HealthWaysFinancials
HealthWaysFinancials
| Nurse-Run Clinic Scenario | ||||||||
| Patient Encounters | FY 2018 | FY 2017 | ||||||
| Established patients | 3,348 | 3,204 | ||||||
| New patients | 331 | 287 | ||||||
| Total Encounters | 3,679 | 3,491 | ||||||
| Cash | $5,675 | $12,098 | ||||||
| Financial Ratios: | ||||||||
| Expense per Encounter = Total Operating Expenses / Total Encounters | ||||||||
| Total Operating Revenue per Encounter = Total Operating Revenue / Total Encounters | ||||||||
| Operating Margin = Net Income/Total Operating Revenue | ||||||||
| Days Cash On Hand = (Cash + Cash Equivalents) / (Operating Expenses / Days in Time Period) | ||||||||
| Table 2. HealthWays Clinic, Income Statement, FY 2018. | Table 3. HealthWays Clinic, Balance Sheet, December 31, 2018. | |||||||
| FY 2018 | FY 2017 | Current Assets | December 31, 2018 | December 31, 2017 | Current Liabilities | December 31, 2018 | December 31, 2017 | |
| Gross Revenue (charges) | $558,520 | $497,221 | Cash | 5,032 | 9,877 | Notes Payable | 27,449 | 50,000 |
| Less write-offs & adjustments | 117,254 | 104,332 | Short-term Investments | 40,389 | 34,181 | Accounts Payable | 78,702 | 69,412 |
| Net Patient Revenue (collected) | $441,266 | $392,889 | Accounts Receivable | 63,392 | 59,359 | Accrued Expenses: | ||
| +Other Revenue | 209,671 | 234,953 | Supply Inventories, at Cost | 16,029 | 14,918 | Salaries & Benefits | 38,265 | 28,274 |
| Prepaid Expenses & Other | 2,104 | 1,876 | Taxes | 1,419 | 1,398 | |||
| Total Operating Revenue | $ 650,937 | $ 627,842 | Total Current Assets | $ 126,946 | $ 120,211 | Interest Payable | 3,294 | 500 |
| Total Current Liabilities | $ 149,129 | $ 149,584 | ||||||
| Operating Expenses | ||||||||
| Salaries & Benefits | 459,171 | 445,396 | Property, Plant & Equipment (Fixed Assets) | Long-Term Liabilities | $0 | $0 | ||
| Medical Supplies | 97,627 | 92,418 | Cost of PP&E | 56,047 | 55,701 | |||
| Office Supplies | 7,471 | 7,302 | Less Accumulated Depreciation | 4,194 | 3,943 | Net Assets | ||
| Rent & Depreciation | 39,148 | 37,023 | Net PP&E (Net Fixed Assets) | $ 51,853 | $ 51,758 | Unrestricted | 28,541 | 20,569 |
| Other | 43,762 | 47,009 | Other Assets | $ 1,289 | 1289 | Restricted | 2,418 | 3,105 |
| Total Operating Expenses | $ 647,179 | $ 629,148 | Total Assets | $ 180,088 | $ 173,258 | Total Net Assets | $ 30,959 | $ 23,674 |
| Net Income | $ 3,758 | ($1,307) | Total Liabilities & Net Assets | $ 180,088 | $ 173,258 | |||
| Financial Reports: Quick Tips for Interpretation | ||||||||
| •income statement: positive net income indicates profitability | ||||||||
| •balance sheet: positive equity indicates that there is a positive net worth, representing the amount remaining if an institution went bankrupt and had to liquidate | ||||||||
| •compare changes in reports from prior year(s) to identify trends in financial performance, and with industry standards or internal benchmarks. | ||||||||
| Financial Ratios | FY 2018 | FY 2017 | ||||||
| Expense per Encounter | $ 175.91 | $ 180.22 | ||||||
| Total Operating Revenue per Encounter | $ 176.93 | $ 179.85 | ||||||
| Operating Margin | 0.58% | -0.21% | ||||||
| Days Cash On Hand | 3.2 | 7.0 | ||||||
| Interpretation | ||||||||
| Income Statement | ||||||||
| The clinic operated at a loss the prior year, this reporting year the clinic made a small profit. | ||||||||
| One thought is about collections. The collection rate should be as high as possible, ideally 90-95 percent. It is likely that a lot of the write-offs and adjustments represent uncollected patient fees. More analysis and strategies to improve collections should be considered. | ||||||||
| Balance sheet | ||||||||
| The current liabilities are greater than the current assets, so the ability of the clinic to pay its short-term obligations is at risk. | ||||||||
| Expense per Encounter: | ||||||||
| In the prior year, the expense per encounter (patient visit) exceeded the revenue per encounter, so that the operations of the clinic operated at a loss. It is important that the clinic carefully manages its costs because if revenue is not greater than cost, the clinic is not profitable and might not be able to remain solvent. | ||||||||
| Total Operating Revenue per Encounter: | ||||||||
| In the current year, operating revenue is greater than expenses per encounter, but the two amounts are very similar. The clinic management must more carefully control costs, or negotiate higher reimbursement, or both. | ||||||||
| The clinic’s financial health is at risk if it cannot generate adequate profits that cover increases in costs and unexpected expenses. | ||||||||
| Operating Margin: | ||||||||
| The prior year’s net income was negative, thus leading to a negative operating margin. The current year’s operating margin is very low. This low operating margin is related to the very low profitability of the clinic. | ||||||||
| As stated before, the clinic managers should consider how to improve the collection rate, how to negotiate higher reimbursement, and how to better control costs. Another possible strategy is grant writing and fund raising to increase funding and donations. | ||||||||
| Days Cash On Hand | ||||||||
| The clinic’s days cash on hand is very low, with only three days of ability to pay short-term expenses. | ||||||||
| Concerns about meeting short-term obligations are more serious because current liabilities exceed current assets, so it might not be possible for the clinic to meet short-term obligations if there is an interruption in revenue. This puts the clinic at risk of bankruptcy. |
