This paper presents a comprehensive financial management plan (FMP) for Sentinel Life Center, a nonprofit rehabilitation facility acquired by a university hospital. The plan covers the center's balance sheet and statement of operations across two fiscal years, calculation of charge per modality for cost recovery, working capital analysis including effective annual interest rates on purchasing options, loan interest computations, and economic order quantity for the center's most-used inventory item. The paper also details a thirteen-step strategic and operational planning process—including mission, vision, SWOT analysis, goals, policies, and procedures—and concludes with projected volumes for the three most-used physical therapy procedures under an anticipated 6.1 percent increase in utilization.
The main purpose of healthcare financial management is the provision of accounting and finance information that aids healthcare managers in achieving the goals of the organization. Significantly, healthcare financial management supports the supervision and monitoring of numerous performance measurements. A financial management plan (FMP) is pivotal in guaranteeing coordination among the various functional and departmental areas within a healthcare organization through the allocation of funds for different activities in accordance with financial objectives, policies, and procedures.
In the past year, a university hospital acquired a local small rehabilitation center and renamed it Sentinel Life Center (SLC), a nonprofit organization. As the director of this center, this report provides a limited financial management plan to illustrate the current financial position of the center. Based on the plan, it is determined that the charge per modality necessary to recover the total cost is $11.11. Additionally, based on the 2 percent in a ten net 30 provision regarding the Podiatry Whirlpool purchase, the preferred option as director is to pay on day 30, because the annual interest rate is lower at 37.23% compared to paying on day 11, which carries an excessive annual rate of 745%.
Furthermore, concerning the repayment of the loan used to purchase the beds, the interest paid on the loan at the end of October is expected to be $642.91. Regarding inventory, the economic order quantity (EOQ) for Item X — the single most-used item — is 582 units. Finally, taking into account a projected 6.1 percent increase in the use of physical therapies, the projected volumes for pediatric, orthopedic, and vestibular physical therapies are 1,325, 795, and 530, respectively.
The balance sheet displays the financial status of the organization at a precise point in time, normally at the end of an accounting period. The financial statement presents the firm's assets, liabilities, and net assets, as well as the relationships among them (Nowicki, 2018). The following is a two-year balance sheet for Sentinel Life Center, reflecting the previous year and the current year.
ASSETS
Current Assets
Cash: Last Year $10,000 / Current Year $15,000
Temporary Investments: $450 / $600
Receivables, net: $5,400 / $7,200
Inventory: $9,000 / $10,100
Prepaid Expenses: $1,200 / $1,600
Total Current Assets: $26,050 / $34,500
Non-Current Assets
Land, Plant, and Equipment: $45,000 / $53,000
Accumulated Depreciation: $4,500 / $5,300
Plant and Equipment, net: $40,500 / $47,700
Long-term Investments: $10,000 / $44,530
Total Non-Current Assets: $50,500 / $92,230
Total Assets: $76,550 / $126,730
LIABILITIES AND NET ASSETS
Current Liabilities
Accounts Payable: $6,700 / $7,800
Notes Payable: $4,300 / $6,200
Accrued Expenses Payable: $3,700 / $3,900
Deferred Revenues: $5,400 / $6,200
Estimated Third-Party Adjustments: $500 / $760
Current Portion of Long-Term Debt: $7,400 / $8,300
Total Current Liabilities: $28,000 / $33,160
Non-Current Liabilities
Long-Term Debt, net of current portion: $14,000 / $15,600
Total Liabilities: $42,000 / $48,760
Net Assets
Unrestricted Net Assets: $18,600 / $32,900
Temporarily Restricted Net Assets: $10,450 / $20,570
Permanently Restricted Net Assets: $5,500 / $24,500
Total Net Assets: $34,550 / $77,970
Total Liabilities and Net Assets: $76,550 / $126,730
The average length of stay (ALOS) is derived by dividing the number of inpatient days by the number of admissions. At SLC, the number of admissions is 2,500, the average number of patient days is 22, and the discharges number 5.
Therefore: ALOS = 22 / 5 = 4.4 days
Several factors influence the decision for setting charges. The initial charge, before comparisons to other facilities and prior to discounts, should reflect the true cost of products or services provided by the healthcare organization. One applicable method is the hourly rate method, which is used in departments that charge per hour for services provided (Nowicki, 2018). The charge per modality necessary to recover the total cost is calculated as follows:
Charge per modality = Total projected cost / (Total projected hours × 3)
= $1,800,000 / (54,000 × 3)
= $1,800,000 / 162,000
= $11.11
"Interest rate analysis, loan repayment, and EOQ"
"Thirteen-step strategic plan with SWOT and goals"
"Projected therapy volumes with 6.1% growth"
"Key takeaways from the financial management plan"
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