Financial analysis of a healthcare organization

¶ … Health Care Organization

Over the last several years, a variety of health care organizations have become involved in a host of transactions to improve their financial situation. Part of the reason for this, is because the rising costs are having an impact upon: the way different providers are adjusting to these challenges. (Khan, 2010) in the case of Life Point Hospitals, they have been adapting to these changes. These are designed to generate positive earnings results in an environment, when this can be increasingly challenging. To fully understand how the company is able to adjust to these changes requires: examining various pieces of financial information about the organization, risk contracting agreements inside the company and some considerations that must be taken into account (when to reducing the financial risks from risk contracting). Together, these different elements will provide the greatest insights as to how the company was able to adapt to the underlying challenges that they have been facing. While at the same time, it will identify possible risks that could impact their overall bottom line in the future. ("Celebrating a Decade of Making Communities Healthier," 2009)

Discuss some general financial information about Life Point Hospitals. Specifically discuss the size, revenue, expenses, assets and liabilities of the organization.

When you look at the balance sheet of Life Point Hospitals, it is clear that they are in a strong financial position. Currently the company has 16,750 employees and 47 hospitals in 17 different states. As the health care provider, is posting revenues of $3.26 billion or year over year revenue growth of 14.20%. The expenses for the company are $350.30 million. The total amount of assets that they have is $3.87 billion, while the number of liabilities is $2.03 billion. These different elements are showing how the company is in a strong enough financial position to: adjust to the changes that are taking place inside the industry. ("Life Point Hospitals," 2011)

Discuss risk contracting arrangements within Life Point Hospitals. Explain the differences between a risk contract and a non-risk contract?

The difference between a risk and a non-risk contract is when the liabilities for treating patients are divided between: the insurance company, government programs as well as the health care facility. The basic idea under a risk contract is to spread out the overall hazards among the different entities.( Draper, 2002) in the case of Life Point Hospitals, the overall dangers that they face from risk contracting arrangements are higher. The reason why, is because the majority of the revenues for the company are involved in these kinds of arraignments in one way or another. The below table illustrates the total amount of revenues that were generated off of these programs in 2009. ("Celebrating a Decade of Making Communities Healthier," 2009)

Life Point Hospitals' Revenues that are tied to Risk Contracting Agreements

Program

Total Percentage of Revenues

Medicare

28.8%

Medicaid

10.4%

HMO's / PPO's / Private Insurance

44.4%

("Celebrating a Decade of Making Communities Healthier," 2009)

These numbers are significant, because they are highlighting how the majority of the revenues from the company, are earned based upon: various risk contracting agreements that they have.

Outline some considerations that an organization must address when negotiating a risk contract.

Some considerations that must be taken into account during any part of the negotiation process include: the overall impact that this will have on revenues, possible effects that this can have on the business model, the downside of entering these kinds of agreements and the overall benefits that can be realized for both organizations. These different elements are important, because they are showing how there are possible benefits and drawbacks from these kinds of contracts. As a result, an approach must be taken that will reduce the risks, while at the same time creating win-win situations for all parties. ("Celebrating a Decade of Making Communities Healthier," 2009)

Describe ways to reduce the financial risks involved in a risk contracting

Two possible ways that will reduce the underlying hazards for risk contracting is to: ensure that no agreement will result in financial losses and having provisions that allow for renegotiations. As far as ensuring that no contract is resulting in financial losses, this means making certain that the long-term benefits will: help to increase the bottom line of the company. Having provisions that allow for renegotiation will help to prevent Life Point from: entering agreements that could result in losses. As this will help executives to renegotiate the terms of the agreement (if this kind of situations takes place). These different elements are important, because they are showing how using them, in conjunction with one another can help to reduce the overall amounts of risk. ("Celebrating a Decade of Making Communities Healthier," 2009)