Palm Beach State College hsa674
Phase Three: HCO Financial Performance Analysis & Strategy Formulation Group 2 Department of BAS Health Management, HSA4938 Capstone Experience: Health Management Dr. wiggle 03/12/2024 Part One: HCO Financial Performance Analysis Balance Sheet and Ratio Analysis Balance Sheet Analysis total assets = $117,719 Liabilities= $68,560 Debt: $24,089 (Wiley-Blackwell) Liquid Ratio Analysis Current Ratio: Formula: Current Assets / Current Liabilities Calculation: FY02: $117,719 / $68,560 = 1.72 Quick Ratio: Formula: (Current Assets – Inventory) / Current Liabilities Calculation: FY02: ($117,719 – $27,876) / $68,560 = 1.61 Competitors Comparison/Contrast Competitor John Hopkins hospital Total assets= $2,611,735,848 Total liabilities= $1,401,817,470 Current Ratio = Total Assets / Total Liabilities = ($2,611,735,848 + $1,150,794) / $1,401,817,470 = $2,612,886,642 / $1,401,817,470 ≈ 1.86 Quick Ratio = current assets-inventory / Total Liabilities = = $2,611,735,848 – $1,150,794/ $1,401,817,470 ≈ 1.86 Current Ratio: JHH has a higher current ratio compared to EMC, indicating that it has more current assets relative to current liabilities. This suggests a stronger liquidity position for JHH in covering its short-term obligations. Quick Ratio: JHH also has a higher quick ratio compared to EMC, indicating that it has more quick assets (excluding inventory) relative to current liabilities. Again, this suggests a stronger liquidity position for JHH in meeting immediate short-term obligations without relying on inventory (Paine et al., 2004). Income Statement and Ratio Analysis Income Statement Analysis Revenue (FY02): $68,560,000 Net Income (FY02): $480,000 Profitability and Return on Investment Ratio Analysis Return on Equity (ROE)=0.76% Return on Assets (ROA)=0.49% (Wiley-Blackwell). Operating Margin= 0.19% Competitors Comparison/Contrast Given Data for JHH: Revenue: $1,826,726,232 Expenses: $1,647,183,606 Net Income: $179,542,626 Total Assets: $2,611,735,848 Total Liabilities: $1,401,817,470 Net Assets: $1,209,918,378 Return on Equity (ROE): ≈14.85% Return on Assets ≈6.87% Operating Margin: ≈9.82% Cash Flow Statement Analysis A cash flow statement is a financial report that summarizes a company’s cash inflows and outflows over a given time. A cash flow statement provides insights into a company’s financial health and operational efficiency (Murphy, 2018). The cash flow statement is an essential accounting tool that provides valuable information about a company’s liquidity, financial performance, and ability to handle changeable economic situations. Its application extends beyond internal management to external stakeholders such as investors, lenders, and analysts, who utilize it to make effective investment and lending decisions. The cash flow statement typically consists of four main sections: the total cash flows from operating, investing, and financing activities and cash and cash equivalents. Cash flow from operating activities (CFO) indicates the amount of money a company brings in from its ongoing (Seth,2010). Table 11 shows a considerable decline in total cash flow from operating activities between 2020 and 2022. In 2022, it was -$89,910,435, while in 2021 it was $507,827, and in 2020 it was $31,820,866. When the cash flow from operating activities decreases, it indicates that the company is generating less cash from its main business operations than in the prior period. Cash Flow from Investing Activities is the component of a company’s cash flow statement that shows how much money was spent on investing within a specific time period (Vipond,2023). Between 2020 and 2022, the cash flow from investing activities has been up and down. In 2022 it was -$4,162,027, but in 2021 it was $465,296, and in 2020 it was $322,237. Since the value is negative at -$4,162,027 as of 2022, it indicates that Emanuel Medical Center spends more cash on its investing activities than it receives from them. Next, the cash flow from financing activities (CFF) measures the movement of cash between a firm and its owners, investors, and creditors (Murphy,2022). Between 2020 and 2022, the cash flow from finance activities decreased significantly. In 2022 it was $51,512, while in 2021, it was $51,812, and in 2020 it was $52,171. From 2020 to 2022, Emanuel Medical Center decreased its financial activities by about $1000. When the cash flow from financing activities decreases, it typically means that a company is generating less cash from its financing-related transactions. Cash flow from financing activities includes activities that involve the company’s capital structure, such as issuing or repurchasing stocks, issuing or repaying debt. Cash and cash equivalents were not available for Emanuel Medical Center. Several factors could have contributed to changes in the organization’s cash flow statements from 2020 to 2022. It’s important to consider both external and internal factors that may influence the cash flow dynamics of the medical center. First, Economic conditions can have a significant impact on a company’s cash flow. Economic downturns or recessions may lead to decreased consumer spending, affecting a company’s revenue and cash flow. Next, the