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Finance analysis of Hanover regional medical center
NHRMC is a major nonprofit healthcare provider in southeastern North Carolina. It had revenues of $674 million in 2011 but profits declined 28% to $26 million due to rising expenses outpacing revenue growth. Assets increased 3.8% to $949 million driven by capital improvements. Liquidity and debt ratios were stable while profitability metrics like return on assets declined from the prior year.
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Finance analysis of Hanover regional medical center
- 1. Project of financeunder supervision of : Dr. khaled Bahaa El-Din GROUP OF NEW HANOVER REGIONAL MEDICAL CENTER
- 3. General Overview ofU.S Economics ITEM % Change ( 2010 – 2011) GDP ( Gross Domestic Production) 1.7 % Healthcare and social assistance sector 2.6 % 1.7% 2.6%
- 4. • • Address: 2131S 17th St, Wilmington, NC 28401, United States • Phone: +1 910-667-7000 • Web site : www.nhrmc.org/new-hanover-regional-medical-center
- 5. NHRMC in aglance • New Hanover Regional Medical Center (“NHRMC”) is a public, nonprofit corporation providing health care to residents of southeastern North Carolina. • NHRMC is a component unit of New Hanover County (“County”), North Carolina for financial reporting purposes and is included in the basic financial statements of the County together with its component units. • It performed 10,436 annual inpatient and 17,781 outpatient surgeries. Its emergency room had 116,233 visits and have 855 beds.
- 6. NHRMC in aglance • As required by accounting principles generally accepted in the United States of America, these financial statements present NHRMC and its component units. • All dollars presented in these Notes to Financial Statements are in thousands.
- 7. History • On June14, 1967, seven prematurely born infants arrived in cardboard cradles as tiny ambassadors in perhaps the crowning civil rights achievement in the history of Wilmington, N.C. They were the first patients of the newly opened New Hanover Memorial Hospital. During a turbulent period of civil rights in this nation’s history, their arrival marked the merger, in a small city in the Deep South, of a black and white hospital – without protest, riot or bloodshed. For the first time, the county’s hospital treated everyone, regardless of race, creed, national origin or ability to pay.
- 8. Accreditations • Have manyof accreditations such as: • Joint Commission on the Accreditation of Healthcare Organizations • Cardiac and Pulmonary Rehabilitation
- 9. Mission • New HanoverRegional Medical Center is a team-centered, value-focused, teaching provider of quality health care to all in need of its services.
- 10. Vision • To bethe best provider of comprehensive health services rendered with value, dignity, and respect.
- 11. Values • As oneof the largest employers and the leading provider of health care in southeastern North Carolina, New Hanover Regional Medical Center believes in the value of life. Our philosophy is to honor and celebrate life through the care we deliver to patients and their families, the service we provide to physicians, the environment we create for our employees and volunteers, and the attitude we display to all. We embrace the following values: • Quality • Dignity • Loyalty • Education • Compassion • Integrity • Respect • Efficiency
- 12. Balance Sheet September 30,2010September 30, 2011 156945 ( 17.16%) 169289 ( 17.84%) Current Assets 757428 (82.83%) 779712 ( 82.16%) Fixed Assets 914373 (100%)949001 (100%)Total Assets 101277 ( 23.59%) 110469 ( 25.23%) Current Liabilities 328084 ( 76.41%) 327471 ( 74.77%) Long Term Liabilities 429361 (100%)437940 ( 100%)Total Liabilities 485012511061Owner Equity
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- 14. Income Statement September30, 2010September 30, 2011 599018655690 ( 9.5%)Net Patient service revenue 1754218638Other revenue 618276674328 ( 9%)Total operating revenue 287103305257Salaries, wages, benefits 130269137964Medical supplies 2250340967 ( 82%)Professional fees 1090313287Insurance 87946100973Purchased services 4265243457Depreciation and amortization 1716(5146)Non operating revenues (551)(1228)Capital contributions from / to component units 580211648279 ( 11.7%)Total expenses 3634926049 ( 28.3%)Net profit
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- 16. Income Statement Tot. operatingrevenue Tot. expenses Net Profit 2011 6.74 6.48 2.6 2010 6.18 5.8 3.63 0 1 2 3 4 5 6 7 8
- 17. Comments • Despite thegrowth of revenues ( app. 9%), the net profits has declined sharply by app. 28%. • This is due to the aggressive increase of total expenses ( 11.7%) i.e. expenses raised more than revenues leading to net profit decline. • Salaries, wages, and benefits increase: 6% • Professional fees increase : 82% • All these items have set up to keep the organization salary structure competitive in healthcare sector.
- 18. Cash Flow 20102011cash flow 8925971551fromoperating activities 21952261 from non capital financing activities -(76166)-(70694) from capital financing activities 5209-(8662)from investing activities 20497-(5544)net 81283101780at beging of year 10178096236at end of year 5.4% 19.8% 266% 7.1 %
- 19. Cash Flow cash flowat end of year 2011 9.62 2010 10.17 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 10.5 11
- 20. Cash flow fromoperations 20102011 611250641783Cash from patients 1400922913Cash from other activities (249436)(289275)Cash to suppliers (286564)(303870)Cash to employees 8925971551Net cash flow from operations
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- 24. Comments on Revenue •The increase in operating revenue is largely due to the expansion of the NHRMC physician network combined with increased utilization of both inpatient and outpatient services from the previous year. • Other operating revenue consists primarily of cafeteria sales, outpatient pharmacy sales, grants, contributions and rental income from NHRMC owned facilities.
