City Community Hospital Analysis

EXECUTIVE SUMMARY

City Community Hospital (CCH) is a 200-bed, not-for-profit hospital located in suburban Detroit, Michigan. CCH has a reputation for providing high quality service, and its medical staff is among the most respected in the community. Although CCH is the smallest, it has traditionally enjoyed some of the highest patient satisfaction scores and lowest employee turnover rates as compared to the other hospitals in the area. Despite its strengths, the Board of Directors recognized the need to keep ahead of its competitors and thus hired Beth Consulting to analyze its financial statements.

Beth reached several basic conclusions. While CCH has many strong points such as its strong excess revenue over expenses compared to the industry, weaknesses are perceptible:

• The hospital should look for ways to stabilize its salaries and wage expenses while at the same time increasing its net patient service revenue.

• Net plant and equipment growth will drag down excess revenue over expenses if it is not stabilized.

• Debt management is on par with the median of the industry, but should be managed carefully.

• Liquidity is not currently a problem, but the trend is sharply unfavorable. Such losses cannot be sustained indefinitely.

• The hospital is not focusing enough efficient use of its fixed assets. More administrative automation and electronic recordkeeping will create efficiencies.

SCOPE OF WORK

Beth Consulting was hired by the City Community Hospital Board of Directors to review CCH’s financial performance and make recommendations in light of its analysis. This report will provide:

1) A detailed analysis of City Community Hospital’s Balance Sheet, Income Statement and Cash Flow Statement;

2) City Community Hospital’s financial ratio trends in recent years, as well as an industry comparison;

3) An overall assessment of the City Community Hospital’s key financial strengths and challenges, based on review of...