial Condition Analysis Chapter 17 ANSWERS TO END-OF-CHAPTER QUESTIONS 17.1 a. Financial statement analysis, which focuses on the data contained in a business’s financial statements, is designed to assess the financial condition of the business. Operating indicator analysis, which focuses on operating (as opposed to financial) variables, attempts to identify the underlying operating parameters that contributed to the assessed financial condition. b. Of course, it is extremely important to understand a business’s financial condition, because any future plans must be supported financially. However, it is equally important, especially for managers, to understand what operational actions are required to ensure that the business maintains the financial condition needed to accomplish its mission. 17.2 Analyses that examine historical data provide managers and investors with an appreciation of the business’s current condition, which is important. However, the future is more important than the past, and the most important use of a historical analysis is as a springboard for preparing for the future. When plans are being made, pro forma (forecasted) financial statements are prepared and analyzed, so that managers can gain insights regarding the impact of alternative strategies on the business’s financial and operating condition. 17.3 The inventory turnover ratio indicates how well a business is utilizing its inventories. It tells managers how many dollars of......

Words: 3811 - Pages: 16

Premium Essay

The Politics of Health Finance Reform in Hong Kong

...International Journal of Public and Private Healthcare Management and Economics, 1(2), 17-25, April-June 2011 17 The Politics of Health Finance Reform in Hong Kong Raymond K. H. Chan, City University of Hong Kong, Hong Kong ABSTRACT Since the late 1950s, Hong Kong’s public health services have increased. They are mainly funded by taxes, supplemented by minimal user fees. In the late 1980s, the government recognized the limitations of this financing model and subsequently proposed alternative methods of funding. Their proposals have been rejected by various stakeholders, who represented different, and even conflicting, values and interests. This paper describes the development of health services and the debates that have surrounded health financing since the late 1980s. It shows that the health finance debate in Hong Kong is not a simple issue that can be tackled by rational planning; instead, it is a complex consequence of welfare politics in an increasingly mobilized society. Keywords: Health Finance, Health Policy, Health Services, Hong Kong, Public Health Services INTRODUCTION The earliest public health services in Hong Kong were mainly devoted to combating communicable diseases. As the government was largely unresponsive to demands for further services, the gap in provision was filled by traditional Chinese medical practitioners and hospitals operated by local philanthropic organizations. It was not until the late 1950s that the government expanded its......

Words: 1384 - Pages: 6

Premium Essay

Components of Healthcare Finance

...a sample of the instructor resources for Louis C. Gapenski, PhD, Fundamentals of Healthcare Finance, Second Edition. The complete instructor resources include Test Bank PowerPoint slides Sample course syllabus Solutions to the end-of chapter questions and problems Solutions to the online cases This sample includes the following resources for Chapter 2: Answers to end-of-chapter discussion questions PowerPoint slides If you adopt this text, you will be given access to the complete materials. To obtain access, email your request to hapbooks@ache.org and include the following information in your message: Book title Your name and institution name Title of the course for which the book was adopted and season course is taught Course level (graduate, undergraduate, or continuing education) and expected enrollment The use of the text (primary, supplemental, or recommended reading) A contact name and phone number/e-mail address we can use to verify your employment as an instructor You will receive an e-mail containing access information after we have verified your instructor status. Thank you for your interest in this text and the accompanying instructor resources. Copyright and distribution of this PDF is prohibited without written permission. For permission, please contact Copyright Clearance Center at www.copyright.com Healthcare Business Basics Chapter 2 8/1/12 ANSWERS TO END-OF-CHAPTER QUESTIONS 2.1 a. A business is an entity that obtains financing from the......

Words: 3921 - Pages: 16

Premium Essay

Study Group

...2-1 CHAPTER 2 Healthcare Business Basics       Concept of a business Legal forms of business For-profit versus not-for-profit ownership Organizational goals Financial goals Taxes 2-2 Concept of a Business  A business is an entity that  raises money in the capital markets,  invests these funds in assets (land, buildings, equipment, inventories, and so on),  uses these assets to create products or services, and  sells these products or services to sustain itself.  A pure charity is different. Why? 2-3 Legal Forms of Business  There are four major categories of business organization (legal forms of business):     Proprietorship (sole proprietorship) Partnership Corporation Hybrid forms  How much does the organizational form influence the practice of healthcare finance? 2-4 Proprietorships and Partnerships  Advantages:  Ease of formation  Subject to few regulations  No corporate income taxes  Disadvantages:     Limited life Difficult to transfer ownership Unlimited liability Difficult to raise capital 2-5 Corporation  Advantages:     Unlimited life Easy transfer of ownership Limited liability Ease of raising capital  Disadvantages:  Cost of formation and reporting  Double (or triple) taxation for investor-owned corporations 2-6 Hybrid Forms of Organization  Limited partnership (LP)  General partners have control  Limited partners are liable only for their initial contribution  Not commonly used by healthcare providers ......

