Elijah Health
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Maya Calloway Richardson
Week Three Assignment: Elijah Heart Center Paper
FIN HC 571
Professor: Douglas McFadden
Elijah Heart Center
Elijah Heart Center (EHC) is a cardiac care hospital facing declining profit margins despite the increase in the number of patients and increase in revenue. The dilemma requires input from a financial consultant to help create a strategy to turn things around. The following issues must be addressed to avoid corporate failure by EHC: shortage of working capital, review funding options for equipment acquisition, as well as secure or identify funding for expanding capital.
Alternate Sources of Short-Term Financing
EHC has a history of bestowing discounts to managed care companies. EHC pays higher wages to contract nurses. The company also faces challenges with Medicare reimbursements, an increase in liability growth, and payments for hospital equipment that is not currently in use. Immediate changes are necessary to improve EHC’s cash flow issues. The first step requires a staff reduction. Reducing the staff will allow EHC to focus on improving the skills mix by cross training employees. EHC should also review loan options. A loan in the amount of $1.5 million with an interest rate of 9.45% will cost EHC $131,490 per month for one year. The loan has a higher interest rate; however EHC can potentially close out the loan in three months with only $32,603 in interest. This option provides a practical solution to the cash flow problems. A loan at a lower rate might come with pre-payment penalties forcing EHC to unnecessarily carry the debt for a longer period of time.
Accounts Receivable and Inventory
EHC faces the equipment challenges by entertaining the idea of purchasing newer and more efficient machinery. EHC wants to purchase a High-Speed CT Scanner, an X-Ray Machine, and a new Ultrasound System to stay competitive in patient care. The recommendation for purchasing refurbished equipment is approved and EHC...
Week Three Assignment: Elijah Heart Center Paper
FIN HC 571
Professor: Douglas McFadden
Elijah Heart Center
Elijah Heart Center (EHC) is a cardiac care hospital facing declining profit margins despite the increase in the number of patients and increase in revenue. The dilemma requires input from a financial consultant to help create a strategy to turn things around. The following issues must be addressed to avoid corporate failure by EHC: shortage of working capital, review funding options for equipment acquisition, as well as secure or identify funding for expanding capital.
Alternate Sources of Short-Term Financing
EHC has a history of bestowing discounts to managed care companies. EHC pays higher wages to contract nurses. The company also faces challenges with Medicare reimbursements, an increase in liability growth, and payments for hospital equipment that is not currently in use. Immediate changes are necessary to improve EHC’s cash flow issues. The first step requires a staff reduction. Reducing the staff will allow EHC to focus on improving the skills mix by cross training employees. EHC should also review loan options. A loan in the amount of $1.5 million with an interest rate of 9.45% will cost EHC $131,490 per month for one year. The loan has a higher interest rate; however EHC can potentially close out the loan in three months with only $32,603 in interest. This option provides a practical solution to the cash flow problems. A loan at a lower rate might come with pre-payment penalties forcing EHC to unnecessarily carry the debt for a longer period of time.
Accounts Receivable and Inventory
EHC faces the equipment challenges by entertaining the idea of purchasing newer and more efficient machinery. EHC wants to purchase a High-Speed CT Scanner, an X-Ray Machine, and a new Ultrasound System to stay competitive in patient care. The recommendation for purchasing refurbished equipment is approved and EHC...