Financial statements sensitivity analysis and budget issues at Patton Fuller Community Hospital

Patton Fuller

Provide a comparative analysis of the last two years of data.

In the case of Patton Fuller Hospital, they have been increasing their total amounts of debt, liabilities and assets. This is weakening their financial position with administrators failing to aggressively address rising expenses. At the same time, they are causing the total current and long-term assets to decrease dramatically. The below table is illustrating the overall scope of these changes in the last two years. ("2009 Annual Report," 2010)

Adjustments to the Financial Position of Patton Fuller Hospital

Current Assets

$130,026

$128,867

Total Assets

$588,567

$558,545

Total Current Liabilities

$8,380

$23,807

Total Liabilities

$213,450

$462,163

Current Long-Term Debt

$4,185

$14,599

This is showing how Patton Fuller is facing major financial challenges. The way that this is occurring is through the facility experiencing rising levels of debt and liabilities. While their current and long-term assets are declining. These factors are indicating that increasing costs are having an adverse effect on the operations of the facility. ("2009 Annual Report," 2010)

Explain how the 2010 budget assumptions will positively or negatively affect Patton-Fuller.

The budgetary assumptions are negatively impacting Patton Fuller. This is because the facility is underestimating their costs associated with treating inpatients. According to the CEO, these estimates were $1 million below what the projections were for the last year. This is from the economy slowing and the hospital realizing declining levels of income. While the costs; for providing care have continued to increase exponentially. ("2009 Annual Report," 2010)

Evidence of this can be seen with the CEO saying, "To address the rise in Accounts Receivable, the Board created a business management committee to examine and report on efficiencies in the business office, including the error in inventory expense and the increase in inventory overall. We started 2010, in an environment of uncertainty fueled by an uneven economy, continued high unemployment and the contentious debate of healthcare reform." This is showing how the 2010 budgetary assumptions are underestimating the impact of inefficiency, government regulations and rising costs on the hospital. ("2009 Annual Report," 2010)

Explain how you may use a trend analysis to plan for staffing at Patton-Fuller.

Trend analysis is useful in showing the way staffing problems are becoming worse. This is because it is identifying how the ratio of nurses to patients is declining with it sitting at 5 to 1. In the next year, the staff is supposed to work on improving recruiting and training inside these areas. Their objectives are to reduce this amount to a 4 to 1 ratio. This will result in an increase in costs for the hospital. As they will see a rise in spending in order to address staff shortfalls. In this case, trend analysis is identifying how there is a critical problem when it comes to staffing levels. ("Nursing Options," 2010)

Moreover, Patton Fuller is only utilizing 60% of their beds. If there was increase in the number of nurses, this will erode any kind of profit margins for the facility. This is highlighting how all hiring initiatives must be used in conjunction with a strategy that will improve patient demand for services. As a result, trend analysis is useful in determining the long-term effects these changes on their financial position. These areas are identifying potential weaknesses associated with the proposed strategy and other factors that must be taken into account. It is at this point when everyone can see what specific actions will improve quality, reduce costs and ensure that staffing levels are meeting the needs of cliental. ("Nursing Options," 2010)

Summarize the trend analysis and how comparative data facilitates forecasting at Patton-Fuller.

The trend analysis is showing that Patton Fuller is dealing with rising costs and declining profit margins. This is because the facility is only 60% full. At the same time, the CEO wants to increase the nurse to patient ratio. This is problematic, as it will result in the hospital realizing even greater costs. ("Nursing Options," 2010)

Moreover, the inability to attract new patients for the 40% of unoccupied beds is a sign that customer demand is weakening. When this happens, there is a realistic possibility that the increase in staff members will create more fiscal challenges for the hospital. In the future, this will lead to higher expenses and it will make it difficult to adjust with changes in customer demand. ("Nursing Options," 2010)