Hca Financial Analysis

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Date: February 8, 2013
To: Dr. Harland Hodges
From: Kacie Burton
Subject: Evaluation of HCA’s financials

The following is an analysis of HCA’s financial statements and an explanation of changes in revenue; cost of goods sold to sales; selling, general, and administrative to sales; accounts receivable turnover; inventory turnover; plant property, and equipment; and accounts payable turnover. Income Statement

During the past year, total revenue increased by 5.9%, a near $1.6 billion in additional sales. The cost of goods sold to sales was 17.4%. Selling, general and administrative costs to sales were 45.3%.

|Revenue |  |  | | |31-Dec-11 |31-Dec-10 | | Total Revenue | 29,682,000 | 28,035,000 | | Sales Growth |5.9% |4.7% |

Revenue

The health care industry is impacted by the overall economy. During economic downturns governmental entities experience budget deficits, resulting in decreased spending for health and human service programs that represent sources of revenue for hospitals. While other hospitals have suffered by the growing number of uninsured patients, The Health Corporation of America has thrived. HCA sales growth increased 5.9% from 2010 to 2011. Revenues consist of net patient services and depend on inpatient occupancy levels, medical services offered to patients, the volume of outpatient procedures, the payment rates for such services, and an allowance for doubtful accounts. The health care industry is rapidly changing due to the Health Reform Act. Healthcare reform is forecasted to increase the number of insured patients and increase industry revenue. The recently passed Patient Protection and Affordable Care Act (PPACA) has started and will continue to drive changes in the industry. The act offers the promise of health insurance coverage for a vast number of the currently uninsured population. Another factor influencing revenue is HCA’s new billing methods. The methods make Medicaid and Medicare pricing more difficult for inpatient services. Medicare and Medicaid services represent about 40% of the total industry. Along with new billing methods, updates to accounting standards have increased which affects how revenues are recorded. In July, the FASB issued the “Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities.” The main provisions require health care entities to change the presentation of their statement of operations by reclassifying bad debts from an operating expense to a deduction from revenue, thus, lowering the company’s total revenue. In order to reduce the amount of doubtful accounts, HCA has considered screening all patients, including the uninsured, to determine the appropriate care setting in reference to their condition. HCA is also considering increasing up-front collections from patients in order to increase deductible requirements of uninsured patients.

|Percent of Merchandise Sales by Category |2011 |2010 | | Medicare |34 |34 | | Managed Medicare |11 |10 | | Medicaid |9 |9 | | Managed Medicaid |8 |8 | | Managed Care...
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