Module 2, Financial and Strategic Planning (CASE) - Essay Example

Financial and Strategic Planning (CASE) al Affiliation) FRANKLIN HEALTHCARE Income ment Years ending 2010 and 2011 2010 2011 ($) ($)Revenue Patient revenue 375,000,000 312,500,000Third-party revenue 750,000,000 625,000,000Grants & investments 375,000,000 312,500,000Total revenue 1,500,000,000 1,250,000,000 Less marketing cost (25 000) (25 000)Gross profit 1,499,975,000 1,249,975,000Less operating expenses (500 000) (300 000)Operating income 1,499,475,000 1,249,675,000Less dividends & tax (-) (-)Net income 1,499,475,000 1,249,675,000Discussion Franklin Healthcare obtains its revenue from patients, third-parties, and grants and investments.

Revenue reduced by 16.67% from $1,500 million to $1,250 million in 2010 and 2011 respectively. Franklin Healthcare’s performance in 2011 can be attributed to a number of factors. Firstly, a single marketing strategy was used in both years. The analysis originates from both average daily patient population and marketing cost. The average daily patient population reduced by 100 patients; from 500 in 2010 to 400 in 2011. It is evident that the Hospital incurred a constant marketing cost between the two years.

The marketing strategy was appealing in the year 2010, hence attracting $1,500 million in terms of revenue. In the year 2011, the marketing strategy was not as effective, hence leading to a lower performance; reporting total revenues of $1,250 million. A strategic plan would be for the hospital to adopt a new marketing strategy (Bryce, 2000). The new strategy would boost the hospitals preference among the sick, increase the amount of grants offered, and increase third-party investments. Secondly, Franklin Healthcare had a structural change and dismissed some staff.

The change had a positive effect in efforts to reduce the operating expenses; from $500 thousand in 2010 to $300 thousand in 2011, but had some material effect on the revenue. There was a causal and effect relationship between reducing the number of employees and the amount of patient revenue reported. The low number of staff led to a reduction in the average patient population to achieve a balance between the demand and supply of healthcare. The hospital should increase the number of staff to maximize the supply of healthcare.

All employees should report to a senior health worker to improve the level of accountability (Charupat, & Huang, 2012). The hospital should also invest in new equipment and have all the employees trained on how to operate them. A single marketing strategy and the structural change had a significant effect on the hospital’s net income. The hospital reported a $249,800,000 reduction in net income from $1,499,475,000 in 2010 to $1,249,675,000 in 2011. The hospital should have a forecast of what to expect in the next financial year.

It should prepare a budget income statement that would serve as a policy variable and govern the control variables and external variables (Greenwood, 2002). The forecasting process should be automated to enhance ease of access and accept frequent reviews. An analysis of the income statement indicates that the facility may be financially unstable. The healthcare is a nonprofit facility. Grants from well wishers service most of its expenses. Grants and investments reduced by $62,500 thousand from $375,000 thousand to $312,500 thousand in 2010 and 2011 respectively.

In an attempt to minimize costs, the facility did not invest in marketing activities and dismissed some staff. Such attempts to minimize costs are a clear indication that the institution is not financially healthy. The Williams Foundation should reconsider their grant to salvage the financial and strategic performance of Franklin Healthcare. The facility derives most of its funds from grants and investments considering that it is a not-for-profit organization (Bryce, 2000). An increase in grants and investments would boost the institution’s operations in an attempt to improve the quality of healthcare.

Reference listBryce, H. J. (2000). Financial and strategic management for nonprofit organizations: a comprehensive reference to legal, financial, management, and operations rules and guidelines for nonprofits (3rd ed.). San Francisco: Jossey-Bass Publishers.Charupat, N., & Huang, H. (2012). Strategic financial planning over the lifecycle: a conceptual approach to personal risk management. New York: Cambridge University Press. Greenwood, R. P. (2002). Handbook of financial planning and control (3rd ed.). Aldershot, Hants, England: Gower.