COVID-19 pandemic, which began in 2019, has had widespread effects on businesses globally. Lockdowns, supply chain disruptions, and changes in consumer behavior have affected various industries, leading to fluctuations in cash flow for many companies. Last, changes in industry dynamics, market demand, or competitive pressures can influence a company’s cash flow. For example, shifts in consumer preferences, technological advancements, or regulatory changes could have also an impact on the company sales and operational cash flow. Table 11.0 Emanuel Medical Center Cash Flow Statement Emanuel Medical Center 2022 Total Cash Flows: Operating Activities ($89,910,435) Total Cash Flows: Investing Activities $(4,162,027) Total Cash Flows: Financing Activities $51,512 2021 $507,827 $465,296 $51,812 2020 $31,820,866 $322,237 $52,171 Cash and Cash Equivalent N/A N/A N/A Note (HCAI,n.d) Competitors Comparison/Contrast When looking at Emanuel Medical Center, Mercy Regional, St. Mary’s Hospital, there are some similarities and differences. When looking at the cash flow of operating activities, both Mercy Regional and St. Mary’s Hospital had decreased over the past three years. In 2020 Mercy Regional cash flow from operating activities was $252,374,376, -$25,982,906 in 2021, and $200,817,625 in 2022, as seen in Table 12. St. Mary’s cash flow from operations activities was $112,798,357 in 2020, -$49,808,284 in 2021, and -$37,843,051 in 2022, as seen in Table 13. This is the same as Emanuel Medical Center. However, when looking at the cash flow from investing activities, there are some big differences among all three facilities. While Emanuel Medical Center investing activities increased in 2022, Mercy Regional and St. Mary’s Hospital had decreased for the three years. In 2020 Mercy Regional cash flow from investing activities was -$17,483,453, -$6,923,720 in 2021, and -$116,638,219 in 2022. St. Mary’s Hospital cash flow from investing activities was -$95,354,280 in 2020, -$13,859,775 in 2021, and -$20,776,312 in 2022. There is a similarity between Mercy Regional and St. Mary’s Hospital in their financing activities since both decreased from 2020 to 2022. In 2020 Mercy Regional cash flow from financing activities was -$145,197,301, -$66,096,461 in 2021, and -$60,056,214 in 2022. St. Mary’s cash flow from financing activities was -$10,366,563 in 2020, $17,652,250 in 2021, and $61,362,494 in 2022. The cash and cash equivalents were also not available for both organizations. Table 12.0 Mercy Regional Cash Flow Statement Mercy Regional 2022 2021 2020 Total Cash Flows: Operating Activities $200,817,625 ($28,982,906) $252,374,376 Total Cash Flows: Investing Activities ($116,638,219) ($6,923,720) ($17,483,453) Total Cash Flows: Financing Activities ($60,056,214) ($66,096,461) ($145,197,301) Cash and Cash Equivalent N/A N/A N/A Note. (HCAI,n.d) Table 13.0 St. Mary’s Hospital Cash Flow Statement St. Mary’s Hospital 2022 2021 2020 Total Cash Flows: Operating Activities $(37,843,051) $(49,808,284) $112,798,357 Total Cash Flows: Investing Activities $(20,776,312) $(13,859,775) $(95,354,280) Total Cash Flows: Financing Activities $61,362,494 $17,652,250 $(10,366,563) N/A N/A N/A Cash and Cash Equivalent Note. (HCAI,n.d) Table 12.0 Ascension St. Vincent’s Birmingham Cash Flow Statement (ALL TABLE NAMES NEED TO BE ADJUSTED) (CREATE TABLE) Table 13.0 Birmingham VA Medical Center Cash Flow Statement (ALL TABLE NAMES NEED TO BE ADJUSTED) (CREATE TABLE) Part Two: Strategy Formulation Strategic Alternatives-Adaptive Strategies PLC analysis could be the precise strategy for Emanuel Medical Center to achieve a healthcare industry that is affected by complexity. It should be noted that during these technologies, one can see all the life cycle steps in the organization’s output of services and its positioning in the market. The PLC (Product Life Cycle) Analysis represents the services provided that cater to the different phases of initiation, growth, maturity, and the end phase of decline (Udroiu, 2020). This organization knows the phases and what you can do in each section. The strategy will be suitable for this service in Emanuel Medical Center. Through this illustration, one can extrapolate that services growing in size may be a problem, leading to further stringent measures to serve all the needs of that growing demand. Then, Turning to the services that are in decline may result in what is widely known as scaling down – that is, best practices of waste elimination and excess capacity elimination. While PLC is helpful, BCG Portfolio Analysis is an even more exciting feature that can arrange services into stars, risky question marks, cash cows, and peril dogs by counting their market share and growth rate (Czinkota et al., 2021). High-quality, high-market capitalization services with clear star status are on the one hand. On the other hand, the market neophytes are expected to have high growth, but low shares should be carefully considered in terms of the strategy to be applied, whether for investments or market exit. Stars are going for the cash, while, on the one hand, vixens are rushing for the market share and growth that ends up eating away at them, and they need to offload