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FINANCIAL MANAGEMENT

Student’s Name

Author’s Affiliation

Course Number & Name

Instructor’s Name

Assignment Due Date

Financial risk management in health facilities- Methodist Hospital (San Antonio, Texas)

The technique of protecting a company’s economic worth by using financial instruments to limit exposure to financial risk is known as financial risk management. The three primary categories of financial risk are operational efficiency, liquidity, and market volatility, among others. Identifying the sources of financial risk, measuring it, and creating plans to deal with it is all part of risk management in general (Yang et al., 2019).

The first health center to operate in Southern Texas Medical Center was Methodist Hospital (San Antonio), which received its charter in 1955. The hospital’s main specialties are cardiology, oncology, emergency care, bone and bone marrow transplant, neurosciences, women’s health, and orthopedics. A Comprehensive Stroke Center that is certified exists at the hospital. The hospital has conducted more neck and back surgery than any hospital in Texas and is renowned for its neurological and neurosurgery services.

The complexity of the healthcare sector makes it more challenging for managers to anticipate potential financial risks. As a result, providers must employ someone to methodically search for potential issues and create controls to reduce potential harm. This study aims to examine the methods used by Texas’ Methodist Hospital (San Antonio) to control financial risk. The study will concentrate on the management’s approach to managing the risks that the Methodist hospital faces.

Reference

Yang, Q., Wang, Y., & Ren, Y. (2019). Research on financial risk management model of internet supply chain based on data science. Cognitive Systems Research, 56, 50-55.

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FINANCIAL MANAGEMENT

Assignment 6: Group Presentation Paper

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Instructions
As a small (3-4 student) group you are required to develop a financial analysis of a healthcare organization. The intent of this assignment is to evaluate the financial and operational health of the organization. You may pursue, analyze, and synthesize any information source you choose (e.g., website content, current resident personal interviews, organizational documentation, etc.). During the development process you will also be asked to review the work of at least one other group, provide feedback, and help support their development effort. This will also help you (1) learn about one other’s organization and (2) benchmark your efforts against the work of your peers. Your content should be clear, logical, and report on (at a minimum) the business’ location(s) and competitive market(s). Use of a PESTLE and SWOT analysis is encouraged. From a financial perspective, your final presentations should contain analysis and discussion on 2- 3 ratios from each of the primary financial ratio categories discussed in Week 4 (e.g., liquidity, profitability, operating efficiency, and capital structure). A five year trend analysis – including the most recent year of available information/data – is expected for each ratio selected . Interpret the ratios, the financial and market trends and provide your perspectives on the strengths and weaknesses of the organization. Do not just report the data. Tell us what it means. Ultimately, we want to know if the organization is financially sound and has strong long-term growth prospects. Why or why not? Grading will focus on content development, depth of analysis and professionalism of delivery. Your final deliverable is a presentation of no more than 10 minutes in length, developed in a professional format suitable for presentation to the Board of Directors or a C-Suite executive team. ·     Deliverables: – A financial analysis of a healthcare organization paper- submit the papers in this folder. One per group submission is fine. Make sure to list all group members on the title page. Page count should be no less than 6 -12 pages.  -Video presentation (visual aids could be PPP, Prezi, poster, etc) submit presentation to the video submission folder. Make sure to list all group members on the title page.  Video presentation means that everyone presenting should be on camera and visible.  -Peer Review forms – separate submission folder (individual submissions)

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From a financial perspective, your final presentations should contain analysis and discussion on 2- 3 ratios from each of the primary financial ratio categories discussed in Week 4 (e.g., liquidity, profitability, operating efficiency, and capital structure).

The healthcare industry is one of the largest industries, encompassing a variety of industries such as hospitals and medical equipment. As a result, tracking and analyzing financial ratios are critical for healthcare organizations. The financial ratios show where operating costs are, including managing cash flow and providing a baseline for analyzing profitability (Hospaccx Healthcare Business Consultancy, 2019).

Financial ratios, discussed below, will help the Methodist Hospital, San Antonio, Texas, to determine the level of financial stability of practice and help to make better decisions for the future of the facility (Norris, 2021). Furthermore, financial ratios are important to the healthcare industry because they allow for assessing the facility’s overall financial health in providing a quick means to determine if the facility has assets to meet upcoming liabilities. Also, the ratio enables authorities to monitor the facility’s growth by assessing previous statements to see how numbers have changed over the period (Lane, 2021). In addition, the financial ratio measures the ability of a hospital to cover current debt obligations with funds derived from both operational and non-operational activity (CHIA, n.d)

Liquidity Ratio
Analysis

Liquidity Ratio uses several financial ratios to determine the ability of an organization to pay its bills promptly. This analysis is important for lenders and creditors who want to understand a borrower’s financial situation before granting them credit (Accountingtools, 2022).

