Abstract
The people of Kelsey and the surrounding communities have been receiving a revolutionary and devoted medical care by the Patton – Fuller Community Hospital (PFCH) since its establishment in 1975. This research essay has analysed the financial statement of PFCH between 2008 and 2009 and has explained the reasons for material changes in them in detail.
Introduction
The people of Kelsey and the surrounding communities have been receiving a revolutionary and devoted medical care by the Patton – Fuller Community Hospital (PFCH) since its establishment in 1975. One of the specialties is that PFCH is owned by physicians active in the PFCH who are dedicated to offer the best patient care, and it is a for-profit hospital. PFCH motto is to offer a best and superior patient care and has grown to a full-service hospital with 600-bed in the Northwest Valley, and it is being regarded as the star premier healthcare facility. (Patten –Fuller Community Hospital, 2009, p1).
PFCH’s Revenue Statement Analysis 2008-2009
As compared to the year 2008, year 2009 witnessed a 9.89 % increase in its Net Patient Revenue and other revenue. PFCH witnessed a marginal increase in its revenue, mainly due to the economic downturn in USA’s economy, which has affected the PFCH’s income drastically in 2009.
Increase in Depreciation and Amortization Expenses in 2009
There was about 45% increase in Depreciation and Amortization expenses of PFCH in 2009 as compared to earlier year. It is to be noted that there were opportunities in the economic downturn as the nation-wide economic recession has affected the hospitals whole of USA. Due to offer of heavy discounts by major equipment vendors because of a slump in their sales due to economic recession in USA in 2009 and the PFCH Board reacted constructively to deep discounts extended by vendors of equipment and thus made a substantial investment in new medical equipments and hence as PFCH had charged depreciations on the newly added machineries and hence there is a vast increase in the depreciation and amortization expenses of PFCH in 2009.
Increase in the provision for doubtful debts
During the year 2009, PFCH receivable have increased unprecedentedly. Due to steep increase in Accounts Receivables during the year 2009, the company is forced to increase its provision for doubtful debts during the year 2009.
Net Income has fallen sharply during 2009.
As compared to the year 2008, net income in the year 2009 has fallen by about 98% and this is mainly due to increase in overall expenses of 5.91% during the year 2009.
Balance sheet Analysis of PFCH for the year 2008 with that 2009
Cash and Cash Equivalents
There has been a decrease in cash and cash equivalents about 54.94% in the year 2009 as compared to 2008. Due to offer of heavy discounts by major equipment vendors due to slump in their sales because of economic recession in USA in 2009 and the PFCH Board reacted constructively to deep discounts extended by vendors of equipment and thus made a substantial investment in new medical equipments, as the board of directors of PFCH had employed cash reserves to purchase these new medical equipments in the year 2009 and hence there was a decrease in cash reserves in the year 2009 as compared to the year 2008.
Assets of Limited Use
The management of PFCH used assets of limited use for the purchase of new medical equipments in 2009 and hence there was a decline in assets of limited use of about 65.93% in the year 2009.
Accounts Receivables
There was a steep increase in accounts receivable in the year 2009 of about 56.07%. This is mainly due to economic recession prevailed in USA in 2009. The Board of PFCH has created a business management committee to look into the steep increase in Accounts Receivable and to check and to make a statement on effectiveness in the business of the hospital and find out the reasons for the increase in receivables and how to collect these receivables at the earliest possible time.
Inventories
There is a steep increase in inventories of about 120% during the year 2009 as compared to the year 2008. The Board of PFCH has created a business management committee mainly due to the steep increase in inventories to check and to make a statement on effectiveness in the business of the hospital and find out the reasons for steep increase in inventories including the mistake occurred in calculating the inventory expense and the overall increase in inventories during the year 2009.
Funded Depreciation
Though funding of depreciation is not needed, it is strongly advocated that accountants in USA should employ this mechanism as a way of protecting company’s funds for the purchase of assets after the life time of the existing asset. Accumulated funds in these accounts should be invested in readily marketable investments. (Office of Federal Registrar, 2010, p779). The funded depreciation account of PFCH had declined by 17.58% in 2009 as these investments have been used to purchase new medical equipments during the year.
The Property, Plant & Equipment, net
During the year 2009, the equipment account has increased by 41.29% which represents the investments in new medical equipments. Due to offer of heavy discounts by major equipment vendors because of a slump in their sales and due to economic recession in USA in 2009 and the PFCH Board reacted constructively to deep discounts extended by vendors of equipment and thus made a substantial investment in new medical equipments and hence there is a vast increase in the above account of PFCH in 2009.
Current Portion of Long-term Debt
There has been a steep increase in the current portion of long-term debt in 2009 of about 248.84% in the year 2009. This is mainly due to increase in borrowing, which was authorized on a restricted basis for purchase of equipment.
Accounts Payable, accrued interest
During the year 2009, there has been a steep increase in accounts payable about 248.84%. PFCH witnessed mismatch in cash available due to steep increase in accounts receivables. Due to cash crunch, there has been a steep increase in accounts payable of PFCH in 2009.
Long-term Debt
There has been a steep increase in long term debt of PFCH in 2009 as it had bought many new medical types of equipment with the help of borrowed funds. On the PFCH CFO’s advice, long-term debt was raised with an adjustable interest rate during the year 2009.
General
PFCH witnessed some major events in 2009, which are mirrored in the financial statements. About four-fifths of PFCH revenue is derived from its inpatient activities, which include Intensive Care Unit (ICU), medical –surgical nursing and surgery charges. The balance one-fifth of PFCH’s revenue came from outpatient services and Emergency Department. PFCH has witnessed a distinctive “seasonal” variation in its revenue in 2009 while winter months resulting in larger workload, whereas the summer witnessed a dull season and PFCH is able to fine-tune its staffing as per seasonal requirements and workload and expenses had also oscillated as per seasonal effects in 2009. However, PFCH is having some fixed expenses like usage fees, computer –related expenses and professional fees, which will not oscillate in tune with seasonal effects.
PFCH started the year 2010 in an atmosphere of vagueness propelled by a rough economy, sustained high unemployment and the controversial deliberation on healthcare reform. However, the top management of PFCH is confident that Patton –Fuller Community Hospital will encounter the storm. As experienced in the past, PFCH dedication to quality healthcare will facilitate them to flourish in the coming years also.
An evaluation of the unaudited financial statements of 2010 of PFCH indicates that there has been improvement of all financial ratios, and PFCH is poised to continue its profitable trend in the coming years also. (Patten –Fuller Community Hospital, 2009, p1).
References
Office of the Federal Registrar (US). (2010). Code of Federal Regulations, Title 42, Public Health, Pt 400-413. New York: Government Printing Office.
Patten –Fuller Community Hospital. (2009). Annual Report 2009. Web.