them. Using the BCG Portfolio Analysis, Emanuel Medical Center can discover the investment areas that use more resources for a lower return. Such aligns the priorities and the strategic plan of the hospital’s performance to enhance its competitiveness. After running the PLC Analysis, it is clear that the Emanuel Medical Center can assess services and determine whether the service is in its experimental stage, introductory stage, or mature stage. Some of the services in the product family that may be in the growth stage are in-depth research or a primary care line that may be in the maturity phase. The NGO will be there with all the data concerning how the intervention will be widened, maintained, or even narrowed down (Grisolia et al., 2023). The plans/ strategies implemented in servicing are timed to sync with the turnaround time on each service to allow for optimal resource planning, effective operations, and growth as opportunities arise. The services of Emanuel Medical Center are now being rated through the analytical grid of BCG Portfolio Analysis, which acts as a standard tool for investigating the factors and constructing the framework to work with, such as growth rate and market share. Identifying the stages makes the business separate what should be invested in and where to which resources should be directed. For instance, for the service areas that are the hubs of life, the increasing number of stars will require more resources and make them perform better. In contrast, the dog areas that are not in demand can be rationalized for exit and used better by refocusing the resources on the more promising areas. As a static component of the strategic tools designed to strengthen its healthcare delivery services, a BCG Portfolio Analyst can be what Emanuel Medical Center needs to make the right choices and prove that it is working toward achieving its mission. Emmanuel Health Center’s shortlisting of itself on the PLC Analysis and BCG Portfolio Analysis is seen by the hospital as a guide that can be used for different decision-making processes in the health sector. These adaptations generate profound discoveries for tactical planning of campaign activities: what extensions to use, how to allocate the resources, and in which areas to invest to make the revenues high. Intelligent handling of these techniques will facilitate the surgical center to compete well and execute its function more adequately. Consequently, the patients, consulting partners, and the sponsor’s needs will be thoroughly cared for. Strategic Alternatives-Market Entry/Exit Strategies Table 1. External Conditions Appropriate for Market Entry/Exit Strategies Market Entry/Exit External Conditions Strategy Acquisition Fragmented market with potential targets. The desire for rapid market penetration. Availability of suitable acquisition targets. Capital availability for acquisition. Licensing Intellectual property rights are available for licensing. The desire to expand into new markets without significant investment. Availability of potential licensing partners. Venture Capital Investment High-growth potential identified in specific healthcare sectors. The desire for external funding to fuel growth. Existence of venture capital firms specializing in healthcare. Table 2. Appropriate Internal Resources, Competences, and Capabilities for Market Entry/Exit Strategies Market Entry/Exit Resources, Competencies, and Capabilities Strategy Acquisition Financial resources for acquisition. Due diligence capabilities. Integration expertise. Management and leadership for post-acquisition integration. Licensing Strong intellectual property portfolio. Legal expertise in negotiating and drafting licensing agreements. Market research capabilities to identify potential partners. Regulatory compliance knowledge. Venture Capital Investment Innovative technologies or healthcare solutions. Strong management team with a track record of success. Ability to articulate growth strategy and potential ROI to investors. Understanding of venture capital landscape and investor expectations. Strategic Alternatives-Competitive Strategies Table 1. External Conditions Appropriate for Strategic Postures Posture Strategy Appropriate External Conditions Table 2. Appropriate Internal Resources, Competences, and Capabilities for Strategic Postures Posture Strategy Appropriate Resources, Competences, Capabilities Table 3. External Risks Associated with Positioning Strategies Generic Strategy External Risks Table 4. Appropriate Internal Resources, Competences, and Capabilities for the Positioning Strategies Generic Strategy Resources and Competencies Organizational Capabilities Strategy Map (incorporate the strategic map below and then provide a discussion under synthesis and implications of strategy choices heading) Strategy Map Adaptive StrategiesMarket Entry/Exit Strategies Competitive Strategies Expansion of ScopePurchasingStrategic Postures Reduction of Scope Cooperation Maintenance of ScopeDevelopmentPositioning Strategies Synthesis and Implications of Strategy Choices Health care organization External Conditions Market Entry/Exit External Conditions Strategy Acquisition Fragmented market with potential targets. The