Patton Hospital Financial Analysis of Patton Hospital Abstract The purpose is to analyze financial position of Patton Hospital for

2009. For this purpose comparative analysis have been used. The financial position of 2009 has been compared with its corresponding period of 2008. The income statement of the hospital has been compared showing difference in dollars in 2009 as compared to 2008. Then the change has been shown in percentage in 2009 over the previous year of 2008. The balance sheet has been compared showing the difference in dollar amount between two years and change in percentage has been shown in 2009 as compared to previous years data. The strength and weaknesses have been highlighted in comments in the current year of 2009 as compared to previous year. Finally, it has been recommended the actions may be or should be taken by the management of the hospital. Analysis

Patton - Fuller Community Hospital Balance Sheet as of December 31 2009 and 2008 (In thousands) (Audited) 2009 Assets Current Assets 2008 Difference % change

Cash and Cash Equivalents

$22,995

$41,851

($18,856)

-45%

Assets of Limited Use

$27,594

$41,851

($14,257)

-34%

Patient Accounts Receivable (1)

$58,787

$37,666

$21,121

56%

(net of Allowance for Bad Debts

2009: $11,757 / 2008: $7,533)

Other Receivables (3rd party payer settlements Inventories

$18,396

$87 $8,370

($87) $10,026

-100% 120%

Prepaid Expenses

$95

$201

($106)

-53%

Total Current Assets Other Assets

$127,867

$130,026

($2,159)

-2%

Funded Depreciation

$137,970

$167,404

($29,434)

-18%

Held under Bond Indenture

$73,584

$75,332

($1,748)

-2%

Property, Plant and Equipment, net Total Assets Liabilities and Equity Current Liabilities

$248,346 $587,767

$175,774 $548,535

$72,572 $39,232

41% 7%

Current portion of long-term debt

$14,599

$4,185

$10,414

249%

Accounts payable, accrued expenses

$9,198

$4,185

$5,013

120%

Bond interest payable

$10

$10

$0

0%

Total Current Liabilities Other Liabilities

$23,807

$8,380

$15,427

184%

Long term debt

$452,945

$209,255

$243,690

116%

less: current portion of long term debt Net long term debt Total Liabilities Equity

$14,599 $438,346 $462,153

$4,185 $205,069 $213,450

$10,414 $233,277 $248,703

249% 114% 117%

Common Stock, $ 0.01 par value

0%

10,000,000 shares authorized

5,000,000 shares outstanding

$50

$50

Additional Paid-in Capital

Retained Earnings (or "Net Worth" or "Unrestricted Fund Balance")

$125,564

$335,035

($209,471)

-63%

Total Liabilities and Equity

$587,767

$548,535

$39,232

7%

Patton - Fuller Community Hospital Statement of Revenue and Expense 2009 and 2008 (In thousands) (Audited) 2009 Revenues 2008 Difference % change

Net Patient Revenue

$459,900

$418,509

$41,391

10%

Other Revenue Total Revenues Expenses

$3,082 $462,982

$2,805 $421,314

$277 $41,668

10% 10%

Salaries and benefits Supplies

$220,752 $74,584

$214,129 $71,346

$6,623 $3,238

3% 5%

Physician and professional fees Utilities Other

$110,376 $1,200 $1,840

$107,065 $1,164 $1,785

$3,311 $36 $55

3% 3% 3%

Depreciation & Amortization ("non-cash" expenses) Interest Provision for doubtful accounts (1) Total Expenses

$36,036 $3,708 $14,797 $463,293 ($311) ($62) ($373)

$24,955 $3,597 $13,383 $437,424 ($16,110) $264 ($15,846)

$11,081 $111 $1,414 $25,869 $15,799 ($326) $15,473

44% 3% 11% 6% -98% -123% -98%

Investment income Net income

Comments The net loss of the organization went down in 2009 as compared to 2008 by 98%. It was due to increase in revenues by 10%. All expenses were increased between 3 to 5%, except for depreciation and bad debts expense. They have increased by 44% and 11% respectively, in 2009 as compared to 2008. The increase in depreciation expense is due to increase in fixed assets in 2009 as compared to 2008. The increase in bad debt expense is due to increase in account receivable in 2009 as compared to 2008. The interest income was also decreased by 123%, and it may be due to more interest expenses in 2009 as compared to 2008. If it would have been fewer in 2009 as compared to previous year of 2008 then the net loss might have been converted into net income. The decrease in net income has affected the return on assets ratio and return equity ratio in both years; they are around 0%in 2009 and -3% in 2008 for both ratios. The ratio has been shifted form negative to almost 0%, due to increase in revenues and net income. The increase in assets in the year 2009 is 7%, which is due to increase in account receivable by 56%, inventories by 100% and increase in property plant and equipment by 41%. The hospital might have provided more credit to customer to raise the revenues and also more investment in fixed assets and inventories to enhance the revenues. It seems that

company is successful but not completely as they could raise the revenues only by 10%. The increase in fixed assets and current assets have been financed by debt financing, which is evident from increase in account payable and accrued expenses by 120% and net long term debt has increased by 114% as compared to previous year. The decrease in retained earnings by hefty amount of 63% shows that company is relying more on debt financing, therefore the debt to total assets and debt to total assets ratios have been heavily disturbed in 2009 as compared to 2008. In 2008 39% of total assets were financed from debt financing while in 2009, it rose to 79% showing a hefty increase of 102%. In 2008 the debt to equity ratio has also shown the same pattern rather worse situation than debt to total assets, in 2008 it was 64% but rose to 368%, showing a drastic increase of 478% which is main cause of net interest expense in 2009 which was net interest income 2008. The management has to make sure that they fully utilize the resources in forthcoming period to make sure that the revenues are enough to create net income; otherwise they should try to reduce the investment, especially in account receivable and inventories. For this purpose, they must concentrate on the return on total assets which is the combination of both profit margin and total assets turnover and also pay attention to return equity ratio. For control purpose they can look what are done by other organizations of the same sector. The debt financing should be reduced and try to finance from equity which will also reduce the interest expense and also the profit margin of the organization. They should try to control debt to total assets ratio and debt to equity ratio. Once again for this purpose they can look into the organizations of the same industry and compare their capital structure with Patton capital structure. Reference: Income Statement and Balance Sheet of 2009 and 2008