Health Care January Revenue Total Revenues Expenses

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Consider the following scenario: A month after submitting and receiving approval of the ABC Health Care Operating Budget, you receive an email from the chief financial officer (CFO) informing you the financial data of the organization has been reported and it shows the organization reported a loss for the month. He is requesting you to complete and review the income statement to determine what category(s) suffered a loss and adjust your expenses to show a profit for the incoming month.

You will be responsible for presenting the adjusted budget to the board of directors showing a profit and will need to explain your new budgetary figures. Complete an income statement using the ABC Health Care Income Statement Template. The CFO provided you with the following figures to input in the income statement: Your clinic received $175,000 from the government as fee-for-services reimbursements, as well as $80,000 from private payers. The clinic had a fundraiser that brought in $26,000 and the grants department brought in $25,000. Categories Monthly Expense Monthly salaries $165,000 Monthly benefits $42,500 Monthly rent $80,000 Monthly insurance $3,750 Monthly depreciation $1,700 Monthly overhead $18,000 Monthly supplies $4,500 Monthly utilities $7,600.

Paper For Above instruction

In this analysis, we examine the financial performance of ABC Health Care over a recent month, focusing on the income statement's reconstruction to reflect a profit. The initial report indicated a loss, prompting a detailed review of revenues and expenses, with the goal of adjusting the budget to demonstrate fiscal stability and sustainability.

First, analyzing the revenues reveals several sources: government reimbursements of $175,000, private payers contributing $80,000, a fundraiser yielding $26,000, and grants amounting to $25,000. The total revenue before adjustments sums to $306,000. The revenue categories suggest potential areas for strategic increases, especially in private payers and fundraising efforts, as these often depend on organizational initiatives and marketing efforts. For example, increasing private payer revenue by 10% would generate an additional $8,000, bringing it up to $88,000. Similarly, expanding fundraising efforts or grant applications could result in incremental revenue increases, further strengthening financial position.

Next, the expense analysis shows a set of fixed and variable costs. Fixed expenses such as rent ($80,000), insurance ($3,750), and depreciation ($1,700) remain relatively stable irrespective of revenue fluctuations. Variable expenses, including salaries ($165,000), benefits ($42,500), supplies ($4,500), and utilities ($7,600), are more flexible. To attain a profit, expenses should be scrutinized for cost-cutting opportunities without compromising care quality or organizational integrity.

Potential expense reductions could involve negotiating lower rates for supplies or utilities, implementing energy-saving measures, or optimizing staffing schedules to reduce overtime or unnecessary workforce costs. For example, reducing supplies by 10% would save $450, and cutting utilities by 15% could result in savings of approximately $1,140. Some expenses, like salaries and benefits, are fixed or semi-fixed in the short term, making them less adjustable without affecting staffing levels or employee morale.

Adjustments in expenses should carefully consider the organization's operational needs and ethical implications. Cutting essential expenditures could compromise patient care quality or staff well-being, which is ethically unacceptable. Therefore, the focus should be on flexible costs that do not undermine organizational mission and values.

Based on the adjusted revenue and expense projections, the organization can shift toward profitability by increasing revenue streams and managing controllable costs. Increasing revenue is often more sustainable and ethically sound than substantial expense cuts that might affect staff or service quality. Therefore, a balanced approach that targets a 10% increase in private payers and fundraising efforts, alongside a 10-15% reduction in variable expenses, appears prudent.

To summarize, I recommend increasing revenues through targeted efforts in private payers and fundraising by approximately $16,000 to $20,000 combined, while reducing variable expenses such as supplies and utilities by approximately $2,000 to $3,000. These adjustments should be paired with ongoing monitoring to ensure financial targets are achieved responsibly and ethically. The goal is to reach a breakeven point or a modest profit that can support future growth and organizational stability.

References

• Bragg, S. M. (2018). Healthcare finance: An introduction to accounting and financial management. Jones & Bartlett Learning.
• Glickman, G., & Chatterji, P. (2021). Financial management in healthcare organizations. In S. R. H. Cummings (Ed.), Contemporary issues in healthcare management (pp. 198-220). Springer.
• Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2019). Introduction to financial accounting. Pearson.
• U.S. Department of Health and Human Services. (2020). Financial management in healthcare: Principles and practices. HHS Publication.
• Young, D. W., & Hassell, K. (2015). Cost containment strategies in healthcare. Healthcare Management Review, 40(4), 340-348.