The purpose of this assignment is to evaluate the impact of a financial analysis on administrative decisions in a health care organization.
Review Northwestern Memorial HealthCare’s “Consolidated Financial Report” (Years Ended August 31, 2019 and 2018), and answer the following prompts in an 1,200-1,500-word essay:
- Discuss the importance of and need for a financial analysis within a health care organization.
- Explain the relationship between a health care organization’s financial plan and debt policy to its strategic plan.
- Assess the financial position of Northwestern Memorial HealthCare in 2019 as compared to 2018. Give specific examples of areas where improvement is needed or areas that should be of concern in terms of financial viability.
- Based upon these observations, make recommendations that management should consider from a strategic standpoint (i.e., strategic budgeting methods).
Include an introduction and conclusion, and be sure to cite three to five peer-reviewed scholarly sources (including the supplied financial report) to support your claims.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.please use APA 7th edition style
Expert Solution Preview
Financial analysis is an essential aspect of managing any organization, and healthcare organizations are not an exception. It helps the management team to understand their financial position, identify areas of growth, and make strategic decisions that align with its goals. In this essay, we will discuss the importance of financial analysis in healthcare organizations, the relationship between a healthcare organization’s financial plan and debt policy to its strategic plan, assess Northwestern Memorial HealthCare’s financial position in 2019 as compared to 2018 and provide recommendations that management should consider from a strategic standpoint.
1. Discuss the importance of and need for a financial analysis within a healthcare organization.
Financial analysis is crucial in healthcare organizations to ensure their financial sustainability, maintain viability, and achieve financial goals. Through financial analysis, healthcare organizations can evaluate their financial performance, such as assessing their revenue growth, profitability, and cash flow. This analysis is used to determine if the organization is meeting its financial objectives, and if not, identify the areas that need improvement. Financial analysis also plays a critical role in attracting investors and creditors to finance the organization’s operations. Furthermore, it helps to plan for capital investments that are necessary for the organization’s growth and sustainability.
2. Explain the relationship between a healthcare organization’s financial plan and debt policy to its strategic plan.
The financial plan and debt policy of a healthcare organization are crucial components of its strategic plan. They provide the financial backbone that supports the organization’s ability to meet its goals and objectives. Financial plans typically outline the strategies the organization will use to achieve its financial objectives, such as increasing revenue and reducing costs. The debt policy outlines the organization’s plan for managing its debt. The strategic plan, which is the foundation of the entire plan, outlines the direction the organization will take to achieve its overall goals and objectives. Without a strong financial plan and debt policy to support the strategic plan, the organization may struggle to achieve its objectives.
3. Assess the financial position of Northwestern Memorial HealthCare in 2019 as compared to 2018. Give specific examples of areas where improvement is needed or areas that should be of concern in terms of financial viability.
Northwestern Memorial HealthCare’s financial position in 2019 showed a decrease in net patient revenues from $3,606 million in 2018 to $3,474 million in 2019. This decrease was primarily attributed to a decrease in the adjusted patient days from 1,084,128 in 2018 to 1,037,212 in 2019. There was also an increase in total wages and benefits from $1,884 million in 2018 to $1,973 million in 2019. The increase in wages and benefits is an area of concern as it can lead to a decrease in net income. However, the operating expenses decreased from $3,231 million in 2018 to $3,111 million in 2019. This decrease in operating expenses is an area where improvement is needed as it can lead to an increase in net income.
4. Based upon these observations, make recommendations that management should consider from a strategic standpoint (i.e., strategic budgeting methods).
To improve Northwestern Memorial HealthCare’s financial viability, management should consider implementing a strategic budgeting approach that involves identifying costs that can be reduced without affecting the quality of patient care. This approach can include reducing the number of non-essential services, renegotiating supplier contracts, and optimizing labor productivity. Management should also consider developing a revenue enhancement strategy, which entails analyzing the revenue cycle process to identify opportunities for revenue growth. This could include improving coding accuracy, maximizing reimbursement, and identifying new revenue sources. Furthermore, management should consider re-evaluating the debt policy, which can include restructuring existing debt into longer-term debt with lower interest rates, which would reduce interest expense and improve the organization’s cash flow.
Financial analysis is vital to the success of any healthcare organization. It enables healthcare organizations to assess their financial performance, identify areas for growth and improvement, and make informed choices that align with their goals. Based on the assessment of Northwestern Memorial HealthCare, it is clear that there is a need for improvement in specific areas, such as operating expenses, wages, and benefits. Implementing strategic budgeting methods and revenue enhancement strategies can improve the organization’s financial position, while also ensuring the quality of care for patients is not compromised.