Question

Riverside Memorial Hospital has experienced the following cash flows for the 2019 financial period (in thousands):

o Cash flows from operating activities: $11,196

o Cash flows from investing activities: ($6,293)

o Cash flows from financing activities: ($5,735)

• The nursing department is requesting additional funding (estimated $10,000) for additional, hospital-based continuing education programs.
• The Women’s Center expansion project is estimated to cost roughly $1,000,000, and will require 4 years for build-out. • Due to the Patient Protection and Affordable Care Act (PPACA) of 2010, Medicare recoupments due to HCAHPS survey responses have consistently resulted in a reduction of patient service revenue and are estimated to increase by 1.5% annually for the next 3 years.

In addition to the information provided in the case, what other types of information would you request in order to thoroughly analyze the hospital’s financial position to-date?

Answer 1

1. Basis the cash flow provided, the net decrease in the cash flow is as given below, This signifies that operating cash flows are not covering the investment and financing activities of the hospital

Particulars	Amount in 000's
o Cash flows from operating activities:	11,196
o Cash flows from investing activities:	(6,293)
o Cash flows from financing activities:	(5,735)
Net reduction in cash flow	(832)

2. Additional information provided is:

a. $10,000 for educational programs for nursing dept which will result the operating cash flows to become lower

b. $1000,000 for new woman centre

c. 1.5% yoy increase in recoupment disallowance

3. What other types of information would you request in order to thoroughly analyze the hospital’s financial position to-date?

a. Firstly income statement , balance sheet and detailed cash flow would be required to obtain detailed break up of the operating cash flows (movement in receivables, payables etc) , financing and investing activities to check the movement of cash across items and to check if there is any cash being locked

b. Details to check if any one off items which has impacted the cash flow which will not recur subsequently

c. Apart from the investment of 1 million, future projected cash flows with respect to investment activities

d. What shall be the spread over 4 years for the 1 million investment in woman center

e. Details of current amounts in operations relating to medicare recoupments to quantify the 1.5% ireduction mpact on the recoupments over the next few years

f. projected expense with respect to financing activities over the next few years

g. If there shall be future growth in revenue for the hospital which will result in increase of operating cash flow  to accomodate future investments