Words: 985 - Pages: 4

Premium Essay

Health Care Event

...Grading Criteria Significant Health Care Event Paper This assignment is due in Week One. |Content |Points |Points |Additional | |60 Percent |Available |Earned |Comments: | | |6 |X/6 | | |Paper discusses a significant event or aspect that has changed or affected health care today | | |  | |and includes the following: | | | | |How does this significant event relate to the changes on health care? | | | | |In your opinion, has this event impacted the historical evolution of health care? If so, how?| | | | |If not, could it? | | | | |Do you personally agree with the event’s significance, based on your beliefs and values? How | | | | |so? | | | ...

Words: 1563 - Pages: 7

Premium Essay

Job Satisfaction

...institutions are growing in complexity and size. They are cutting across space and time by embracing technology, globalization and information. Mere operational efficiency is no more sufficient. Managerial capabilities have become necessary for firms to act on a global platform. Although there are a large number of institutions offering MBA programs, many of them just churn out non employable MBAs. A good institute must incorporate what the industry requires with changing times. The SMU way to Management degree or diploma is to mould the learning towards this objective. With this perspective it has introduced several programs which are geared to meet the industry requirement. These areas are Banking, Information System, Retail Operations and Healthcare. It is planning to offer more programs in the field of environment, disaster management, and media. The master of business administration (MBA) is an integrated program designed to provide an advanced program in management for those seeking managerial positions in industry, commerce and services. The core subjects are aimed at developing knowledge and skills in fundamental management disciplines. The program also involves participation in group work with students from diverse backgrounds and is aimed at improving the decision making abilities of the participants in management related areas. 2. Objectives of the Program The program aims at realizing the following objectives:  To provide a strong theoretical and practical......

Words: 7200 - Pages: 29

Premium Essay

Health

...-HS100-section-unit7 Project/Assignment.doc •Current issues 1-Healthcare.gov (2010) Brochure: The Health Care Law & You (PDF – English 8.99 MB, Spanish 8.3 MB) This brochure is design to accompany the www.healthcare.gov website. Its sole purpose is to provide readers with a little incentive on what to look forward to when visited the website. So one would wonder why I would then go to the website, and the reason or answer to that would be to get more information. The brochure is mainly used to introduce the company or organization, and to inform or provide you with The Healthcare Law, The Law Makes Healthcare More Affordable, and Law Increases You Access to Affordable Care. It’s like almost having the website in you hand. I think this brochure is helpful because it has information that small business could get insight on regarding getting help. Also show anyone can save money on affordable healthcare. 2-Nicholas Bakalar (2013). New York Times Newspaper. Safer Hospital Rooms. This article geared toward showing how some hospital really tries to help improve the safety of others. Also how the cleaning process take place to make you stay a clean and health one by committing to effectiveness. In the article it states that studies that were develop to understand why this was happen in the first place. This is clearly a helpful and useful article to read to let people know wonder you’re a visitor or patient not all hospitals are clean but some are try to make it......

Words: 1669 - Pages: 7

Premium Essay

Lean

...MSRSAS - Postgraduate Engineering and Management Programme - PEMP Module Code Module Name Course Department EMM515 Lean Operations and Management of Lean Organizations M.Sc. in Engineering and Manufacturing Management Mechanical and Manufacturing Engg . Name of the Student Reg. No Batch Module Leader Liju G BUB0912004 Full-Time 2012. SANDEEP. N M.S.Ramaiah School of Advanced Studies Postgraduate Engineering and Management Programmes(PEMP) #470-P, Peenya Industrial Area, 4th Phase, Peenya, Bengaluru-560 058 Tel; 080 4906 5555, website: www.msrsas.org POSTGRADUATE ENGINEERING AND MANAGEMENT PROGRAMME – (PEMP) ASSIGNMENT i Declaration Sheet Student Name Reg. No Course Batch Module Code Module Title Module Date Module Leader LIJU G BUB0912004 EMM Full-Time 2012 EMM515 Lean Operations and Management of Lean Organization 13-05-2013 SANDEEP. N to 15-06-2013 Batch Full-Time 2012 . Declaration The assignment submitted herewith is a result of my own investigations and that I have conformed to the guidelines against plagiarism as laid out in the PEMP Student Handbook. All sections of the text and results, which have been obtained from other sources, are fully referenced. I understand that cheating and plagiarism constitute a breach of University regulations and will be dealt with accordingly. Signature of the student Submission date stamp (by ARO) Date 15-06-2013 Signature of the Module Leader and date Signature of Head of the......

