Happy Hospital

Happy Hospital Scenario

Professor Bruce Thomas

ACC/HC 561

December 20, 2010

Happy Hospital Scenario

Overview

Harm O. Knee is the CEO of Happy Hospital and has been tasked with the responsibility of ensuring the continual success and sustainability of the establishment. As the company is growing and errors are being discovered, there is a need to invest in technology that will cut down on financial loss as a result of human error by investing in new technologies that can improve efficiency and help reduce medical errors. In 2006 and 2007, the numbers provided showed that the hospital had two very difficult years and was not sure what to do with the money.   As a result, the Hospital did not have any debt coming into 2008 but they did take on some long-term debt that year. As a result of the hospital losing money, they have negative interest and debt service coverage ratios. All of the profitability ratios are negative as Happy Hospital had both operating and total losses for the year.  Financial stress is evident, and in order to turn the numbers to positive, there is work to be done in order to turn the two years of operating losses in to financial gains and opportunities.

Budget and Performance Reports

Mr. Knee realizes the importance of budgets and performance reports as vital tools for business planning and decision-making.   The business performance must report the following: cost, cash flow, financial position such as that of assets, capital and liabilities and net presentation of calculations. Implementation of said practices would also allow the hospital to identify any cash, working capital, or long-term finance shortages, which would enable Mr. Knee to prepare for and possibly avoid any future disasters.

A budget performance report would also provide Happy Hospital with a picture of the low revenue and high expense situation they are currently facing. The financial manager and program manager can discuss any shortfalls or excess in revenue...