Financial planning is an affirmative financial action that is spelt for a long period of time. It is established upon a set of goals in order to promote the mission and vision of a company. Financial planning is the most appropriate way of managing health sector budgets through allocation and well-targeted long range solutions. It is a step by step financial process that enables the health institution achieves its strategic vision and dwell on its mission (Thompson, 2008)
Universal Health Service financial plan for the year 2012-2014
Step one: Mission and vision of Universal Health Services
Mission: Provide superior healthcare services that patients recommend to families and friends, physicians prefer for their patients, purchasers select for their clients, employees are proud of, and investors seek long term results.
Core Value: Service excellence, continuous improvement in measurable ways, employee development, teamwork, compassion, ethical and fair treatment.
Step two: Performance of Universal Health Service as compared to the past
According to the 2016 UHS annual report, its main focus is on provision of quality care to its patients as it improves its financial performance and efficiency. This is through more efficient use of professional and paraprofessional staff, monitoring and adjusting staffing levels and equipment usage, improving patient management and implementing more efficient billing and collection procedures. According to the recorded UHS’S financial information, the company’s income has been increasing. Net income attributable to UHS increased from $35 million to $545 million during 2014 as compared to $511 million during 2013 whereas it also increased from $67 million to $511 million during 2013 as compared to $443 million during 2012 (UHS, 2016).
UHS also dwells on corporate social responsibility by providing charitable care to patients who have a gross income of less than 400% of the federal poverty guidelines. This is in an attempt to improve the image of the institution and cooperate with the community. It does not pursue collection of amounts that qualify as charity care and are therefore not reported in its net revenues. The estimated cost of providing charity care in the years 2014, 2013 and 2012 was $78,475, $ 95,675 and $131,890 respectively (UHS, 2016).
Step three: A plan which in congruent with both the vision and mission of UHs based on its capital budgets
Capital budgets are majorly for the purposes of procuring projects, assets, and programs. They are long term budgets in themselves. According to (Mclean, 2003) a capita budget is one that assumes that the asset procured, will be pay to pay for itself through generating revenue or acquiring support through funding externally. This therefore means if the proposed asset is not in a position to pay for itself, then it should not be purchased.
Although UHS is a non-profit making hospital, the issue of capital budgeting is a matter of essence. It should be noted that over the years UHS has been on the front line to conduct acts of philanthropy to its organization. According to (UHS, 2016) the hospital has been ranged as a top performer through its registration of billions in earnings. In the year 2012, UHS collected a total of $(789,590) from all of its investing activities. The amount moved to even a higher notch in 2013 where cumulatively they acquired $ 884,241. And in 2014 a total amount of $1,035,876 was also gathered. All this endowment should be put in good use so as to assist in providing good patient care by constructing buildings, diversify the specialties available and also purchasing more land.
Step four: Harmonize the UHS’ financial goals together with its strategic goals
A good and long term image of an organization helps it maintain a good credit. This in return helps it promote the strength of their credit (Thompson, 2008). A positive rating will only occur if the organizations profit margin over the years is positive. In UHS, it has recorded rise in profit margins over the three consecutive years. In 2012 it recorded $450,467 in 2013 $530,077and a higher amount in the year 2014 $544,921. The results are positive despite the fact many people have recently lost their medical covers.
Step five: Identify and evaluate both the micro and macro environments of UHS in order to create new opportunities.
This financial plan cannot be successful if UHS does not invest in evaluating the mentioned environments. This is done through constant reviewing of their financial positions and also the macro environment. Ensuring that all the strategic plans are based on its strength. UHS has a very strong management team that ensures that all departments result to yield revenues which amounts to 73% of its total income (UHS, 2016). In the consecutive years that is 2012 -2014 UHS has developed from providing acute care hospitals to surgical and behavioral healthcare centers and in 2014 has introduced ambulatory surgery and radiation services.
Future decisions of UHS should be based on its big strength which is its managerial team and the fact that it has been recognized as the largest hospital. This new opportunities identified should provide a guideline on how financial projections can be developed by UHS. New opportunities are usually accompanied with risks. They include changes ion cost of operation of activities, patient revenues and changes in productivity. All risks should be assessed. With new opportunities comes expected net present values this ought to be assessed in order to evaluate the new opportunities then an optimal decision should be chosen (Mclean, 2003)
Step six: Evaluate and monitor all steps
According to the financial statements provided by UHS their total operating revenue has continually increased. From 2012-2014 the sum amount of operating revenue rose from $ 799,231 to $1,035,876. This means that debts and funds are being well managed (McLean, 2003).
McLean, R. (2003). Financial management in healthcare organizations. new York: Clifton Park,.
Thompson, A. S. (2008). Crafting and executing strategy. New York: McGraw Hill:1-17.