Liquidity Ratio Analysis can be
categorized into cash, quick, and current ratios. All these ratios use the same accounting concept of comparing liquid assets to short-term liabilities.

Cash Ratio: This ratio compares an amount of cash and investments to short-term liabilities and excludes any assets which might not be immediately convertible into cash, particularly inventories. Also, it represents the most conservative view of an organization’s liquidity than other liquidity ratios because it only considers a company’s most liquid resources (Accountingtools, 2022: Kenton et al., 2022).

Quick ratio: It is similar to the cash ratio; however, it includes accounts receivable such as assets. Quick ratio explicitly avoids inventory, which might be difficult to convert into cash. Furthermore, the ratio is especially useful when a business owns many obsolete inventories (Accountingtools, 2022).

Current ratio: Compares current assets to current liabilities. It also includes inventory, which is not especially liquid and can misrepresent a business’s liquidity (Accountingtools, 2022).

Profitability,

Analysts and investors use profitability ratios to measure and evaluate the ability of an organization to generate income that is profit relative to revenue, operating costs, shareholders’ equity, and balance sheet assets at a particular period. Furthermore, Profitability ratios show how well an organization utilizes its assets to produce profit and value for shareholders (Kenton et al., 2022).

Profitability ratio analysis can be
categorized into margin ratios and return ratios.

Margin ratios: Represent the firm’s ability to translate sales dollars into profits (Carlson, 2020). Moreover, Margin ratios represent the facility’s ability to convert sales into profits at various degrees of measurement. For example, some margin ratios include operating profit margin, net profit margin, gross profit margin, cash flow margin, EBIT, EBITDA, operating expense ratio, and overhead ratio (CFI Team, 2022).

Return ratios: Return ratios measure the overall ability of the firm to generate shareholder wealth (Carlson, 2020). This ratio represents the organization’s capability to generate returns for its shareholders. Examples include return on assets, return on equity, cash return on assets, return on debt, return on retained earnings, return on revenue, risk-adjusted return, return on invested capital, and return on capital employed (CFI Team, 2022).

Efficiency ratios

Efficiency ratios are metrics used in analyzing a company’s ability to effectively employ its resources, such as capital and assets to produce income. The ratios serve as a comparison of expenses made to revenues generated, essentially reflecting what kind of return in revenue or profit an organization makes from the amount it spends to operate its business (CFI Team,

2022b).

The below chart is an illustration of the Efficiency Ratio debt and how it is categorized in an organization.

Figure 1.0: Illustration of Efficiency Ratio

Source: (CFI Team, 2022b).

Capital structure

It refers to the relative use of

debt
and

equity
employed by a firm to fund its operations and finance its long-term assets. An organization’s capital structure is typically expressed as a debt-to-equity or debt-to-capital ratio (CFI Team, 2022b). Leading healthcare systems’ capital structure is a strategic component of their financial plans. Healthcare is a capital-intensive industry, requiring significant investments in brick-and-mortar, high-tech imaging machines, and other medical equipment. Texas Methodist Hospital (San Antonio) is a not-for-profit (NFP) hospital with the benefit of being able to issue tax-exempt debt. (Lombardi,2021)

Figure 2.0: Capital Structure in an Organization

The figure presented here (Figure: 2.0) is a pictorial illustration of an organizations’s capital structure.

References

Accountingtools (May 23, 2022). Liquidity ratio analysis.

https://www.accountingtools.com/articles/liquidity-ratio-analysis.html

Carlson, R (February 6, 2020). Categories of profitability ratios to help your business.

https://www.thebalancemoney.com/types-of-profitability-ratios-393210

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CFI Team (January 23, 2022a). Profitability Ratios: Measures of a company’s earning power.

https://corporatefinanceinstitute.com/resources/knowledge/finance/profitability-ratios/

CFI Team (September 14, 2022b). Efficiency Ratios:Ratios that are used in analyzing a firm’s ability to effectively employ its resources to produce income.

https://corporatefinanceinstitute.com/resources/knowledge/finance/efficiency-ratios/

CHIA (n.d). Interpretation of financial ratios.

