Balance Sheet Patton Fuller Community Hospital
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Determine the financial health and stability of Patton Fuller Community Hospital by analyzing its balance sheet and statement of revenue and expense for 2009 and 2008. Focus on the changes in assets, liabilities, and equity, and interpret the reasons behind these changes based on the hospital’s annual report. Discuss the implications of these financial trends for the hospital’s operations and future prospects.
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Introduction
Financial analysis of a healthcare organization like Patton Fuller Community Hospital is critical for understanding its financial stability, operational effectiveness, and potential for growth. By examining the balance sheet and statement of revenue and expense from 2008 and 2009, we gain insights into how the hospital managed its assets, liabilities, and equity during this period, especially in light of the economic challenges faced during these years.
Analysis of Assets
The hospital’s total assets increased significantly from approximately $548 million in 2008 to about $588 million in 2009. This rise was primarily driven by increases in property, plant, and equipment, as well as investments. Specifically, property, plant, and equipment (net) grew due to capital investments, possibly financed through long-term debt, as indicated by the rising long-term debt figures. The cash and cash equivalents, however, declined markedly from $41.85 million to $22.995 million, reflecting cash outflows related to asset acquisitions, debt service, or operational costs.
The assets of limited use, such as bond indenture-held assets, decreased from approximately $87,000 in 2008 to about $73,000 in 2009, possibly indicating reclassification or utilization of these reserves for operational or capital expenses. The substantial increase in patient accounts receivable, from around $58.7 million to \(58.666\) million, signifies a rise in outstanding collections, likely due to the hospital's increased revenue of over $459.9 million in 2009 compared to $418.5 million in 2008, driven by successful contract negotiations and increased patient volume.
Liabilities and Equity
Overall, liabilities increased sharply from approximately $213.45 million in 2008 to about $462.15 million in 2009. The most notable change was in long-term debt, which surged from roughly $209 million to $453 million, reflecting new borrowing to finance expansion and equipment purchases. The current portion of long-term debt also increased to accommodate debt repayments within the year.
Equity, represented mainly by retained earnings, grew from an estimated $125 million in 2008 to approximately $125 million in 2009, indicating retained earnings were bolstered by operational profits in 2009 despite some losses in earlier years. The increase in net assets aligns with the hospital’s strategic investments and profitable operations, as shown by the net income of approximately $373,000 in 2009 against a loss of over $15.8 million in 2008.
Revenue and Expenses
The statement of revenue and expense reveals a positive turnaround, with total revenue rising from about $421.3 million in 2008 to over $463 million in 2009. This increase reflects successful negotiations with managed care organizations, leading to a 9% rise in net patient revenue. Operating expenses also increased modestly, by approximately 6% (from $437.4 million to $463.3 million), primarily due to increased salaries, benefits, and supply costs.
Despite the increase in revenue, the hospital recorded a marginal operating loss in 2009 of around $311,000, contrasted with a significant loss of over $16 million in 2008. The net income improvement to nearly break-even demonstrates better management efficiency and strategic financial planning. The hospital’s non-operating income, mainly from investments, declined sharply due to market downturns, contributing to the overall profit improvement.
Implications and Conclusion
The hospital’s financial data indicate a period of strategic growth and resilience amid economic downturns. The substantial increase in assets, particularly property and long-term debt, underscores ongoing capital expansion aimed at enhancing service capacity. The improved revenue performance coupled with controlled expenses suggests operational efficiency and effective contract management.
However, the rising accounts receivable highlights ongoing challenges in collection processes, necessitating improvement in receivables management. The hospital’s ability to leverage borrowed funds for essential investments positions it well for future growth, assuming it manages debt responsibly, especially with an adjustable interest rate environment.
In conclusion, Patton Fuller Community Hospital demonstrated significant financial recovery and strategic growth in 2009. Its focus on expanding capacity, improving revenue streams, and managing costs effectively has enhanced its financial stability. Continued vigilance in receivables management and prudent debt utilization will be vital for sustaining long-term success, especially in uncertain economic conditions affecting healthcare delivery and funding.
References
- Patton-Fuller Community Hospital. (2009). Annual Report.
- Albert, B., Borze, B., & Stoops, A. (2010). Audited Financial Statements of Patton-Fuller Community Hospital.
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