UHS. (2016). 2014 Annual Report- Universal Health Services. UHS. New York:
. Depending on your review of the financial statements, suggest a fundamental insight about the financial health of the company. Speculate on the likely reaction to the financial statements from various stakeholder groups (employee, investors, shareholders). Provide support for your rationale
Universal Health Services is a publicly traded company and know for operating acute care hospitals, surgical and behavioral health centers. The firm also operates in ambulatory surgery as well as radiation centers. The company is recognized as the largest hospital management in the United States having more than 240 acute care hospitals and employing more than 74,000 workers (UHS, 2016). Based in Pennsylvania, the firm is known to register billions in earnings enabling it to be classified as a top performer. This has also allowed the company to create franchises in rapidly-growing markets. However, efforts are owed to its management which works on the principle of integrity to effectively be competent and compassionate. As such, most of its revenues are gotten from its various departments with acute care hospitals bringing in 73% of income (UHS, 2016). Nonetheless, it is believed that behavioral health services bring in more than hospitals due to the high occupancy rate. In other words, it could be said that the behavioral centers bring in the highest amount of revenue than hospitals. The fact that health management is large in size, there are bound to be numerous accounting concepts.
Since the financial statement is helpful in monitoring the financial health of a company, integrity should be applied. Accurate financial information gives the position of the firm in the market. According to the recorded UHS’S financial information, the company’s income has been increasing. Nonetheless, the business should make correct entries on the financial statements especially when recognizing income and expenses. Therefore, it could be said that the financial health of the company is good but may be complicated with the numerous acquisitions. However, the higher returns on investments have been attracting investors.
Current Industry Trends
There is no doubt that firms get into business in a bid to make money rather than meeting the full needs of the market. This is no different from the health care industry where industry players are focusing on financial aspects instead of providing quality care to their patients (UHS, 2016). More so, what is taught in schools also involve economic aspects as part of its curriculum. What people fail to apprehend is that quality care attracts more people and eventually increasing the amount of revenues. At the same time, having more patients and clients raises the spending of resources raising overall costs (Kaplan & Witkowski, 2014). Besides, hospitals are turning to technology, and this also increases the overall costs and stakeholders are not left behind (Jena & Philipson, 2013). In fact, they are behind every planning, developing, and implementation of hospital projects. Therefore, the trend that hospitals are now following is not new but something that is rapidly gaining acclamation in the industry. Additionally, the future health direction the industry players are taking is gaining momentum (Gengler, 2011). All in all, what is more, important is that lack of quality care in hospitals affects the firm’s financial performance. Sadly developing sound business practices does not stick with the industry players. Gambling with people’s health in a bid to reduce hospital costs is undesirable and a recipe for disaster. It is, therefore, essential for hospitals and health care providers to practice good business ethics that entails focusing on providing quality care to patients.
3. As the CFO, suggest one (1) basic strategy that you might use in order to improve the financial performance of the organization. Recommend an approach to implementing the proposed plan. Provide justification for your recommendation.
For above reasons, it is my responsibility as the CFO to ensure that individual and organizational goals are aligned. In turn, this translates to increased revenues since both employees and the employers would be satisfied. Better still, there would be increased customer loyalty and brand image. It is crucial to note that stimulating individual motives will lead to greater motivation and will to work efficiently. This, therefore, means that core values have to be instilled as a culture that appreciates everyone’s efforts is cultivated (Baker & Baker, 2013). This is so because formal business policies will integrate both individual and organizational goals towards one direction. Still, group objectives should be recognized as essential for success and continuity of business growth. In turn, the organization’s missions and vision will be met entirely as the strategies would be linked to goals.
In essence, if personal objectives would be fulfilled, group goals would be easy to attain. For instance, if UHS decides to align its overall goal of increasing revenue with individual needs of providing quality care, there would be smooth operations. As such, the strategy is found to be useful in all types of organizations. While little is being done on performance, the critical focus is lost. In our case, the focus should be on creating a balance between providing good quality health care and make more revenues at the same time. In as much, as it is a medical institution, it operates as a business and requires funding as other firms do. However, even though there is no harm in wanting more money, it should be made clear that patient health outcomes matter. In supporting this performance program, the health care provider should ensure they include customer and business profitability is achieved through proper alignment of goals and strategies. As a result, there will be reduced costs, increased efficiency, and increased income levels.
Baker, J. J., & Baker, R. W. (2013). Health care finance. Jones & Bartlett Publishers.
Gengler, A. (2011). The future of your health care.
Jena, A. B., & Philipson, T. J. (2013). Endogenous cost-effectiveness analysis and health care technology adoption. Journal of health economics, 32(1), 172-180.
Kaplan, R. S., & Witkowski, M. L. (2014). Better accounting transforms health care delivery. Accounting Horizons, 28(2), 365-383.
UHS, (2016). 2014 Annual Report- Universal Health Services. UHS.