Hcs 405 Healthcare Financial Accouting Essays

Hcs 405 Healthcare Financial Accouting Essays Hcs 405 Healthcare Financial Accouting Essay Hcs 405 Healthcare Financial Accouting Essay In the United States, organizations are financially accessible because of many years of financing cuts, reductions in Medicare payments imposed by Balanced Act of 1997, decreases in Medicaid reimbursements, and the lowering stresses of controlled care (University of Phoenix, 2013). Organizations and other health care facilities should organize cautiously when the situation comes to financing choices, service agreements, type of equipment, physician favorites, and locating to assist in making the best decisions.According to several published and quoted surveys, organizations are postponing or eliminating equipment investments in short-term (Barlow, 2009). Leasing is a substitution to another means of financing. When an organization is deciding when to lease or purchase, the team will decide by how much cash they own from their current funds. If the organization does not have the funds to purchase equipment, then the organization will borrow money to purchase the equipment. Service agreements are contracts to examine or repair the equipment and can be made part of a lease settlement.Whether the equipment is leased or bought, a service agreement will be indicated as an expense and does not need to be used for comparison between leasing and purchasing (Baker amp; Baker, 2011). Elijah Heart Center is a 120,000 square foot hospital to manage, and function as a coronary care unit for up to 140-beds in New York. The finance department has reported that Elijah Heart Center is facing a potential working capital shortfall because of discounts given to manage care companies, decreased in Medicare reimbursements, increase in present liabilities, unused equipment placed in patient’s room, and obtain the workflow of contract nurses.Elijah Heart Center will receive 2,300,000 from Medicare and other administered care organizations within three months but is required to set a cost saving target of 900,000 for the first year (University of Phoenix, 2013). The cost cutting options for Elijah are downsizing staff, cutting benefits, reducing agency staff, decreasing length of stay, and modifying the skill mix. Downsizing staff and cutting their benefits greatly would impact the quality of care and potentially would cause staff to obtain excessive amount of overtime. Reducing a patient’s length of stay would not affect the annual savings for the organization.Reducing high waged agency staff would increase the savings by 2,043,683 and changing the skill mix would increase the savings by 1,471,452 (University of Phoenix, 2013). Reducing the agency staff will increase savings because the organization will save on the premiums and management fees. Over a period of time, changing the skill mix will allow employees to assist with easy task and others personal to focus on their necessary tasks. Option one loan was the best choice for maintain beneficial cash flow because there was not a prepayment limitation.Therefore, the organization could pay the loan off within three months from the payments from Medicare and managed care organizations (University of Phoenix, 2013). Elijah Heart Center needs to choose to buy or refurbish radiology equipment because the patient volumes are increasing and equipment is aging. The useful life of a CT scanner is considered to last for approximately 10 years. An x-ray machine useful life is 15 years with a low change of technological advancements. An ultrasound system is considered to last five years, but with a high continuing advancement of technology (University of Phoenix, 2013).The best loan choice for the high-speed CT scanner is the refurbish loan because they can use the CT scanner for to the end of the useful life and then upgrade. An operating lease will have to pay for an upgrade fee after three years (University of Phoenix, 2013). Purchasing health care equipment indicates acquiring the title or undertaking ownership of the product, which is documented on an organization’s balance sheet. The organization could purchase the equipment by disbursing cash from the company’s money funds, or the organization could finance the entire or a portion of the purchase.When financing happens, the resultant obligation is documented on the organiza tion’s balance sheet (Baker amp; Baker, 2011). The best loan choice for the x-ray machine is a capital lease because the payment of present value is higher compared to taking an operating lease or buying refurbished equipment. The capital lease option does not cover the care of technology advancements but the useful life is 15 years and with the bargain price of the x-ray machine is the best option (University of Phoenix, 2013). The organization could lease to purchase, which is an agreement to contract o purchase. The equipment is still documented on the balance sheet as an asset with a corresponding liability is called capitalizing (Baker, amp; Baker, 2011). The best loan choice for the ultrasound machine is the operating lease, because it has lower upfront payment and lower monthly installments. With the operating lease, the organization will confirm on receiving the newest technology (University of Phoenix, 2013). An operating lease is counted as an operating expenditure that will be indicated as a cost, but is not capitalized or documented on the balance sheet.An operating lease is considered as a cost of present operations, whereas a financial lease is considered as an asset and an obligation. The operating lease develops into an operating expense by a payment that is made within that time interval (Baker, amp; Baker, 2011). Elijah Heart Center is need of a $75 million expansion and advancement project with the increasing number of patients. The organization will house five open-hear operating rooms, twenty critical cardiac patient rooms, and seven cardiac catheterization labs, along with the newest cardiac technology.After considering the net present value, collateral requirements, cost for funding, and prepayment limitations, the best funding option for the four-year planned expansion is the HUD 242 loan insurance program. The HUD 242 loan insurance program qualifies hospitals to have their debt financed as an investment category, which arranges the lowest borrowing prices available. An advantage of this bond is that they are capable to be redeemed after eight years, so the organization could purchase the bonds again and redistribute the debt at a lower price (University of Phoenix, 2013).In conclusion, understanding the difference between purchasing new equipment, purchasing refurbish equipment, and leasing equipment is an intelligent financial requirement. Always, considering the impact of the financial decisions will affect the organization’s cash flow and balance sheet. Deciding on the most cost-effective loan depends on the interest rate, prepayment limitations, net present value, and the usefulness of life. Knowledge and comprehending the terms of agreement will assist in future, strategic investments within an organization.These financial accounting concepts are essential for implementing the tactics to succeed operative organization outcomes. References Baker, J. J. , amp; Baker, R. W. (2011). Health care fi nance: Basic tools for nonfinancial managers (3rd ed. ). Jones amp; Bartlett. Barlow, R. (2009). Effective equipment planning begins in the basement. . Healthcare Purchasing News, 33(9), 50-52. University of Phoenix. (2013). Analyzing Financial Indicators for Decision Making [Multimedia]. Retrieved from University of Phoenix, HCS 405 Health Care Financial Accounting website.