Healthcare

Omega Health Foundation According to William O. Cleverley, and Andrew E. Cameron (2007) Omega Health Foundation consist of Omega hospital, Able Memorial hospitals, and various related medical service providers. Omega Health Foundation has appointed Lenji Jacob as a consultant to evaluate the Omega Health Foundation’s finance. The paper will report principles of finance and the relationship with Omega Health Foundation’s financial position, compare and contrast net income and cash flows, compare and contrast market value and book value of assets, address the weaknesses and strengths, provide recommendations, and request additional information required to further evaluate Omega health foundation. Principles of Finance and the relationship with Omega Health Foundation’s finance According to William O. Cleverley, and Andrew E. Cameron (2007) principles of finance primarily includes four elements balance sheets, statement of revenues, and expenses, statement of cash flows, and statement of changes in fund balances or net assets. Balance sheets Balance sheets consist of current assets, and current liabilities. Current assets include cash and cash equivalents, accounts receivables, prepaid expenses, property plant and equipment, deferred financing costs, deferred third reimbursements, many more items of the similar trait (Cleverley & Cameron, 2007). Current liabilities include current portion of the “long-term debt,” notes payable, accounts payable, accrued expenses, accrued wages, salaries, and fees, payments to third party payers, accrued retirement costs, and many more items of the similar trait (Cleverley & Cameron, 2007). The balance sheets of Omega Health Foundation indicate the decrease in the current ratio from fiscal year 2008 to fiscal year 2009 from 1.42 to 1.1. The liquidity of Omega Health Foundation decreased to 10% from 29% in the fiscal year 2009. The study of the balance sheet indicate the primary cause of the decrease in liquidity because of the increase in the accounts payable, and payments owed to the third party payers (Cleverley & Cameron, 2007). Statement of revenues, and expenses The statement of revenues and expenses provides the income statement of an organization indicating the net revenue, and expenses. Revenues includes patient services revenue, equity in net income, and gifts (Cleverley & Cameron, 2007). Expenses include salaries, and wages, bad-debt expense, depreciations, amortizations, and many more items of the similar trait (Cleverley & Cameron, 2007). The net patient services revenue of Omega Health Foundation decreased by approximately one percent (Cleverley & Cameron, 2007). The income statement of Omega Health Foundation indicates a loss in net revenue. In comparison to fiscal year 2008 and 2009 the year 2009 indicates a decrease in loss of net revenue because of decrease in the bad debt expense by approximately 41% (Cleverley & Cameron, 2007). Statement of cash flows Statement of cash flows indicates the sources of funds and the employment of the funds in a given time (Cleverley & Cameron, 2007). The net cash flow of Omega Health Foundation indicates an increase from fiscal year 2008 to fiscal year 2009. The net cash flow increased approximately by 42%. The statement of cash flow indicates an increase in the “accounts payable” line item, and “cash being invested” line item. The statement of cash flow indicates a net increase in cash and cash equivalents by approximately 19% from fiscal year 2008 to fiscal year 2009. Statement of changes in fund balances or net assets Statement of changes in fund balances represents the net change in unrestricted net assets (Cleverley & Cameron, 2007). Omega Health Foundation examined a net loss in the equity valuation adjustments for non-trading securities of 498,000 dollars in the fiscal year 2009 (Cleverley & Cameron, 2007). Compare and contrast net income and cash flows According Douglas R. Emery, John D. Finnerty, and John D. Stowe (2007) cash flow will points out the cash accessibility of the organization. The organization net income statement will indicate the difference in the revenue and expense to determine profit or loss. The cash flow statement of Omega Health Foundation indicates a decrease in current assets from fiscal year 2008 to 2009 and increase in current liabilities from fiscal year 2008 to 2009. The net income statement indicates a decrease in revenues from fiscal year 2008 to 2009. The decrease in net income is attributed to a decrease in revenue, and increase in expenses. Compare and contrast market value and book value of assets “Four factors affect the likelihood of a difference between market and book values: the time since the asset was acquired, inflation, the asset’s liquidity, and whether the asset is tangible or intangible (Emery, Finnerty, & Stowe, 2007, p. 50).”According to William O. Cleverley, and Andrew E. Cameron (2007) book value will indicate the value at the time of purchase of asset, and market value will indicate the current value of the asset. In the case of Omega Health foundation will source land, and equipments to determine the book value and market value of the organization. The market value of Omega Health Foundation has increased in the fiscal year 2009 in comparison to the fiscal year 2008. The book value of the land and equipments for Omega Health Foundation in available because no financial notes are available. Address the weaknesses and strengths and recommendations Omega Health Foundation indicates large accounts receivable for services provided to patients. Omega Health Foundation must establish guidelines and minimum allowable account receivable status. Omega Health Foundation must make approaches in collecting co-pays to minimize some account receivable. Omega Health Foundation indicates liability increase caused because of third party payers payments. Recommendation is made to minimize the debt to third party payers, and increase payment from third party payers to form collateral. The income statement indicates a decrease in the net patient service revenue. Recommendation is made to evaluate the cause of decrease to minimize the decrease in the net patient service revenue. The income statement indicates strength in the revenue because of the decrease in bad-debt expense (Cleverley & Cameron, 2007). Requesting additional information Financial notes are not available for Omega Health Foundation. To determine the book value of the property request is made to Omega Health Foundation to provide the sources of purchase indicating initial price for the land, and equipment. References: Cleverley, W.O., and Cameron, A.E (2007) Essentials of health care finance (6th ED.) Sudbury, MA: Jones and Bartlett Publishers. Emery, D.R, Finnerty, J.D and Stowe, J.D (2007) Accounting, cash flows, and taxes Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx.