Elijah Heart Center Working Capital
Health Care Finance FIN/HC571
May 9, 2011
Elijah Heart Center
Elijah Heart Center (EHC) is a 140-bed cardiac care hospital in New York. Services offered at EHC include cardiac cauterizations, radiology, nephrology, pulmonary, open-heart surgery, coronary angioplasty, and rehabilitation. Administrative staff members include Gilbert Sanchez, Chief Executive Officer, Saika Takeuchi, Vice President of patient services, Zachary Macholz, Chief Financial Officer, and Dr. Brenda Lopez, Radiologist (University of Phoenix, 2011).
Patient volumes are growing at EHC; however profits are dropping. EHC is also facing a potential working capital shortfall because of discounts to health management organizations, large wages paid to Registered Nurses through agency, decrease in Medicare reimbursements, and growth in liabilities, which have outpaced current assets (University of Phoenix, 2011). The organization needs to bridge a working capital shortage, evaluate funding options to purchase new equipment, and evaluate funding options for capital expansion. Board members at EHC have recommended that a financial consultant be brought in to turnaround the organizations financial position.
Working capital is important to an organization and is the current assets minus current liabilities. Current assets can include accounts receivables and inventories, and liabilities are bills due to creditors or suppliers. Organizations can withdraw or cash current assets to pay for current liabilities (Brealey, Myers, and Marcus, 2004).
EHC needs working capital to by new or refurbished equipment; they also want to invest in a $75-million dollar expansion that will include new services, new operating rooms, new catheterization labs, new patient rooms, and bring the latest in cardiac technology to the hospital.
Alternate Sources of Short-term Financing
Ms. Takeuchi, Mr. Macholz, and Dr. Lopez will...