Review of the financial statements and the ratio analysis for the Essay

Review of the financial statements and the ratio analysis for the 2016, 2017 and 2018 fiscal years reveals that Boca Raton Regional Hospital is currently below industry standards (benchmarks) for operating margin, return on assets, and days cash on hand. They are above average for days in patient accounts receivable.

Based on our analysis, BRRH realized a significant drop in Income from Operations from 2017 to 2018.

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Although there was a $33.9M increase in Revenue, Expenses increased by $37.8M. An increase in the cost of insurance appears to be the major cause of the decrease in Income from Operations from 2017 to 2018. Insurance more than doubled from $3,146,949 to $7,008,964 in 2018, accordingly.

It is imperative that BRRH improve the Operating Margin. At present, the Operating Margin is a mere 0.11%, well below the 2.7% industry benchmark. Revenues have increased each year, but expenses against these revenues have also increased. Improving Operating Income is key because making a profit on growing revenues will solve BRRH’s cash problem.

In order to improve the Operating Margin, BRRH should focus on decreasing expenses while continuing to increase revenues.

Based on our analysis, expenses have been steadily increasing. Expenses need to be monitored closely. Significant or non-routine expenses should require multiple levels of authorization, i.e. Manager, Director and the Chief Financial Officer, before they are approved.

Decreasing the following expenses will have a positive impact on the bottom line, provided revenues do not decline:• Salaries, Wages & Benefits

o Review annually to remain competitive and avoid employee turnover

o Changes to Retirement Plan (already implemented)

• Supplies and Purchased Services

o Supply Chain oversight on approved vendors and items available

o Negotiate prices for economies of scale (multiple ordering sites)

o Implement bundling/order minimums to avoid multiple shipping charges

• Insurance

o Review policy to avoid excess coverage

o Renegotiate insurance premiums; consider new vendor

• Inventories (Medical & Pharmaceutical Supplies)

o Evaluate vendor contracts and negotiate prices, resulting in cost savings

o Educate and train Medical Staff to select the optimal drug regimen; reduce waste and use of unnecessary pharmaceuticals

It’s imperative that expenses be monitored daily. Managers should review their expenses, adjusting for fluctuating volumes, reducing whenever possible and eliminating unnecessary expenses.

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