BHA FPX 3008 Assessment 2 Financial Statement Analysis

Financial Statement Analysis

Student Name

 University name

BHA-FPX3008: Health Care Budgeting and Reporting

Professor name

Submission date

The paper looks at the performance of the St. Anthony Medical Center over the three years, with resulting changes in terms of revenue and receivables. Gross patient revenue increased; net margins were stable because of increasing contractual adjustments and uncollectibles. Suggestions include improvements in the revenue cycle management, the renegotiation of contracts, and the increase in outpatient telehealth services. Such measures will enhance cash flow, reduce the pressure on debt, and maintain investments in the quality of care.

Financial Position

The financial position of St. Anthony Medical Center portrays a worrying imbalance of assets and liabilities that reflects a serious case of liquidity and solvency problems. In three years, total assets have gone down to 191.2M compared to 199.9M, whereas the liabilities increased to 231.3M compared to 234.1M, resulting in the deterioration of the edge fund by (-40.1M). It is worth noting that as cash balances became negative, decreasing by $1.6M to error, with cash balances (-1.0M), there is evidence of acute liquidity stress. Accounts receivable went down, but the growth in estimated uncollectibles of 2.0M to 3.9M is used to offset this advantage. The fixed asset levels were not decreasing, indicating that there was consistency in the investment and depreciation, but it does not add to the immediate liquidity.

Current liabilities grew only slightly to $29.9M with late payments to vendors and accrued compensation, whereas the long-term debt is a productive structural trend with a balance of over 201M and mostly due to the parent company. Such a level of financial leverage puts the hospital further at risk as the debt/asset ratio of 1.21 and the current ratio stand at an unsatisfactory 1.29, with both showing a downward trend. Operating margins have been kept low, with the net margin reaching a best of 3.01% last year, only to reverse to 1.99%. To make it worse, retained earnings stand at a negative of $40.1M, which damages investor confidence and the ability to borrow.

To help St. Anthony become more financially viable, one must consider regulating the cash flow by increasing collections, renegotiating vendor terms, and prudent short-term credit first (Chang et al., 2025). Secondly, a re-pricing of long-term debt that might turn some of it into equity would lower interest payments (Stubbs et al., 2023). Lastly, the leadership must enhance efficient operations, reduce unnecessary expenditures, and increase outpatient services, which have demonstrated revenue gains (Amiri et al., 2025). With the backing of the best practices in healthcare financial management, these strategic advances will be imperative in healing financial conditions.

Compare Financial Position to Previous Years

The balance sheet of St. Anthony Medical Center during the past three years reflects a minor decline in the overall assets, in the middle of which is the declining cash position (becoming +$1.6 million to -$1.0 million) and the declining net receivables of $ 38.7 million to 28.3 million after allowances. In the meantime, the hospital has been heavily investing in property and equipment that have kept its net PP&E stable at around 141142 million and its intangible assets at around 2 million. However, the said non-liquid assets are not assisting a lot during a strained working capital, meaning that there is an impending liquidity crunch.

The liabilities have increased modestly by a factor of $231.3 million, exceeding the assets and increasing the negative equity (retained earnings of -40.1 million as compared to -34.2 million). The current liability also slightly rose to 29.9 million, with payables and accrued compensation increasing, and the amount of long-term debt remains overwhelming at 201.5 million, of which has been due to the parent Vila Health. Significant ratios describe the trend: The current ratio dropped to 1.29 as compared to 1.73 in the previous years; the debt-to-asset ratio rose to 1.21 as compared to 1.17 in the previous years; and the net margin, which was capped at 3.0 percent the year before, fell to 2.0 percent. Collectively, these indicators imply decreasing liquidity, excess leverage, and meager profitability.

Three evidence-based interventions are suggested in order to avoid the decline. The management of Days in Receivables Outstanding, which is associated with managing Days in Receivables Incidentals, as the average amount of time required to collect payment was highlighted at the start of Chandawarkar et al. (2024) and was recommended, will take 30 days or less to collect the full dues. Second, according to Issa & Issa (2025), formally undertake a debt capacity analysis (along with cash flow, leverage, and liquidity ratio) to streamline borrowing with sustainable service delivery.

Third, reinforce the liquidity with the objective of days cash on hand reaching 60-80 days by tightening the expense levers, as well as the supply-chain efficiency (Lalani et al., 2021). These actions will improve St. Anthony and increase its working capital, reduce its financial risk, and lay the path to increased healthy profit margins.

Accounts Receivable Changes

During the three-fiscal-year period the gross accounts receivable of St. Anthony Medical Center decreased by about 29.8% between the years 2006 and 2007 to 32.41 million compared to areas like gross accounts receivable which went down to an amount of 46.17 million, and the estimated uncollectable allowances decreased to 2.04 million and then increased to 3.89 million as a result of which the combined figures of gross accounts receivable and estimated uncollectible allowances yielded a net amount of about 38.74 million in 2006 and then 28.51 million as of today.

The concurrent cash-flow benefits reduction due to decreased receivables points to increased write-offs, which have been reduced more by the reduction in collections and decreased volumes: the days cash on hand is negative, and working capital is constrained. This reduction in the ratio of the receivable balance improved the current ratio (1.73 to 1.29) but has not been completely translated to the liquidity position, as the hospital continues to rely on short-term funding and parent loans to settle its liabilities.

