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Objective:
FINANCIAL ANALYSIS PAPER
Student must obtain the financial and operational statistics for a healthcare organization, at least, for a three (3) year period. This means you must obtain the necessary data for more than two years’ financial statements of a “stand alone” healthcare organization. That organization can be a hospital, an outpatient surgical center, a hospice, a long-term care organization, Blue Cross/Blue Shield, etc.
Student will develop a Financial Analysis, critiquing and analyzing current health care finance issues, and using the tools acquired in textbook and additional materials and from their own experiences. You should then develop and present the financial analysis and final recommended solutions with copies .
If you are examining an organization that has its own financial statements, you should be able to obtain three to five years’ worth of balance sheets, income statements, and operating statistics. Operating statistics are data elements such as FTE, enrollees, member months, discharges, physician FTE, non-physician FTE, visits, surgeries, procedures, hours, case mix index, acuity levels, etc. If you are dealing with a division or department, you might wish to deal with monthly data instead of annual.
The financial analysis is to be performed primarily through the use of financial, operational, and statistical ratio calculations. This analysis will consist of both cross-sectional and time series (trend) analysis. All analyses will include cost of capital determinations.
Your first task is to determine the organization/entity which you wish to examine. It will be important that you have access to financial information (balance sheet, income statement, internal departmental reports if appropriate), operating statistics, and, in some cases, internal financial information not generally reported in the financial statements created for public consumption.
A good analysis will be thorough and integrative through recognition of the relationship between various indicators. The DuPont chart (ROE) relationships are valuable for this stage of the analysis. The summary and conclusions section should include your evaluation of past trends, current position, recommendations for change or adjustments, and a discussion of the implications and impacts of following through with your recommendations. This must include a sensitivity analysis of varying your initial assumptions. Therefore, a forecast of conditions with and without your recommendations is to be included. Attached to your report, you should include the balance sheet and income statement data used in your analysis. Bibliographic information must also be included (or list of references).
Paper Guidelines
The following is a list of specific items you might use as a guideline to help in the development of your financial analysis:
1.The Introduction should consist of a description of the entity being analyzed, including a mission statement — name, governance, ownership type (investor owned, tax exempt, religious, government, etc.). This description will also include the relationship with other organizations, mission statement, competitive environment, market share, threats, opportunities, and any other information which is relevant to an evaluation of the financial statements. For example, if your organization is owned by another organization, one that believes in centralization, all cash might be managed by the parent, in which case the fact that your entity has little or no cash does not mean that they are in a risky situation. On the other hand, if your firm is freestanding and you have little or no cash, then financial distress be an appropriate conclusion.
2.It is valuable to look at the utilization rates over time. This will help you explain what has happened to some of the ratios and to identify potential solutions. The same is true of the payer mix and changes in the payer mix over time.
3.The paper is to include an evaluation of the financial status, including potential causes for specific indicator changes, values, etc.
4.Remember that each ratio is made up of both a numerator and a denominator, and either can cause a ratio to change.
5.Recommendations should be made regarding specific activities and ratios, and the implications of the suggestions should be examined. For example, if the average payment period is too short, what would be the financial implications of increasing the payment period to a desired value?
6.If the institution uses no debt, what would be the implications of acquiring debt — on the return on equity, on net income, on return on assets, on operating margin, etc. — what you are doing at this stage is making a forecast as to where the institution is going with and without your recommendations.
7.You should also examine the cost of capital for your specific case, and discuss this figure relative to the return on investment and return on equity values.
Grading Criteria
The following criteria will be used when grading your financial project report.
•Student turned in report when it was due, according to the Schedule of Assignments above.
•Report is organized, neat, and typed.
•Student demonstrates knowledge of content material and is accurate.
•Student has responded to all of the questions that were outlined for the report.
•Student demonstrates critical thinking about report topics and clearly shows pros and cons.
APA, 8 references, master level
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