Riverview Community Hospital is assessing its financial performance against competitors in its area. The assistant was tasked with analyzing Riverview's financial statements from 2005-2009. While total revenues increased each year despite new competition, Riverview's profit margins and asset management ratios declined slightly. Strengths included above average current and total margins, but weaknesses included below average debt management. The assistant recommends Riverview increase local marketing, lower outpatient costs, and expand inpatient and outpatient services to improve its financial condition against competitors.

1. By : Bianca Cole
ASSESSING HOSPITAL PERFORMANCE

2. WHO?
• Riverview Community Hospital is a 210-bed non-for profit
acute care hospital.
• It’s located in an area with three other hospitals: two non-
for-profits and one for profit.
• Riverview is the smallest of the four but has traditionally
been ranked highest in the patient satisfaction polls.

3. WHAT’S THE PROBLEM?
• A large for-profit chain has recently purchased the for-profit
hospital.
• That has caused some anxiety among the managers at the
other three hospitals.
• The large chain has a reputation for aggressively increasing
market share in the markets they serve.

4. WHAT’S MY TASK?
• I was brought on as a special assistant to the CEO.
• Melissa Randolph, CEO has assigned me the task of
conducting a financial statement and operating indicator
analysis.
Two Relevant Factors:
• In 2004, the board made the decision to significantly expand
the hospital’s outpatient services.
• Board members were complaining that too much time is
being spent at quarterly board meetings discussing the
hospital’s financial condition.

5. CASH FLOW OR NOT……
• My interpretation of the statements of cash flow from 2005-2009
even though there was an increase in the competition amongst
the hospitals, the Total Revenues(net patient services and other
revenues) continue to increase yearly.
• Net cash was increased due to the ability to get rid of the fixed
assets and long-term debts.
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed asset acquisitions (4.722)$ (6.402)$ (7.686)$ (4.328)$
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt (0.184)$ (0.102)$ 3.549$ (1.427)$

6. OVERVIEW OF RIVERVIEW’S FINANCIAL
POSITION
• Total Margin Ratio is used as the primary measure of a hospital's profitability.
2005 2006 2007 2008 2009
Total margin 11.38% 11.28% 8.75% 6.48% 6.75%
Total asset turnover 0.68 0.66 0.66 0.61 0.67
ROA = TM x TATO 7.75% 7.43% 5.75% 3.97% 4.53%
Equity multiplier 1.82 1.73 1.66 1.79 1.69
ROE = ROA x Equity multiplier 14.10% 12.88% 9.54% 7.09% 7.66%
Check ROE (Excess/Funds) 14.10% 12.88% 9.54% 7.09% 7.66%

7. STRENGTHS AND WEAKNESSES
• Strengths: Even though, the hospital had a decline in the
total margin from 11.38%(08)-6.79%(09) we were above the
the industry average of 3.48% in Total Margin
• Current Ratio is currently at 2.67% above the industry
average at 1.99%.
• Financial Weakness: The Debt Management Ratio is below
average
• Asset Management Ratio is slightly below average at
60.59%; however the average collection period above the
normal rate.

8. FINANCIAL CONDITION
2005 2006 2007 2008 2009
ProfitIndicators:
Profitperinpatientdischarge $305.00 $301.98 $280.03 $126.72 $79.61
Profitperoutpatientvisit ($38.61) ($26.87) ($33.07) ($24.49) ($1.60)

9. MY OVERALL ANALYSIS
• Smallest Hospital with aggressive competitors.
• Increase Marketing of hospital services on a Local Level.
• Decrease Cost of operation for the Outpatient Clinic.
• Increase inpatient and outpatient services.