By focusing on 30-40 days of accounts receivable, the hospital should optimize the revenue cycle in an effort to enhance its liquidity and cash turnover. According to the industry standards, the net outstanding days in AR should not exceed 40 days, with less than 10 percent of the accounts receivable not more than 90 days old (Chandawarkar et al., 2024).

The aged -AR analyses and DNFB (discharged and not final billed) monitoring processes that have a goal of DNFB less than 5 days may help to identify the points in the process that are bottlenecks and ensure the receivables are not left to age to less-collectable DNFB buckets (Croteau, 2025). By closely tracking these indicators and setting certain post-discharge follow-up rhythms, St. Anthony can reduce the AR days by 20-30 per cent and, consequently, enhance the cash flow, reduce the bad-debt expense, and avoid the necessity of having to bank on borrowed funds.

Analyze the Financial Obligations

St. Anthony Medical Center is burdened with huge financial responsibilities as it embarks on the new fiscal year. Current liabilities have soared to $29.9 million, with increasing levels of accounts payable and accrued compensation displaying these increases, but long-term debt is at $201.5 million, nearly all to its parent, Vila Health.

The annual interest charge of the hospital amounted to approximately 18.7 million, and zero current maturities of the long-term debt amount, indicating that the hospital has a big cash outflow that cannot be mitigated by the cash repayment of principal in the current year. In addition, operating deficits are also exacerbated by an increase in Medicare and Medicaid underpayments, which is estimated at an average of 14 percent in the period between 2019 and 2023 (American Hospital Association, 2025). Such requirements imply a constraint of liquidity and higher chances of refinancing.

It means that the hospital would have to find approximately 50 million internally generated funds to cover its interests and working capital needs without additional financing because of its negative cash on hand and decreasing current ratio (now 1.29). Reimbursement delays or further underpayment would subject St. Anthony to increased reliance on high-interest short-term borrowing and, again, with retained losses further compromising margins as they continue to wade much deeper into negative equity. The need to implement sustainable debt strategies by 2025–2026 is underlined by the pressure on policymakers to focus on the sustainability of hospitals.

By strategically addressing debt and increasing cash flow, St. Anthony Medical Center should make strategic moves to improve its economic status. To smooth repayment of principal, Scheffler et al. (2021) recommend healthcare debt management strategies such as negotiating long maturities or partial debt-to-equity swaps with its parent. Concurrently, the maximum exposures within the volatile markets can be capped under an interest-rate hedging program (Ti & Husodo, 2024). Finally, the hospital will become stronger with regard to its ability to fulfill its obligation by ensuring that there is tight management of payables and selective cost reduction.

Analyze Patient Revenue

Patient services revenues at St. Anthony Medical Center have increased in the past three years by a compound annual rate of approximately 13.8 per cent to 992.7 million to $1,282.5 million, due to a rise in inpatient volumes, 613.3 million to 752.8 million, and outpatient revenues, 379.5 to 529.7 million. But even following contractual changes and uncompensated care, net patient service revenue is only slightly increasing by the margin of $261.8 to 264.3 million, as the uncompensated care and write-offs of bad debts have consumed nearly all top-line growth. It is in this difference between the gross and net revenue that structural pressures in terms of reimbursements and collections are highlighted.

Such compression of margins endangers liquidity and capacity to make reinvestment: operating expenses are steadily increasing (between $268.6 million and $ 269.7 million) whereas net operating revenue ranges between $ 3.9 million and $ 6.8 million. The hospital needs to increase the contract and denial-management procedures to bolster net margins. Moran (2024) proposed the method of standardization of the system processes, use of technology to capture charges and analyze the roots of denied payments to enhance the net revenue by increasing the cash flow and decreasing the cash write-offs. These tactics will recover the revenue leakage embedded in the middle-cycle inefficiencies and finance important operations.

Going forward, St. Anthony also needs to differentiate and enhance the extent of the high-margin service lines to cushion itself against additional reimbursement headwinds. McKinsey emphasized that by moving into outpatient specialty clinics, telehealth, and home-based care more quickly, health systems are able to access more rapidly growing streams of profit as well as underpin core operations (Azzoparde et al., 2022).

Also, using inflation on the reimbursement rate by negotiating in advance with payers, aiming at an annual increase of more than 7 percent CAGR of government and commercial segments, is aligned with the prospects of growth of the profit pool of 7 percent CAGR through 2027 (Patel and Singhal, 2024). With a focus on revenue-cycle excellence and strategic service diversification, St. Anthony should enhance its financial condition and maintain its investments in quality care.

Conclusion

St. Anthony Medical Center is undergoing deteriorating liquidity and negative equity, whereby its assets are shrinking, and liabilities are more than 231 million. Major ratios reflect a decreasing current ratio (1.29), a high debt-to-asset ratio (>1.2), and low net margins (less than 2 percent). Cash is negative, and the amount of uncollectible has increased even though more investment is made in PP&E and assets. A few of the recommended courses of action include strict receivables management, debt restructuring, efficiency in operations, and revenue diversification.