The Purpose of the Financial Policy - Essay Example

Medical Business Week Part Total annual revenue 090,800 Fixed Expenses 389,600) Total expense ($568,758) Net revenue $132,442 Number of patients 16,245 Net Revenue per patient 132,442 / 16,245 = $8.15 Part 2 The month of January had an over-budget. This is because the expenses were so many to outweigh the revenues making the net income become negative, meaning there was a loss instead of a profit. In February, the month seemed less burdened with expenses hence not over-budgeted. This is because, the net expenses reduced to allow the net income rise to a positive, indicating a profit was made. This profit reduces in March, showing that the month of March was also a little bit over-budgeted but they still manage to make a profit anyway. The trend is seen to go up to April where the expenses increase to reduce the net income. A profit is still made, though it is a reduced profit, less than that of the previous month, hence the month is also a little bit over-budgeted. Coming to the month of May, the expenses go much down, making the net income to increase, hence an increase in the profit. This shows that the month was not much over-budgeted. On the month of June, the net expenses and deductions increase again drastically. This reduces the net income in the same way, hence making the net profit be reduced. Even though the company does not realize a loss in this month, the profit it gets is so much reduced when compared to the previous month. Part 3 New dollar amount of patient revenue; 1.03 x $329,269.68 = $339,137.47 New dollar amount of expenses: Jan 415,973.59, Feb 236,786.67, March 240,433.89, April 248,393.98, May 231,205.66, June 298,075.48, July 232,241.62, August 229,037.99, Sept 231,859.84, Oct 273,041.04, Nov 298,856.04, Dec 389,047.93 Operating budget 2012 Jan Feb March April May June July Aug Sept Oct Nov Dec Net revenue 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 339,137.47 New roof 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Cost of expense 415,973.59 236,786.67 240,433.89 248393.98 231,205.66 298,075.48 232,241.62 229,037.99 231,859.84 273,041.04 298,856.04 389,047.93 Total expense 465,973.59 286,786.67 290,434.89 298,393.98 281,205.66 348,075.48 282,241.62 279,037.99 281,859.84 323,041.04 348,856.04 439,047.93 Net Income (126,836.12) 52,350.8 48,702.58 40,743.49 57,931.81 (8,938.01) 56,895.85 60,099.48 57,277.63 16,096.43 (9,712.57) (99,910.46) Week 2 Part 1 Equipment cost for year 1 $79,000 Total loan cost $1,564.29 Hiring a radiologist $39,600 5 years total cost associated with the purchase $120,164.29 Reimbursement $56,793 Total cost of studies $3,564 Total revenue from studies $60,357 Net income ($59,807.29) This is not a good purchase since it brings losses to the business with a loss of $59,807.29 after the first year of purchase. Part 2 New cost = 120,164.29 + 7,000 = $127,164.29 New revenue = 5,644.75 + 89,043 + 60,357 = 155,044.75 Net income = 155,044.75 – 127,164.29 = $27,880.46 The profit = $27,880.46. Looking at the 2 years together, the purchase is considered to be a good one since it gives a profit. Part 3 Year 3; New cost = 127,164.29 + 40,500 = 167,664.29 New revenue = 155,044.75 + 6,002.5 + 94,955 = 256,002.25 Net income = 88,337.96 Year 4; New cost = 167,664.29 + 40,500 = 208,164.29 Net revenue = 256,002.25 + 6,624 + 98,982 = 361,608.25 Net income = 153,443.96 Year 5 New cost = 208,164.29 + 41,500 = 249,664.29 New revenue = 361, 608.25 + 7,085.5 + 102,360.5 = 471,054.25 Net income = 221,389.96 Year 6 New cost = 249,664.29 + 42,000 = 291,664.29 New revenue = 471,054.25 + 106,514 + 7,543 = 585,111.25 Net income = $293,446.96 Week 3 Part 1 Financial policy is criteria or procedure that describes a company’s choices as far as debt/ equity mix, currencies of denomination, maturity structure, method of financing investment projects, and hedging decisions with a goal of maximizing the value of the firm to a particular group of stockholders. The purpose of a financial policy is to minimize cost over a long period of time, providing citizens, investors and business owners with confidence when they know that there are strong, and consistent financial policies in place to guide their businesses. The benefits of a financial policy include the fact that, the stakeholders are guided by certain rules and regulations, hence the gain of confidence in the business over a long period of time. It also enables people to receive payment at the time of service. Financial policy allows one to gain control over a financial system, this enables one to offer financial services to patients while minimizing possible confusions. Financial policy should include a healthcare financial program, bank and debit card options, and payment once the treatment is delivered. Part 2 Receivable turnover ratio = net receivable sales / average accounts receivable = 1,340,000 x 12 = 16,080,000 / 1,650,000 = 9.745 This shows that the company is collecting its debt 9 times, close to 10 times a year. This shows the company is averagely profitable. Week 4 The function of the contract is to guide the stakeholders on the DOs and the Don’ts. It also illustrates the compensation that comes after completing the particular agreed activities. It illustrates very well when a party is required to act, what they are to do and what they will get in return and the duration of performing the service and compensation. On the other hand, the contract also specifies clearly the steps and procedures that the aggrieved party can take in case their part of the contract is not met by the party that was to be with it. The terms of the contract re that; the Kentucky department of Medicaid services within the cabinet for health and family services is charged with the responsibility of administration of the Kentucky Plan for medical assistance in accordance with the requirements of the title XIX of the social security Act of 1935. The contractor is eligible to enter into a risk contract in accordance with section 1903m and the Act of 42 CFR 438.6, is engaged in the business of providing prepaid comprehensive health care services. It is very important to specify the terms of the contract to inform the both parties of the consequences of not fulfilling their parts of the contract or going contrary to the contract. It also makes the contract to be executable. Once the terms of the contract are specified, it is upon each part to read them and determine whether they can comply to the terms as far as they are laid down. This will make the parties to make decisions to whether they want to go ahead with the contract or not. Contracts are monitored and evaluated by the external quality reviews. Commonwealth is required to acquire an independent external quality review of the quality of services that are provided by the MCO under the contract with Commonwealth. This will include the evaluation of quality outcomes and timeless access to services. The process of monitoring and quality evaluation includes, obtaining an external quality review, informing the contractor of the EQR, carry out the quality evaluations, inform the contractor of the findings, give the contactor a report on what they should improve on. The EQR should also provide suggestions on areas of improvement, what was done well and what requires improvement. The contractor is supposed to give the EQR his time and space, plus any assistance to carry out his duty. This process should not be compromised by anyone whatsoever. Read More