desire for rapid market penetration. Availability of suitable acquisition targets. Capital availability for acquisition. Licensing Intellectual property rights are available for licensing. The desire to expand into new markets without significant investment. Availability of potential licensing partners. Venture Capital Investment High-growth potential identified in specific healthcare sectors. The desire for external funding to fuel growth. Existence of venture capital firms specializing in healthcare. Merger Consolidation trend in the healthcare industry. The desire for increased market share and economies of scale. Existence of suitable merger partners. Alliance Need for complementary resources or expertise. The desire for strategic partnerships to access new markets or technologies. Potential alliance partners with aligned goals are present. Joint Venture The desire to share risks and resources when entering new markets. There is a need for local expertise or market knowledge. Existence of suitable local partners for joint ventures. Internal Development Internal solid R&D capabilities. The desire for complete control over product development and commercialization. Availability of resources and expertise for internal development. Internal Venture Desire to foster innovation and entrepreneurship within the organization. Availability of resources to support internal ventures. Supportive organizational culture for internal ventures. Reconfiguring the Value Need to optimize operational efficiency and cost-effectiveness. Chain The desire is to capture more value from existing processes. Availability of technology and expertise for value chain reconfiguration. Resources, Competencies, and Capabilities Market Entry/Exit Resources, Competencies, and Capabilities Strategy Acquisition Financial resources for acquisition. Due diligence capabilities. Integration expertise. Management and leadership for post-acquisition integration. Licensing Strong intellectual property portfolio. Legal expertise in negotiating and drafting licensing agreements. Market research capabilities to identify potential partners. Regulatory compliance knowledge. Venture Capital Investment Innovative technologies or healthcare solutions. Strong management team with a track record of success. Ability to articulate growth strategy and potential ROI to investors. Understanding of venture capital landscape and investor expectations. Merger Strategic planning and negotiation skills. Integration capabilities. Cultural alignment assessment. Leadership to guide organizational change. Alliance Ability to identify strategic partners aligned with organizational goals. Relationship-building skills. Collaborative culture. Legal expertise in drafting partnership agreements. Joint Venture Understanding of local market dynamics and regulations. Joint decision-making processes. Risk-sharing agreements. Ability to manage cultural differences. Internal Development Strong R&D capabilities. Access to research facilities and equipment. We have a skilled research team. Project management expertise. Internal Venture Supportive organizational culture for innovation. Entrepreneurial talent within the organization. Access to resources and funding for internal ventures. Risk tolerance and willingness to experiment. Reconfiguring the Value Process optimization capabilities. Chain Technology infrastructure. Supply chain management expertise. Change management capabilities. References Emanuel Medical Center. (n.d.). SIERA – HCAI. https://reports.siera.oshpd.ca.gov/ Murphy, C. B. (2018, March 28). Cash flow statement: What it is and examples. Investopedia. https://www.investopedia.com/investing/what-is-a-cash-flowstatement/ Murphy, C. B. (2022, March 21). Cash flow from financing activities (CFF) formula & calculations. Investopedia. https://www.investopedia.com/terms/c/cashflowfromfinancing.asp Seth, S. (2010, October 20). Cash flow from operating activities (CFO) defined, with formulas. Investopedia. https://www.investopedia.com/terms/c/cash-flow-fromoperating-activities.asp Vipond, T. (2023, October 2). Cash flow from investing activities. Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/accounting/cash-flow-frominvesting-activities/ Czinkota, M. R., Kotabe, M., Vrontis, D., & Shams, S. M. R. (2021). Product and Service Decisions. Springer Texts in Business and Economics, 341–397.x Grisolia, F., Dewachter, S., & Holvoet, N. (2023). Follow the hand that feeds you? The effects of non‐governmental cash transfers on citizenship. https://doi.org/10.1111/spol.12914 Udroiu, R. (2020). Product lifecycle management. Hust.edu.vn. https://doi.org/OER000001496 References Wiley-Blackwell, E. (n.d.). Instructors’ Manual to Accompany Strategic Management of Health Care Organizations, Fifth Edition. C A S E 13 Emanuel Medical Center: Crisis in the Health Care Industry, 32. https://www.blackwellpublishing.com/content/swayne/IM/Cases13to16.pdf Paine, L. A., Baker, D. R., Rosenstein, B., & Pronovost, P. J. (2004). The Johns Hopkins Hospital: identifying and addressing risks and safety issues. The Joint Commission Journal on Quality and Safety, 30(10), 543-550.
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