Key Assignment/ financial planning

Key Assignment Draft (4 pages)

Established in 1987, ABC Community Hospital not-for-profit is an acute care hospital located in an east coast Metropolitan area. With a staff of nearly 200 physicians and specialists, 800 employees and 100 volunteers, they offer a full range of healthcare services. They are accredited by the Joint Commission. The hospital has been profitable for the last 5 years with a profit margin of 3-4%.

In March 2012, XYZ Healthcare System, a private, for-profit health care chain, took over management of the 400-bed ABC Community Hospital. In May 2013, officials began to discuss a proposal to build a new wing devoted to a Cancer Center and ancillary services devoted to the treatment of Cancer.  The new wing would have 30 acute care beds, four surgical operating rooms, intensive care unit and extensive support services, including physical therapy and Hospice care. All patient rooms would be private. There are no Cancer Centers within a 200 mile radius of the hospital service area.

The Board of directors is concerned with taking on the additional debt of the Cancer Center. They have tasked the CFO with developing a financial plan and strategic plan that will outline the impact of the Cancer Center. They want you to address the following areas:

  • What are the key financial policy targets for which the board is responsible for? List and explain each.
  • How does the financial planning and strategic planning of the new for-profit status align with the financial and strategic plans of the existing community hospital status? 
  • Explain how management control is used in conjunction with the financial plan. With the takeover, would the ABC Community Hospital CFO need to consult with XYZ Healthcare System executives for the decision making?
  • A financial plan may be thought of as a bridge between two balance sheets. What are the major categories of assumptions that must be specified to project a future balance sheet, given the current balance sheets from the ABC Community Hospital and now XYZ Healthcare System?

Key Assignment (11 pages)

Established in 1987, ABC Community Hospital not-for-profit is an acute care hospital located in an east coast Metropolitan area. With a staff of nearly 200 physicians and specialists, 800 employees and 100 volunteers, they offer a full range of healthcare services. They are accredited by the Joint Commission on Accreditation of Healthcare Organizations. The hospital has been profitable for the last 5 years with a profit margin of 3-4%.

In March 2012, XYZ Healthcare System, a private, for-profit health care chain, took over management of the 400-bed ABC Community Hospital. In May 2013, officials began to discuss a proposal to build a new wing devoted to a Cancer Center and ancillary services devoted to the treatment of Cancer.  The new wing would have 30 acute care beds, four surgical operating rooms, intensive care unit and extensive support services, including physical therapy and Hospice care. All patient rooms would be private. There is no Cancer Centers within a 200 mile radius of the hospital service area.

The board has come back with more question that they want you to add to the original paper:

  • Compare and contrast the kinds of decisions that are made in the Cancer Center capital investment decision analysis for the for-profit and non-profit healthcare facilities using the four stages of capital decision making process.
  • What information is needed by the CFO to evaluate the Cancer Center capital investment project?
  • Who, internally from the healthcare system and externally, should be involved in the capital investment decision process to determine the feasibility of the Cancer Center?

 

Below is an except of solution

Solution

Introduction

Profit and not for profit healthcare organization operates in similar ways except in few different things that distinguish both form of corporation. One major area both differs from each other is in their financial operation and strategic planning. The way not for profit use planning tools to establish its financial operations and strategy surely differs from that of a for-profit organization. The reason according to Russo (n.d) is that the stakeholders particularly the boards of directors expect different thing from not for profit health care and the for-profit healthcare organization. Another important factor is that the mission and ideology between a for-profit organization and not for profit organization are totally different.

It was established that ABC community Hospital is a not for profit acute healthcare center, that is more interested in the well-being of the community and not for profit making. The resources used in running the healthcare is totally sourced in a different way from the resources that are used in running the XYZ Healthcare System that is privately owned for the purpose of profit making, as such their strategic planning process and factors taking into consideration differs.

One can see strategic planning as the process of defining where an organization is going (profit or not for profit) in the next few years, how it will get there and ultimately how it will know if it actually gets there. As such, a strategic plan can be seen as an organization set down a goal. For instance, a for-profit organization goal might be to return dividends to its shareholder in due time while that of not for profit might be to achieve its define mission and probably how to raise money to carry on its mandate. The processes are the same but the formats are different.

Organization Key Policy Targets (For XYZ Healthcare System)

There are basic financial policy targets that the board of directors of XYZ Healthcare system will be responsible for implementing the proposed Cancer Center wing. Among the leading financial targets include:?………………………………………..

Russo, T. (n.d). Strategic Planning for Nonprofits Vs. Profits. Available at http://smallbusiness.chron.com/strategic-planning-nonprofits-vs-profits-70208.html

Sara R. C., Bradford, H. G., & Jack, H. (2001). The for-profit conversion of non-profit hospitals in the US Health care system: Eight case studies May 2001. The Commonwealth Fund’s http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.499.3671&rep=rep1&type=pdf

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