Medical Centers Financial Management
BUSI 685 - Financial Management
Liberty University
Sharp Healthcare
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Sharp Healthcare in San Diego has not afforded the opportunity to acquire financial capital
through equity markets since it is not a profit making hospital. As a result of this it enjoys the
advantage of accessing tax-exempt debt markets. Section 501(c) (3) of the Internal Revenue
Code permits all not-for-profit hospitals to take advantage of the tax-exemption (New Jersey
Commission on Rationalizing Health Care Resources, 2010). In addition, it benefits from
lower interest rates and therefore has the capacity to acquire more debt in its capital structure.
Sharp HealthCare funds the expansion of its programs and facilities through its internally
generated profits, capital borrowings, bond offerings as well as donations from well wishers.
The hospital employs external financial auditors to audit its expenses, report revenues, fund
balances, functional expense allocations, and changes in its net assets as well as its balance
sheet items. As a result, the financial statements presented to the public ought to mirror the
audit reports of the external financial auditors. Just like other not-for-profit hospitals, Sharp
Healthcare has remained financially stable over the past years. For example, Sharp
HealthCare’s net revenue for 2008 was about $1.9 billion and about $2.1 billion for 2009
which are below the standard revenue collection of for-profit hospitals of its caliber (Sharp
HealthCare, 2010).
Unique Financial Policies
For the Sharp HealthCare, it uses financial statements to show the level of charity care that it
offers to the community in. This is usually done in notes and is done to ensure that the
hospital remains pertinent to the donors as well as the oversight agencies and that it maintains
its tax-exempt status. The hospital makes sure that its program service costs equates to its
entity exempt purposes.
Evendale Medical Center
Evendale Medical Center’s financial structures are designed to achieve operating efficiency
as well as profitability unlike in Sharp HealthCare where the financial structure is designed to
maintain entity tax-exempt status. It has adopted prospective payment system to achieve cost
containment in its financial operations particularly in its capital expenditures. The hospital
does not receive any funding from the government and therefore has to depend on its
revenues to carry out its capital expenditures (Evendale Medical Center, 2010). At Evendale
Medical Center, the hospital billings are set to be higher than the expenses to achieve profits.
The hospital relies on its financial leverage to expand its return on assets. Thus, generally the
hospital takes a business perspective in its financial decision makings.
Unique Financial Policies
The manager has to control the hospital’s expenses, the patient revenues, operating revenues
as well as financial and medical adjustments that have to be made in the hospital to ensure the
hospital achieves efficiency and maximum profitability (Evendale Medical Center, 2010).
Lincoln Medical Center
Lincoln Medical Center receives direct funding from the federal as well as the state
governments and therefore its financial structure is not profitability oriented but efficiency
oriented. Most of its revenues come from the large number of publicly insured patients. Since
the hospital does not focus on profitability it uses its positive total margins to subsidize its
operating losses whenever it fails to generate enough total margins that can meet its financial
obligations. Apart from the government’s direct financial support, Lincoln also relies on its
Days Cash-on-hand from its patient revenues to carry out its daily financial operations. Days
Cash-on-hand in this case refers to the hospitals available float cash as well as its highly
liquid assets (New Jersey Commission on Rationalizing Health Care Resources, 2010). It also
depends on the Auxiliary to finance its operations and projects. The Auxiliary acquires funds
from donations, contracts with concessions, membership dues and also earns interests from
its auxiliary accounts.
Lincoln Medical Center acquires long-term debts and its equity funds to finance expansion of
its facilities and programs. The hospital borrows capital from bond proceeds, commercial
banks as well as capital leases from equipment manufacturing companies. Financial auditing
of the hospital is done by both the government auditors as well as other independent external
auditors to evaluate the capitalization ratio of the hospital’s finances as well as the usage of
the patients’ revenue and its overall net revenues. Its financial statements are audited before
they are presented to the public (The New York City Comptroller’s Office, 2002).
Unique Financial Policies
Lincoln Medical Center’s financial policies are designed to be in line with the operating
procedures, rules as well as regulations that were established by New York City Health and
Hospital Corporation so as to meet the qualifications for accessing the auxiliary funds.
Auditing is done to determine whether the hospital’s internal financial infrastructure is in line
with the Auxiliary bylaws (The New York City Comptroller’s Office, 2002).
Common Financial Management Practices
The financial environments of these three hospitals exhibit significant difference especially in
their financial structures and financial policies. However, they share particular financial
management features particularly in terms of borrowing and their management focus towards
achieving efficiency in their operations. All of them borrow financial capital from the
commercial institutions to meet their financial obligations. They also strive to achieve
efficiency in their financial operations and as such, they involve both the internal and external
audits to evaluate their financial performance. They use their financial as well as accounting
information to review their financial practices and hospital operations to ensure that they
focus towards achieving efficiency. They also analyze the inpatient as well as outpatient
services using their internal financial environment to determine their performance.
Problems Specific to the Healthcare Industry
Factors that affect financial performance of these hospitals include the indigent care load,
case mix, payer mix which also includes different levels of self-pay and medical aid, staffing
ratios as well as their high costs of operations which lead to financial distress (New Jersey
Commission on Rationalizing Health Care Resources, 2010). Hospitals are sometimes forced
to offer uninsured treatments as well as uninsured discharges to patients. Unlike other sectors
of the economy, the healthcare industry requires expertise performance, thus the cost of
maintaining medical experts in hospitals is very high as compared to most industries. This
contributes to the financial distress experienced by the hospital. They therefore may not be
able to employ enough staff to meet the demands of the patients thus lowering their revenue
collection. Besides, most hospitals’ capital structures are highly leveraged with long-term
debts as they attempt to meet the increasing demands for medical care. Hospitals also suffer
from the lower revenues they collect from the publicly insured patients. Unlike other
industries, the healthcare industry attracts very few investors who are willing to hold shares
in the hospitals. Most investors rarely take any interest in exploring the already existing
healthcare centers while few opt to establish their own healthcare centers. This leads to the
limited cash reserves in the healthcare sector. Thus the healthcare centers are not able to
achieve efficiency and effectiveness in their operations.
Reference List
Evendale Medical Center. (2010). Revenue cycle manager. Web.
New Jersey Commission on Rationalizing Health Care Resources. (2010). Assessing the
financial and operational condition of New Jersey hospitals. Web.
Sharp HealthCare. (2010). Sharp HealthCare fact sheet. Web.
The New York City Comptroller’s Office. (2002). Audit report on the Lincoln Medical and
Mental Health Auxiliary, Inc., of the New York City Health and Hospitals Corporation. Web.
