Working Capital Policy Alternate Working Capital Policy Elijah Heart Center

Alternate Working Capital Policy Elijah Heart Center

Elijah Heart Center (EHC) is a 140-bed hospital located in New York City. EHC hospital specializes in cardiac care and is equipped to perform cardiac catheterization procedures in the hospital’s surgical suites for open-heart surgeries. In addition, the hospital specializes in pulmonary complications and other cardiovascular complications. However, experience has shown that more organizations fail because of a lack of ready cash than for any other reason, even firms with sound profitability (Cleverly &Cameron, 2007, p.471 ). Therefore, EHC decided to examine the organization’s working capital policy to ensure their policy is sufficient and will enable the hospital to remain solvent during the cyclical market activities with better forecasting methods to identify capital requirements.

Alternate Short-Term Financing Sources

A short-term financing alternative usually refers to an organization’s funding options that do not include traditional loans (Ezinearticle, 2011). Hospitals are multi-operational entities, often providing inpatient and outpatient care, and many times providing long-term patient care, education, and research. Each of these activities has its own stream of revenues, whereas the operational costs for many services rendered are mixed. For this reason, management decisions concerning which, areas to expand or contract, can be vital for safety net providers facing tight financial circumstances, often influenced by assessments of which activities are profitable and which are losing money. These decisions are very sensitive to the allocation of expenses to specific services. Therefore, by reducing EHC’s contracted staff is a good alternative because by implementing this strategy it will drastically reduce costs without developing a tremendous impact on revenue. EHC will save money on the premiums by decreasing contract nurses and other health care professionals because it pays to the staffing...