Case study Questions
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case2f-1696x.xlsxTitle Page
| This spreadsheet supports STUDENT analysis of the case “Cavalier Hospital” (UVA-F-1696). | |
| This spreadsheet was prepared by Michael J. Schill, Associate Professor of Business Administration. Copyright © 2013 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. | |
| Rev. Mar. 26, 2014 | |
Exh1
| Exhibit 1 | ||||||||||
| CAVALIER HOSPITAL | ||||||||||
| Sample Slides on Hospital Growth from the 2010 Presentation to the Cavalier Hospital Board | ||||||||||
| 2007 | 2008 | 2009 | 2010 | |||||||
| Total Revenue Growth | 1% | 13% | 12% | 13% | ||||||
| Inpatient Admissions | 7% | 2% | 3% | 13% | ||||||
| Outpatient Visits | -7% | 15% | -1% | 3% |
GROSS PATIENT REVENUE BY PAYOR CLASSIFICATION
(FY 2010 ompared to FY 2006)
1
1
Total Revenue Growth 2007 2008 2009 2010 1.3070959492673895E-2 0.13111677019526824 0.12092082644987001 0.13156476132573136
Patient Growth
Outpatient Visits 2007 2008 2009 2010 -6.6410427807486627E-2 0.15132638814305666 -1.0007865540652694E-2 2.8474654233354713E-2 Inpatient Admissions 2007 2008 2009 2010 7.0082165919655104E-2 1.9882124289977821E-2 2.8066402649026267E-2 0.12972601969315956
Exh2
| Exhibit 2 | |||||||||
| CAVALIER HOSPITAL | |||||||||
| Sample Slide on Revenue Classification from the 2010 Presentation to the Cavalier Hospital Board | |||||||||
| Gross Patient Revenue by Payer Classification | |||||||||
| 2006 | 2010 | ||||||||
| Third-Party Payer | 50% | 55% | |||||||
| Medicare | 28% | 25% | |||||||
| Self-Pay | 14% | 12% | |||||||
| Medicaid | 3% | 3% | |||||||
| Uncompensated | 4% | 6% |
GROSS PATIENT REVENUE BY PAYOR CLASSIFICATION
(FY 2010 ompared to FY 2006)
1
1
Third-Party Payer
2006 2010 0.50019159999999996 0.55194666000000003 Medicare
2006 2010 0.2843424 0.24565600000000001 Self-Pay
2006 2010 0.141232 0.115 Medicaid
2006 2010 3.2000000000000001E-2 2.894389E-2 Uncompensated
2006 2010 4.2234000000000001E-2 5.8453449999999997E-2
Exh3
| Exhibit 3 | ||||||||||
| CAVALIER HOSPITAL | ||||||||||
| Sample Outcomes Data from the 2010 Cavalier Hospital Annual Report | ||||||||||
| Door-to-Balloon Time, 20101 | ||||||||||
| Door-to-Balloon Time, 2010 | ||||||||||
| Minutes | ||||||||||
| Cavalier | 77 | |||||||||
| National Average | 80 | |||||||||
| AHA Goal | 90 | |||||||||
| PCI Complications, 20102 | ||||||||||
| PCI Complications, 2010 | ||||||||||
| Cavalier | National Average | |||||||||
| Mortality | 1.0% | 1.3% | ||||||||
| Reinfarction | 2.0% | 2.6% | ||||||||
| Emergency CABG | 0.2% | 0.3% | ||||||||
| Blood Transfusions | 3.0% | 3.7% | ||||||||
| 1 Door-to-balloon time is the time interval that begins when a patient having a heart attack arrives at an emergency room with chest pain and ends with the implantation of a stent to re-open a blocked coronary artery. | ||||||||||