- 25. Comments on Revenue •Net patient service revenue continues to be impacted by an increase in unreimbursed services as health insurers shift more reimbursement responsibility to individuals through increased deductibles and co-pays along with an increase in those individuals who have little or no health insurance or other means of payment. These trends are consistent in the healthcare industry.
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- 28. Comments on Expenses •The expansion of the NHRMC physician network and increased utilization of services as described above contributed to the increase in operating expense. • Costs for professional fees, insurance, and purchased services rose above the rate of increase in revenues; costs for personnel, medical supplies and depreciation rose at a rate below revenue growth. • During the years ended September 30, 2011 and 2010, NHRMC granted and paid LCFH approximately $298 and $291, respectively, in support of LCFH‟s Palliative Care Program.
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- 30. • The increasein current assets is primarily due to an increase in patient accounts receivable. • The increase in accounts receivable is attributable to increased utilization of services and the expansion of the NHRMC physician network.
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- 33. Assets 0 100 200 300 400 500 600 700 800 900 1000 current assets fixedassets total assets 2011 2010
- 34. capital 4850122011 4486632010 current assets -current liabilitiesworking capital 58820=110469-1692892011 55668=101277-1569452010 8.1% 5.4%
- 35. Capital & Workingcapital capital working capital 2011 485.01 58.82 2010 448.66 55.66 0 50 100 150 200 250 300 350 400 450 500 2011 2010
- 36. Comments on capital •The increase in capital assets reflects increases in investments in capital improvements of NHRMC in property, plant and equipment during the past year. • Increases in noncurrent assets are the result of interest earnings and unrealized gains / losses in the market value of NHRMC investments
- 37. Net assets • netassets= total assets – curent liabilities year 838532=110469-9490012011 813096=101277-9143732010 5.4%
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- 39. Total Liabilities 20102011 101277110469Current Liabilities 328084327471LongTerm Liabilities 429361437940Total Liabilities 9 % 2 %
- 40. Comments on Liabilities •Totalliabilities have increased by $8.6M over the past fiscal year end. An increase in current liabilities resulted primarily from: • increase in trade payables, • wages payable and • self insured liability offset by a decrease in estimated third- party payer settlements.
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- 42. Liquidity Ratios Quick ratio •Current assets – inventories current liabilities • 169289-15734 110469 = 1.39:1 • 156945-16490 101277 = 1.39:1 2011 2010
- 43. Liquidity Ratios Current RatioQuick Ratio 2011 1.53 1.39 2010 1.55 1.39 1.3 1.35 1.4 1.45 1.5 1.55 1.6
- 44. Gross profit margin •Gross profit / revenues= 674328+6198+1672-(368+64+137964+40967) 674326 = 74.57% 2011
- 45. Gross profit margin •Gross profit / revenues= 616560+6175+7550+828 -(2544+54+30269+22503) 618276 = 76.94% 2010
- 46. Profit margin • Profitmargin= net profit before tax revenue • 26049 674328 = 3.86% • 36349 618276 = 5.89% 2011 2010
- 47. Return on totalassets • net profit total assets • 26049 949001 = 2.74% • 36349 914373 = 3.98% 2011 2010
- 48. Return on ownerequity • net profit owner equity • 26049 511061 = 5.09% • 36349 485012 =7.49% 2011 2010
- 49. Return on capitalemployed • 26049 838532 = 3.1% • 36349 813096 = 4.47% 2011 2010
- 50. Return on investment •profit before tax initial investment • 26049 485012+327471 =3.2% • 36349 448663+328084 =4.67% 2011 2010
- 51. Profitability ratios return on totalassets Profit margin Return on owner equity return on capital employed Roi 2010 3.98 5.89 7.49 4.47 4.47 2011 2.74 3.86 5.09 3.1 3.2 0 1 2 3 4 5 6 7 8 2010 2011
- 52. Debt ratio • Totaldebt total assets • 327471 949001 = 34.51% • 328084 914373 = 35.88% 2011 2010
- 53. Times interest earned •Profit before interest interest change • 13590+26049 13590 = 2.92 times • 36349+13039 13039 =3.79 times 2011 2010
- 54. Capital Structure ratios 0 5 10 15 20 25 30 35 40 Timesinterest earned Debt ratio 2011 2010
- 55. Inventory turn over •Cost of sales average inventory • 137964+40967 11.372 15743 = 365 day =32.09 • 130269+22503 9.265 16490 = 365 day =39.39 2011 2010
- 56. A/R turn overratio • Sales (revenue) account receivables • 674328 86145 = 7.83 times • 616560 78801 = 7.83 times 2011 2010
- 57. Collection period indays • Sales average inventory • 365 7.83 = 46.62 days • 365 7.83 =46.62 days 2011 2010
- 58. Recommendations • To keepcompetitiveness of the NHRMC in a highly dynamic market, we recommend: 1. To develop more healthcare services i.e. offering new and unique services such as hospice and home care services. 2. To improve the quality of healthcare services and pursuing for accreditation from more accrediting bodies such as American osteopathic association, etc. 3. Diversification of services as well as backward integration with suppliers to reduce the cost of sales. 4. Reduction of debt ratio.
- 59. Thanks a lot •Mahmoud Fathy Eldefrawy Mobile Number: 01112343470 • Mohamed Hassan Radwan Mobile Number: 01000011032 • Faisel Edris • Islam Nasr • Mohamed Ismail Kohla