Words: 9715 - Pages: 39

Premium Essay

Emerging Consumer Survey

...January 2015 Research Institute Thought leadership from Credit Suisse Research and the world’s foremost experts Emerging Consumer Survey 2015 EMERGING CONSUMER SURVEY 2015_2 Contents 03 Editorial 04 The emerging consumer in 2015 12 A sum of different parts 20 e-Commerce and the emerging consumer 30 Focus on travel 36 Focus on autos 40 Focus on healthcare 46 Brands and the emerging consumer in 2015 62 Brazil: Steady decline continues 64 China: A life online 66 India: New government, strong consumer 68 Indonesia: An under-penetrated market 70 Mexico: Structural potential, cyclical hurdles 72 Russia: Dark clouds gather 74 Saudi Arabia: The petro-dollar 76 South Africa: Reduced optimism 81 About the survey 83 Imprint / Disclaimer For more information, please contact: Richard Kersley, Head of Global Securities Products and Themes, Credit Suisse Investment Banking, richard.kersley@credit-suisse.com Michael O’Sullivan, Chief Investment Officer UK & EMEA, Credit Suisse Private Banking & Wealth Management, michael.o’sullivan@credit-suisse.com COVERPHOTO: ISTOCKPHOTO.COM/XAVIERARNAU, PHOTO: ISTOCKPHOTO.COM/ALIJA 78 Turkey: Subdued but stable EMERGING CONSUMER SURVEY 2015_3 Editorial We are delighted to publish the fifth edition of the Credit Suisse Research Institute’s “Emerging Consumer Survey.” To undertake the project, we have again partnered with global market research firm Nielsen, which......

Words: 21734 - Pages: 87

Premium Essay

Case2

...This is a sample of the instructor resources for Cases in Healthcare Finance, Fourth Edition by Louis Gapenski. This sample contains the case questions, case solutions, instructor model, and PowerPoints for Chapter 4. The complete instructor resources consist of 268 pages of instructor’s notes including case questions and case solutions; instructor model spreadsheets; and 623 PowerPoint slides. If you adopt this text you will be given access to complete materials. To obtain access, e-mail your request to hap1@ache.org and include the following information in your message: • Book title • Your name and institution name • Title of the course for which the book was adopted and season course is taught • Course level (graduate, undergraduate, or continuing education) and expected enrollment • The use of the text (primary, supplemental, or recommended reading) • A contact name and phone number/e-mail address we can use to verify your employment as an instructor You will receive an e-mail containing access information after we have verified your instructor status. Thank you for your interest in this text and the accompanying instructor resources. Cases in Healthcare Finance Case Questions © Health Administration Press, 2010. Reproduction without permission is prohibited. CASE 4 QUESTIONS APPLE VALLEY FAMILY PRACTICE Cost Allocation Methods 1. Briefly describe the differences in the four allocation methods discussed in the case. (Hint: Don’t discuss the mathematics...

Words: 6883 - Pages: 28

Premium Essay

Case Study

...Advocate Obligated Group Advocate Health Care Analysis of financial statements is a procedure that involves the review and examination of a firm’s financial statements to help the user make informed economic decisions. The financial statement analysis includes the balance sheet, statement of retained earnings, cash flow statement and the income statement (Fridson & Alvarez, 2011). Users of financial statements include management, investors, creditors, regulatory authorities and the government. Ratio analysis is a standard financial analysis method that involves the calculation of several proportions to determine a firm’s performance in key areas. The ratios are categorized as profitability ratios, solvency ratios, liquidity ratios, asset management ratios and market value ratios. The purpose of this paper is to conduct a ratio analysis of Advocate Obligated Group Health Care for the year ended December 31, 2014, and come up with a conclusion of the firm’s financial health. 1. Current Ratio The current ratio is a liquidity ratio that evaluates a firm’s ability to meet its short-term obligations. Its formula is as follows: Current ratio = Current assets/ Current liabilities The reason I chose this ratio is that hospitals mostly buy goods on credit, and suppliers evaluate this ratio to determine whether to extend credit to the organization or not. A high ratio implies that the company can meet its maturing short-term debts. The most appropriate current......