https://www.chiamass.gov/interpretation-of-financial-ratios/

Hospaccx Healthcare Business Consultancy (July 19, 2019). 4 Key Financial ratios Healthcare providers should track.

https://www.linkedin.com/pulse/4-key-financial-ratios-healthcare-providers-should-hospaccx

Kenton,W., James, M & Kvilhaug,S ( May 20, 2022). Cash Ratio: Definition, Formula, and Example.

https://www.investopedia.com/terms/c/cash-ratio

Lane, L (Apr 14, 2021). Healthcare organization financial statements: Understanding best practices.
Richterhc.

https://blog.richterhc.com

Lombardi, M (2021) The Relationship of Debt Ratio and Financial Performance for Large Not-for-Profit Health Systems.
Journal of Health Care Finance www.HealthFinanceJournal.com

Norris, D. (2021). Five financial ratios that track your practice’s financial health
Medical Economics Journal. Volume 98, Issue 4.

https://www.medicaleconomics.com/view/five-financial-ratios-that-track-your-practice-s-financial-health

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Pestel Analysis

Pestel analysis is the most effective framework to assess the performance of an organization. It analyzes political, economic, social, technological, environmental, and legal factors influencing the performance of an organization (Siddiqui, 2021). Moreover, it allows an organization to prepare for the challenges associated with one or more of the above factors to improve organizational policy, services, and performance. For this purpose, the pestel analysis framework has been employed to assess the current operational strategies and actions of the Methodist Hospital. The table below provides a comprehensive analysis of each factor covered in pestel framework.

PESTEL ANALYSIS
Political Factors	Economic Factors	Social Factors	Technological Factors	Environmental Factors	Legal Factors
The organization is fully equipped to change its policies according to the changes taking place politically across the state and at the federal level. The organization is familiar with the political preferences regarding the policy of improving care quality, offering insurance coverage, and improving coordination with other healthcare organizations and the state and federal authorities. The organization has to keep an eye on political factors such as political stability, interference by the government, intellectual property protection policies, trade regulations and tariffs, anti-trust laws, wage legislations, employee benefits, safety regulations, and pricing regulations.	Since the organization is in the field for decades, its leadership is fully aware of economic factors that can influence the organizational factors. The organization remains alert to economic issues such as fuel prices, interest rates, consumer confidence, inflation, and increasing labor costs. Therefore, the organizational leadership is fully prepared to make necessary changes according to the new developments from economic perspectives.	The organizational leadership has actively worked to improve its outlook to meet the challenges associated with social factors. The social factors most likely influencing the organization are consumer behavior, leisure, interests, entrepreneurial spirit, education level, class structure, demographics, and skill level. The organizational staff members understand the significance of each of the above factors.	Technology plays a significant role in making an organization retain its position in the market to keep the competitors behind. Methodist Hospital administration understands the value of technological interventions in improving the quality of care for the consumers and the performance of employees in making correct use of technology to identify the problem and offer a solution. Therefore, the organization had equipped all departments with state-of-the-art technological devices to improve employee performance and patient outcomes. The organizational leadership emphasizes the need to acquire first-hand information about rates of technological diffusion, recent technological developments, and the impact of technology on cost structure and value chain structure.	Environmental factors of air pollution, waste management, attitudes towards renewable energy, water pollution, laws regulating environmental pollution, weather, and climate change can make a healthcare organization thrive in the market or deprive it of its upper hand in the industry. Therefore, every healthcare organization has to pay sufficient attention to each factor. The Methodist Hospital also requires a thorough understanding of environmental protection laws in different states.	To complete the marketing forces effectively, the Methodist Hospital pays more than enough attention to different legal factors influencing it. The legal factors influencing the organizational position in the healthcare industry include the latest developments in data protection, health, safety, employment, consumer protection, e-commerce, copyright, discrimination, and anti-trust laws (Fox & Vaidyanathan, 2016). The organization has equipped itself with experienced lawyers who can pursue the case for the final hearing in this matter.

References

Fox, M., & Vaidyanathan, G. (2016). Impacts of Healthcare Big Data: A Framework with Legal and Ethical Insights. 
Issues in Information Systems, 
17(3).

Siddiqui, A. (2021). The Use of Pestel Analysis Tool of Quality Management in the Health Care Business and its Advantages. 
American Journal Of Biomedical Science &Amp; Research, 
14(6), 507-512. https://doi.org/10.34297/ajbsr.2021.14.002046