Module 4 Project-Capital Decisions

Expanding Credit Lines in Order to Expand

Each country has its own way to fund health care. In the United States, the most used funding model is tax-funded models, which involves pooling risks across large populations to ensure there is universal healthcare. However, in the contemporary economic climate, it is challenging for some organization to attain expansion funds. 

1. Challenges for Financial Healthcare

One of the biggest challenges facing the expansion of healthcare companies is the management of investment in a capital-constrained environment, specifically as more financial resources are needed to cut the costs, attain hospital needs, meet patients demand, expand healthcare access, and change laws (Agran, 2013). Another challenge is the ability to access technological transformation and digital innovations. For example, in the case study, Boston Children’s Hospital may face financial challenges to attain interoperable electronic health records systems, new medical devices, and other technologies. 

2. Caribbean expansion the turnaround company

One of the major issues of Caribbean expansion Turnaround Company was operation cost, which was very high. This led to a reduction of 2012 EBITDA to 1.2 million. The second issue was based on higher financial leverage. According to Rehman (2013), high financial leverage exposes a business to solvency where it may borrow too much funds risking it to bankruptcy during higher liquidity. The Caribbean turnaround was due to equity erosion following involuntary leverage. 

3. Looking Beyond the banks 

Healthcare companies require securing funds beyond their bank where they can raise domestic funds as a way to diversify their funding sources. Some of the options for the health system is by the government prioritizing the industry while allocating budgets, identifying innovative funding mechanisms, and ensuring efficient collection of taxes. Another strategy is identifying international funds (external financial flows). To acquire funds, it is important for a health system to understand the changing legislative and economic environment. Agran (2013) explains that before the capital acquisition, organizations should make reasonable accurate revenue projections. 

The New Break-Even Analysis

1. Health providers case  on Break even

I believe Laskaris and Regan (2013) provide great analysis of break-even analysis. This is because the reader is in a position to understand the assumptions underlying the break-even analysis. Secondly, their revamping process is easy for the readers to follow and apply in their projects. Most importantly, I believe the authors are vital during financial decision making as the reader can assess the financial and non-financial factors (mostly omitted in studies) to make financial clinical decisions. 

2. Non-financial factors in Break-Even Analysis 

While conducting a break-even analysis, healthcare managers require understanding both the financial and non-financial factors. Legislative and economic environments require to be considered in break-even analysis. Another non-financial consideration according to Laskaris and Regan (2013) is the cost of consumables and service contracts. Health managers should consider the changing nature of competition, as the industry has continuously become competitive an aspect termed as geographical competition. 

3. Impact of the Affordable Care Act affect break-even analysis

One of the issues that affect break-even analysis is the Affordable Care Act, which according to Hall (2013) played a role in the reformation of healthcare systems by controlling the healthcare spending in the U.S. In break-even analysis, the Act reduces the fixed costs that influence varying countries whereby it ends up reducing break-even units of production. 

Ethical Scandal

The Enron scandal is one significant economic matter where employees who had invested in the company greatly faced financial losses following the company’s collapse. What we remember more from the collapse is the increase in investors to protect their interests. This is particularly due to the less control that public company investors have on their investments. One of the factors that made this collapse significant is corporate governance, which has diverse standards and rules of officers and governance of U.S. corporations. Corporate governance provides a mechanism to govern the management of a company.  

1. Five Top Ethical Issues in Healthcare

In the contemporary period, healthcare faces a confusing array of laws, regulations, ethical standards, and rules. These top ethical issues involve patient relationships, informed consent, and confidentiality.  One issue is patient confidentiality where the Health Insurance Portability and Accounting Act (HIPAA) require patient information kept confidential. The second issue is patient relationships, which prohibits health workers from entering into personal relationships. The third is malpractice and negligence where the law requires health providers to avoid medical errors. Informed consent is also another ethical issue 

2. American College of Healthcare Executives (ACHE) Code of Ethics

The code of ethics provides a safe culture for the provision of healthcare services. Higgins (2000) explains that ACHE codes expand the profession of healthcare management through the incorporation of inclusion and diversity. These are part of their strategic initiatives and core values. The ACHE is responsible for electing a group of leaders who will direct and govern the ethical operations. 

One factor to consider during capital budgeting of Boston Children’s Hospital is the identification of a project that will add value to the facility. The lenders require conducting financial leverage by calculating the Debt/Equity Ratio. In the financial statement of Boston Children’s Hospital, the Debt/Equity Ratio was 196,028 in 2013, an increase from 2012 which was 186,078. 

Current ratio = Current assets / current liabilities

Current ratio = 46394 /33721

Current ratio = 1.38 in 2013 in comparison to 1.63 in 2012 (56533/34778).

References

Agran, S. (2013). Expanding Credit Lines in Order to Expand: Assessing a Company’s Viability for Expansion Financing [Ebook].

American College of Healthcare Executives C. (2019). Commitment to Ethics. American College Of Healthcare Executives.

Hall, M. A. (2013). Evaluating the Affordable Care Act: The eye of the beholder. Hous. L. Rev., 51, 1029.

Higgins, W. (2000). Ethical guidance in the era of managed care: An analysis of the American College of Healthcare Executives’ Code of Ethics. Journal of Healthcare Management, 45(1), 32-42.

LASKARIS, J., & REGAN, K. (2013). The New Break-Even Analysis [Ebook].

Rehman, S. S. F. U. (2013). Relationship between financial leverage and financial performance: Empirical evidence of listed sugar companies of Pakistan. Global Journal of Management and Business Research.