Words: 963 - Pages: 4

Premium Essay

Health Information System

...Austin and Boxerman’s Information Systems for Healthcare Management Seventh Edition Gerald L. Glandon Detlev H. Smaltz Donna J. Slovensky 1 2 3 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 40 41 42 43 44 [First Page] [-1], (1) Lines: 0 to 27 * 516.0pt PgVar ——— ——— Normal Page * PgEnds: PageBreak [-1], (1) 1 2 3 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 40 41 42 43 44 AUPHA/HAP Editorial Board Sandra Potthoff, Ph.D., Chair University of Minnesota Simone Cummings, Ph.D. Washington University Sherril B. Gelmon, Dr.P.H., FACHE Portland State University Thomas E. Getzen, Ph.D. Temple University Barry Greene, Ph.D. University of Iowa Richard S. Kurz, Ph.D. Saint Louis University Sarah B. Laditka, Ph.D. University of South Carolina Tim McBride, Ph.D. St. Louis University Stephen S. Mick, Ph.D. Virginia Commonwealth University Michael A. Morrisey, Ph.D. University of Alabama—Birmingham Dawn Oetjen, Ph.D. University of Central Florida Peter C. Olden, Ph.D. University of Scranton Lydia M. Reed AUPHA Sharon B. Schweikhart, Ph.D. The Ohio State University Nancy H. Shanks, Ph.D. Metropolitan State College of Denver * [-2], (2 Lines: 2 59.41 ——— ——— Normal * PgEnds [-2], (2 1 2 3 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 40 41 42 43 44 [-3],......

Words: 123678 - Pages: 495

Premium Essay

Healthcare

...APPENDIX Checklists A Checklist A-1 Reviewing a Budget 1. Is this budget static (not adjusted for volume) or flexible (adjusted for volume during the year)? 2. Are the figures designated as fixed or variable? 3. Is the budget for a defined unit of authority? 4. Are the line items within the budget all expenses (and revenues, if applicable) that are controllable by the manager? 5. Is the format of the budget comparable with that of previous periods so that several reports over time can be compared if so desired? 6. Are actual and budget for the same period? 7. Are the figures annualized? 8. Test one line-item calculation. Is the math for the dollar difference computed correctly? Is the percentage properly computed based on a percentage of the budget figure? 333 334 APPENDIX A Checklists Checklist A-2 Building a Budget 1. What is the proposed volume for the new budget period? 2. What is the appropriate inflow (revenues) and outflow (cost of services delivered) relationship? 3. What will the appropriate dollar cost be? (Note: this question requires a series of assumptions about the nature of the operation for the new budget period.) 3a. Forecast service-related workload. 3b. Forecast non–service-related workload. 3c. Forecast special project workload if applicable. 3d. Coordinate assumptions for proportionate share of interdepartmental projects. 4. Will additional resources be available? 5. Will this budget accomplish the appropriate managerial objectives......

Words: 33826 - Pages: 136

Premium Essay

Healthcare Reimbursement

...Principles of Healthcare Reimbursement Anne B. Casto, RHIA, CCS Elizabeth Layman, PhD, RHIA, CCS, FAHIMA Copyright ©2006 by the American Health Information Management Association. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, photocopying, recording, or otherwise, without the prior written permission of the publisher. ISBN 1-58426-070-X AHIMA Product No. AB202006 Ken Zielske, Director of Publications Susan Hull, MPH, RHIA, CCS, CCS-P, Technical Reviewer Marcia Loellbach, MS, Project Editor Elizabeth Lund, Assistant Editor Melissa Ulbricht, Editorial/Production Coordinator All information contained within this book, including Web sites and regulatory information, was current and valid as of the date of publication. However, Web page addresses and the information on them may change or disappear at any time and for any number of reasons. The user is encouraged to perform his or her own general Web searches to locate any site addresses listed here that are no longer valid. AHIMA strives to recognize the value of people from every racial and ethnic background as well as all genders, age groups, and sexual orientations by building its membership and leadership resources to reflect the rich diversity of the American population. AHIMA encourages the celebration and promotion of human diversity through education, mentoring, recognition, leadership, and other......

Words: 9820 - Pages: 40

Premium Essay

Asset

...5/4/09 10:39 AM Page 17 C HAPTER 59643_CH02_5289.qxd 2 Understanding Healthcare Management The prior chapter addressed growth in the health services industry and opportunities for healthcare managers. By now the reader should appreciate that formal preparation in healthcare management can pay big dividends in terms of exciting management jobs and positions with excellent career advancement. But just what do healthcare managers do? And what are their roles and responsibilities? Healthcare management is the profession that provides leadership and direction to organizations that deliver personal health services, and to divisions, departments, units, or services within those organizations. This chapter gives a comprehensive overview of healthcare management as a profession. Understanding the roles, responsibilities, and functions carried out by healthcare managers is important for those individuals considering the field to make informed decisions about the “fit.” This chapter provides a discussion of key management roles, responsibilities, and functions, as well as management positions at different levels within healthcare organizations. In addition, descriptions of supervisory level, mid-level, and senior management positions within different organizations are provided. 17 © Jones and Bartlett Publishers, LLC. NOT FOR SALE OR DISTRIBUTION. 59643_CH02_5289.qxd 18 5/4/09 C HAPTER 2 10:39 AM Page 18 U NDERSTANDING H EALTHCARE M ANAGEMENT THE NEED FOR MANAGEMENT AND...

Words: 4706 - Pages: 19