Creekside Community Hospital, Essay Example

The status of Creekside Community Hospital is difficult to analyze without understanding the managerial factors that are associated with the hospital’s decision-making and overall business production.  The hospital is a non-profit organization, so it is able to receive government funding and provide discounts to individuals that require care under the Medicare and Medicaid plans.  There are several concerns within the operations of the organization, specifically within the areas of management.  Many of the managerial staff are not knowledgeable of management theory and common business practices.  When brought on staff, we were assigned to run a financial audit of the company in order to assess the business’s current status and understanding all activities that the hospital has undergone during the recent years.

Unfortunately, the hospital administrator, Melissa Randolph, does not even appear to have a clear grasp on the long-term business operations associated with Creekside.  First of all, she immediately assigned the financial audit assignment to me in order to present this information to the board members for review.  It is very odd that an experienced hospital administrator would trust a brand new employee to produce such a detailed analysis to the review board.  Despite these problems, Randolph has made very strong suggestions that would provide a detailed analysis of the financial workings of the hospital.  Her suggestions for interpreting cash flows, using the Du Pont equation to help with analysis, and using ratio and operating indicator analyses are positive suggestions; so her knowledge of finance is not completely unhelpful, but her knowledge is from an older time and has not evolved with the improvements that business finance has shown as of late.  On the other hand, Randolph suggests the analysis of the hospital’s economic value added performance from an article she read in Fortune.  When attempting to analyze the hospital’s finance status, it is not reassuring that the hospital administrator is attempting to gain financial business advice from common magazine articles.

Furthermore, most of the review board members do not have a clear understanding of the finances associated with Creekside as it has either never been clearly explained or the members are not knowledgeable of basic business and finance practices that are common.  This has caused a severe problem for the Creekside Community Hospital because there are not knowledgeable, educated managers that are handling the finances of the company’s operations.  It appears as though it is my job to educate the Creekside review board of the specific facts and figures, and help them interpret the figures for recommended spending behaviors because this has not been done efficiently in previous meetings.  One of the board members even states that “there is so much to accomplish that we just don’t have the time to consider a large number of ratios at each meeting.”  Nevertheless, information must be delivered as succinctly as possible while still providing enough details to incorporate proper financial recommendations for future financial activities that will reduce costs and increase profits.  This is why I have suggested two separate dashboards that specifically cover the most important key performance indicators to provide the recommendations to the review board.

On the other hand, the company appears to have long-term emergency relief plans set in place to help protect the hospital in case of unforeseen issues.  The company has purchased professional liability insurance in cases that are over $1 million that helps protect the hospital’s medical staff during the many cases of malpractice lawsuits that can arise.  Currently, a major case for concern is that this small hospital is dealing with 8 major malpractice lawsuits, which does not bode well for public relations or additional costs in lawsuits that can accrue over time.  In addition to professional insurance policies and malpractice lawsuits, the company is also able to provide a pension plan for its workers that continue to offer an increasing payout amount in over $500,000 each year.  Another cause for concern is that the financial payout for the pension plan continues to increase, while the amount that is paid into the pension plan appears to stay the same or even decrease with employee cuts.  This can cause a very large long-term issue that could result in a reduction in pension benefits or eliminating the pension plan completely, which is an action that many companies have chosen to perform given difficult economic times.

The cash flows and general costs analyses show that the hospital is not in serious financial duress.  In each of the five years that have been reported, the hospital has always had greater revenues as compared to costs.  In addition to this, the number of licensed beds within Creekside continues to stay consistent at 210 beds.  However, the hospital has never been at full capacity over the last four years, and in 2005 the hospital showed a substantial decrease in staffed beds with 19 fewer staffed beds from the previous year.  Reduced staff and fewer staffed beds force the hospital to never operate at capacity and can reduce profits within the future years.  Still, the number of outpatient visits has increased from 2004 to 2005 by almost 4,000, which validates management’s decision to increase spending in outpatient resources because of the predicted increase in this area.  Therefore, this decision to increase spending for this area has appeared to have been effective and should yield future benefits.

It is absolutely crucial that the Creekside Community Hospital improve upon its managerial practices and increase efficiency within business finance.  By hiring a younger staff member with newer knowledge of such practices, the hospital may have taken a large step in improving the current situation and allowing for a reduction in poor spending habits.  The review board must receive proper information to make informed decisions and the two specific dashboards for KPI should provide strong recommendations for the review board at the quarterly meetings.  Melissa Randolph could possibly hinder financial decisions within the future, and may be a liability for the hospital.  However, her long-term knowledge of older financial practices could become beneficial in providing me with the ability to be caught up to speed on the inner-workings of the hospital in general.