| 2 PCI is percutaneous coronary intervention, the procedure through which a stent is inserted through the leg up into a coronary artery to treat a heart attack. Although usually successful and far less invasive than open-heart surgery (coronary artery bypass grafting [CABG]), the procedure can result in death (mortality), further heart attacks (reinfarction), conversion to open-heart surgery (emergency CABG), and blood loss (requiring transfusion). |
Minutes
Cavalier National Average AHA Goal 77 80 90
Minutes
Exh4
| Exhibit 4 | |||||
| CAVALIER HOSPITAL | |||||
| Cavalier Hospital Income Statement (in millions of dollars) | |||||
| REVENUE | 2006 | 2007 | 2008 | 2009 | 2010 |
| Gross Patient Revenues | 151.3 | 152.4 | 185.4 | 205.4 | 240.2 |
| Contractual Allowances1 | -64.9 | -64.6 | -85.9 | -94.9 | -114.2 |
| Charity Care2 | -6.4 | -7.4 | -9.5 | -11.4 | -14.0 |
| Net Patient Revenues | 80.0 | 80.4 | 90.0 | 99.2 | 112.0 |
| Trust/Endowment Income | 10.5 | 9.7 | 12.7 | 14.4 | 16.6 |
| Auxillary Income3 | 3.6 | 5.3 | 5.2 | 7.3 | 8.3 |
| Total Revenue | 94.1 | 95.4 | 107.9 | 120.9 | 136.8 |
| EXPENSES | 2006 | 2007 | 2008 | 2009 | 2010 |
| Operating Expenses | 70.7 | 72.7 | 84.0 | 96.7 | 113.4 |
| Depreciation and Amortization | 4.9 | 5.0 | 5.9 | 6.7 | 7.8 |
| Interest | 1.2 | 3.5 | 5.2 | 5.8 | 4.9 |
| Provision for Bad Debt | 1.5 | 1.5 | 1.8 | 2.0 | 2.3 |
| Total Expenses | 83.0 | 85.3 | 98.5 | 113.5 | 129.6 |
| Net Income | 11.1 | 10.1 | 9.3 | 7.4 | 7.2 |
| 1 Amounts discounted from listed rates as a result of agreements with third-party payers, including Medicare, Medicaid, and private insurers. | |||||
| 2 Uncompensated care for the indigent. | |||||
| 3 Funds received from dining facilities, parking fees, gift shop sales, and vending machine sales. |
Exh5
| Exhibit 5 | |||||
| CAVALIER HOSPITAL | |||||
| Cavalier Hospital Balance Sheet (in millions of dollars) | |||||
| ASSETS | 2006 | 2007 | 2008 | 2009 | 2010 |
| Cash and Cash Equivalents | 2.7 | 2.4 | 5.9 | 4.8 | 7.9 |
| Accounts Receivable (Net) | 18.2 | 19.5 | 24.5 | 28.4 | 30.1 |
| Inventories | 1.4 | 1.4 | 1.9 | 2.1 | 2.4 |
| Total Current Assets | 22.6 | 23.3 | 32.4 | 35.3 | 40.3 |
| Plant, Property, and Equipment (Net) | 78.5 | 113.6 | 143.5 | 150.3 | 147.8 |
| Total Assets | 100.9 | 136.9 | 175.9 | 185.7 | 188.1 |
| LIABILITIES | 2006 | 2007 | 2008 | 2009 | 2010 |
| Accounts Payable | 10.1 | 10.3 | 13.6 | 15.0 | 16.5 |
| Current Portion of Long-Term Debt | 2.2 | 2.0 | 2.6 | 4.7 | 2.7 |
| Total Current Liabilities | 12.3 | 12.3 | 16.2 | 19.7 | 19.2 |
| Long-Term Debt | 19.1 | 49.2 | 64.6 | 78.8 | 76.6 |
| Total Liabilities | 27.3 | 61.6 | 80.8 | 98.6 | 95.8 |
| EQUITY | 2006 | 2007 | 2008 | 2009 | 2010 |
| Total Equity (Net Assets) | 73.6 | 75.3 | 95.1 | 87.1 | 92.3 |
Exh6
| Exhibit 6 | ||||||
| CAVALIER HOSPITAL | ||||||
| Cavalier Hospital Financial Ratio Analysis | ||||||
| PROFITABILITY RATIOS | 2006 | 2007 | 2008 | 2009 | 2010 | Comparables1 |
