Case Write-Up
Riverview Community Hospital
Riverview Community Hospital is a 210-bed, not-for-profit, acute care hospital with long standing reputation for providing quality healthcare services. It has recently passed the highest Joint Commission accreditation. The hospital competes with three other hospitals in Metropolitan Statistical Area (MSA)- two not-for-profit and one for-profit. Riverview generates its hospital’s net patient service revenue from patients who are covered by Medicare, Medicaid or other government programs or from various private plans. Net patient revenue seemed to be increasing from $25,661M in 2005 to $34,582M in 2009. Operating expenses of hospital included both inpatient and outpatient expenses. The trend of expenses increased from $23,896M in 2005 to $33,958M in 2009. According to Du Pont analysis, total margin of hospital seemed to be decreasing from 11.38% in 2005 to 6.75% in 2009. Though total asset turnover maintained the same trend, it was below industry standard. Return on equity (ROE) was also down and maintained a poor trend till 2008. Even though it increased in 2009, the equity was below industry average. Overall the management must take action on decreasing financial trends. Net cash from operations has reduced to half from$7,192M in 2006 to $3,481M in 2009. The occupancy rate of Riverside in 2009 is 52.2% which is high than industry average of 45.4% and hence it is using fixed assets more productively than average hospital.
To influence profit margin, Riverside must increase revenues or reduce costs. It is recommended that marketing staff study the effects of raising charges or lowering them to increase volume; moving into new service or markets with higher margins and so on while management staff studies the expense items and can seek ways to reduce costs. Riverside’s analyst should investigate ways of reducing