Financial analysis of Major Medical Center's hospital operations

Financial Analysis

Over the last several years, a wide variety of hospitals have been facing a number of different financial challenges. Part of the reason for this, is because of shifts in the population demographic and the reality that many facilities are unable to provide the kind of treatments that residents demand. As a result, a wide variety of health care facilities have been closing or relocating to areas where their profitability can increase. This has left many different regions with tremendous gaps in the kinds of treatment they are offering. Evidence of this can be seen by looking no further than a study that was conducted by the Robert Wood Johnson foundation. As, they determined many parts of the country are dealing with these kinds of possibilities. The most notable include: Philadelphia, Cleveland, Cincinnati, Saint Louis, Detroit, New York, Washington and areas of New Jersey. ("Growing Trend of Community Hospital Closures," 2011) This is problematic, because these issues mean that they underlying amounts of care will begin to decline in many regions of the country. To prevent a similar situation from happening to Major Medical Center requires conducting an analysis of: the auditor's opinion letter, the financial statements and examining any issues that may raise concerns. Once this occurs, it will provide the greatest insights as to the underlying issues that are affecting the facility.

A Review of the Auditor's Opinion Letter

The auditor's opinion letter is designed to provide the organization with various tools that they can use to objectively determine the strengths and weaknesses of the hospital. There are no red flags that have been raised, as they are indicating the facility has a strong financial foundation. (Finkler, 2010, pp. 558 -- 561)

Review the notes. Do any of them raise cause for concern?

When reviewing the notes, there is nothing unusual that is causing concern about any kind of sudden shifts in the financial strength of the hospital. (Finkler, 2010, pp. 558 -- 561)

What do you think of Major Medical Center's financial status? Explain your analysis

At the moment, Major Medical Center is in a strong financial position. However, between 2011 and 2012 the hospital has been taking steps that have been reducing their underlying financial standing. Evidence of this can be seen by looking no further than the decrease in: the quick, current, debt and debt to equity ratios. As, they have been declining from 2011 to 2012, which is highlighting how there are a number of financial challenges that the organization has been facing.

To deal with these issues, they have been taking on more debt. Once this occurs, it means that that these numbers will begin to consistently decline. As a result, the hospital is currently in strong shape financially speaking. However, if the current trend continues this means that their position will become weaker in the future. This is significant, because it is showing how the administration needs to be aware of the trends that are developing and they must take steps to mitigate them in the future. If this kind of approach can be utilized, it will help to ensure that the hospital is able to remain competitive, while adjusting to the transformations that are occurring inside the industry. (Finkler, 2010, pp. 558 -- 561)