| Profit Margin | 11.8% | 10.5% | 8.6% | 6.1% | 5.3% | 8.9% |
| Return on Assets (ROA) | 11.0% | 7.3% | 5.3% | 4.0% | 3.8% | 4.2% |
| Return on Equity (ROE) | 15.1% | 13.3% | 9.8% | 8.5% | 7.8% | 12.8% |
| NET REVENUE RATIOS | 2006 | 2007 | 2008 | 2009 | 2010 | Comparables1 |
| Contractual Allowance Percentage | 42.9% | 42.4% | 46.3% | 46.2% | 47.5% | 43.2% |
| Charity Care Percentage | 4.2% | 4.9% | 5.1% | 5.5% | 5.8% | 5.0% |
| ASSET MANAGEMENT RATIOS | 2006 | 2007 | 2008 | 2009 | 2010 | Comparables1 |
| Days Cash on Hand | 12.6 | 10.9 | 23.4 | 16.5 | 23.5 | 16.1 |
| Accounts Receivable Turnover | 5.2 | 4.9 | 4.4 | 4.3 | 4.5 | 6.3 |
| AR Days Until Collected | 70.7 | 74.6 | 83.1 | 85.8 | 80.4 | 57.9 |
| Inventory Turnover | 65.4 | 68.1 | 57.4 | 57.9 | 58.0 | 60.1 |
| Current Asset Turnover | 4.2 | 4.1 | 3.3 | 3.4 | 3.4 | 4.1 |
| Plant, Property, and Equipment Turnover | 1.2 | 0.8 | 0.8 | 0.8 | 0.9 | 1.5 |
| Total Asset Turnover | 0.9 | 0.7 | 0.6 | 0.7 | 0.7 | 0.9 |
| LIABILITY AND LIQUIDITY RATIOS | 2006 | 2007 | 2008 | 2009 | 2010 | Comparables1 |
| Accounts Payable Turnover | 7.0 | 7.0 | 6.2 | 6.5 | 6.9 | 6.5 |
| AP Days Until Paid | 52.2 | 51.9 | 59.0 | 56.5 | 53.0 | 56.5 |
| Current Ratio | 1.8 | 1.9 | 2.0 | 1.8 | 2.1 | 2.0 |
| Debt-to-Equity Ratio | 0.3 | 0.7 | 0.7 | 1.0 | 0.9 | 0.7 |
| Asset-to-Equity Ratio | 1.4 | 1.8 | 1.8 | 2.1 | 2.0 | 1.6 |
| Calculation Formulas | ||||||
| Profit Margin | (Net Income) / (Total Revenue) | |||||
| Return on Assets (ROA) | (Net Income) / (Total Assets) | |||||
| Return on Equity (ROE) | (Net Income) / (Total Equity) | |||||
| Contractual Allowance Percentage | (Contractual Allowance) / (Gross Revenue) | |||||
| Charity Care Percentage | (Charity Care) / (Gross Revenue) | |||||
| Days Cash on Hand | (Cash) / (Total Expenses − Depreciation) ´ 365 | |||||
| Accounts Receivable Turnover | (Total Revenue) / (Accounts Receivable) | |||||
| AR Days Until Collected | (Accounts Receivable) / (Total Revenue) ´ 365 | |||||
| Inventory Turnover | (Total Revenue) / (Inventory) | |||||
| Current Asset Turnover | (Total Revenue) / (Total Current Assets) | |||||
| Property, Plant, and Equipment Turnover | (Total Revenue) / (Property, Plant, and Equipment) | |||||
| Total Asset Turnover | (Total Revenue) / (Total Assets) | |||||
| Accounts Payable Turnover | (Operating Expenses) / (Accounts Payable) | |||||
| AP Days Until Paid | (Accounts Payable) / (Operating Expenses) ´ 365 | |||||
| Current Ratio | (Current Assets) / (Current Liabilities) | |||||
| Debt-to-Equity Ratio | (Total Debt) / (Total Equity) | |||||
| Asset-to-Equity Ratio | (Total Assets) / (Total Equity) | |||||
| 1 Comparables are defined as regional hospitals of similar size and objective. |
Exh7
| Exhibit 7 | |||||
| CAVALIER HOSPITAL | |||||
| Cavalier Hospital Operating Statistics | |||||
| INPATIENT ACTIVITY | 2006 | 2007 | 2008 | 2009 | 2010 |
