How can ratios be used in determining the financial condition of a medical facility?

Discussion Questions for this week: 

1.) How can ratios be used in determining the financial condition of a medical facility?

2.) The year-end balance sheet of a hospital shows total liabilities of $5,500,000, including a bank note to expand the facility. Net worth of the hospital is $3,000,000. What is the debt-to-net-worth ratio?

3.) Using the following data, calculate the medical facilities’ current ratios.

Based on the current ratios, which of the following medical facilities is the healthiest financially?

4.) Mrs. Foster meets with her family physician complaining of flu-like symptoms that have continued for almost a week. She has group health insurance through her employer, with the contract requiring a $30.00 office visit copayment from the patient. The facility’s standard billing rate for a routine office visit is $150.00. Complete the following journal entry to record the cash received from Mrs. Foster, the amount due from the insurance company, and the medical services revenue:

5.) Based on the facts in question  5, Mrs. Foster’s insurance company pays the contract rate of $55.00 for the medical service. This is in addition to the patient’s required copayment. Complete the following journal entry to record cash received, adjust medical services revenue, and clear the accounts receivable:

6.) Dr. Foster’s primary care practice had net medical service revenue of $500,000 for the year. Salaries and benefits for the year, including draws for Dr. Foster, were $350,000. Other operating expenses, excluding payments on a bank loan, were $100,000. Payments on the bank loan for the year were $50,000 on principal and $20,000 for interest. What was the net income for the practice for the year?

7.) A home healthcare agency has a physician as the executive director and six employees providing direct care services to patients. The accounting records of the agency show the following items:

**Calculate the total payroll expenses for this agency.**

8.) Debt Service Coverage Ratio:

Figure 7-5

In  Figure 7-5, the debt service coverage ratio for Lakeview Medical Clinic was calculated at 3.37. Assume in the following year that Lakeview Medical’s coverage ratio calculated at 1.50. What factors would you review to analyze the change in the debt service coverage ratio?

9.) In the 2020 financial statements of Northport Regional Hospital, the hospital reported $7,500,000 in total revenues and $285,000 in net income. The balance sheet at December 31, 2020, showed net assets of $4,200,000. Calculate both the operating margin ratio and the return on equity ratio for Northport.

10.) Dr. Zinn is employed at Saunders Medical Practice. Dr. Zinn is involved in teaching surgical technicians surgical skills so they are prepared to enter the workplace. Dr. Zinn has to maintain a professional license along with a surgical certificate to meet the medical facility’s educational requirement. This is an example of which type of exemption?

Course Materials- Cengage 2nd edition: Introduction to Health Care Finance and Accounting- Carlene Harrison and William P. Harrison

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