| Total Discharges | 28,680 | 26,776 | 30,828 | 30,519 | 31,388 |
| Third-Party Payer Discharges | 14,346 | 13,575 | 16,586 | 16,441 | 17,325 |
| Medicare Discharges | 8,155 | 8,010 | 8,207 | 8,371 | 8,539 |
| Self-Pay Discharges | 4,051 | 3,508 | 3,730 | 3,689 | 3,610 |
| Medicaid Discharges | 918 | 803 | 904 | 864 | 908 |
| Uncompensated Discharges | 1,211 | 1,301 | 1,586 | 1,689 | 1,835 |
| Third-Party Payer | 50.0% | 50.7% | 53.8% | 53.9% | 55.2% |
| Medicare | 28.4% | 28.3% | 26.0% | 25.7% | 24.6% |
| Self-Pay | 14.1% | 13.1% | 12.1% | 12.1% | 11.5% |
| Medicaid | 3.2% | 3.0% | 2.9% | 2.8% | 2.9% |
| Uncompensated | 4.2% | 4.9% | 5.1% | 5.5% | 5.8% |
| Average Daily Census | 482 | 451 | 516 | 549 | 556 |
| Total Hospital Beds | 610 | 610 | 670 | 670 | 670 |
| Hospital Bed Occupancy Rate (%) | 79% | 74% | 77% | 82% | 83% |
| Patient Days | 158,983 | 145,506 | 173,977 | 166,428 | 179,648 |
| Average Length of Stay | 5.5 | 5.4 | 5.6 | 5.5 | 5.7 |
| AMBULATORY ACTIVITY | 2006 | 2007 | 2008 | 2009 | 2010 |
| Total Outpatient Clinic Visits | 90,226 | 96,550 | 98,469 | 101,233 | 114,365 |
| Cardiac Center Visits | 7,061 | 7,405 | 7,938 | 8,319 | 9,606 |
| Total Laboratory Procedures | 408,202 | 432,441 | 459,795 | 477,884 | 550,802 |
| Per Outpatient Visit | 4.52 | 4.48 | 4.67 | 4.72 | 4.82 |
| Total Imaging Studies | 71,996 | 74,730 | 84,859 | 88,856 | 99,927 |
| Per Outpatient Visit | 0.80 | 0.77 | 0.86 | 0.88 | 0.87 |
| OTHER | 2006 | 2007 | 2008 | 2009 | 2010 |
| Number of Full-Time Employee Equivalents | 1,517 | 1,521 | 1,698 | 1,890 | 2,074 |
| Average Salary (Including Benefits) | $46,625 | $47,791 | $49,463 | $51,195 | $53,242 |
Exh8
| Exhibit 8 | ||||
| CAVALIER HOSPITAL | ||||
| Rotunda Cardiovascular Care Financial Statements (in millions of dollars) | ||||
| REVENUE | 2008 | 2009 | 2010 | |
| Gross Patient Revenues | 14.9 | 16.9 | 20.2 | |
| Contractual Allowances1 | -7.5 | -8.4 | -9.9 | |
| Charity Care | -0.9 | -1.0 | -1.3 | |
| Net Patient Revenues | 6.6 | 7.5 | 9.0 | |
| Additional Revenue1 | 1.4 | 1.8 | 2.1 | |
| Total Revenue | 8.0 | 9.3 | 11.1 | |
| Approximate Expenses1 | 7.9 | 9.5 | 10.9 | |
| Net Income | 0.1 | -0.2 | 0.2 | |
| Approximate Assets2 | 70.0 | 70.0 | 70.0 | |
| PROFITABILITY RATIOS | 2008 | 2009 | 2010 | Formula |
| Profit Margin | 1.3% | -2.6% | 2.2% | (Net Income) / (Total Revenue) |
| Return on Assets (ROA) | 0.1% | -0.3% | 0.3% | (Net Income) / (Total Assets) |
| NET REVENUE RATIOS | 2008 | 2009 | 2010 | Formula |
| Contractual Allowance Percentage | 49.9% | 49.9% | 49.2% | (Contractual Allowance) / (Gross Revenue) |
| Charity Care Percentage | 6.0% | 5.9% | 6.2% | (Charity Care) / (Gross Revenue) |
| 1 Allocated based on outpatient and inpatient cardiac patient volume as a percentage of patient volume for the entire hospital. | ||||
| 2 Based on the $70 million investment in the center. |
