SMH and Economic Downturn SMH is facing the possibility of economic recession. Let’s get back to the...

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SMH and Economic Downturn SMH is facing the possibility of economic recession. Let’s get back to the analysis of our fictitious facility. While the SMH data for 2007 suggests that its financial situation is stable, it is not prepared for a recession. The following year, SMH is hit with a storm of bad news. Medicaid announces a big cut and the hospital’s investments suffer a loss and drop from a multimillion-dollar gain to a $7 million loss. When there is an economic downturn, many lose their jobs and their medical insurance. This increases the number of patients who depend on Medicaid. Additionally, SMH can no longer rely on donors to fill the gap caused by Medicaid cuts, because contributor’s incomes also suffer from the recession. This Module Any cut in Medicaid payments increases the volume of unpaid or partially paid care for hospitals. Therefore, Medicaid cuts are disastrous for many hospitals. A drop in the value of investments also affects expected contributions. Because contributors face the same economic conditions as the hospitals, they are less able to donate. The drop in contributions can be expected to continue for years to come. This compounds the problem for hospitals. This module covers solutions to the financial problems faced by so many hospitals. You will use techniques such as cost volume profit (CVP) analysis. CVP is a classic technique that is used by management to provide an answer to “what if” questions. In this module, you will create a strategic plan that can be used in the event of a crisis. The purpose of this technique is to help plan for contingencies. You will explain how SMH should move forward with its mission and survive into the future despite its current problems. Page 1 of 1 Module 6: SMH and Economic Downturn © 2009 Argosy University

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Robert · Accepted Answer

RUNNING HEAD: FINANCIAL CRISIS – SMH HOSPITALS             1
Financial crisis – SMH hospitals 
Student’s Name 
Course Name 
Date
FINANCIAL CRISIS – SMH HOSPITALS                2 
Financial crisis – SMH hospitals 
Introduction 
The SMH is currently facing financial crisis because of the of the changing economic and 
financial conditions the company is facing lot of problems. With the changing economic 
conditions and economic downturn, the employees are loosing their jobs. The hospitals are 
losing out on the high margin procedures and are becoming less profitable.  
Current scenario of the company 
Currently the company is having $6576606 as the loss.  The company is having an 
inpatient revenue of $407909342.40 whereas the direct patients account for $77511777.60. The 
total expenses pertaining to the personnel include $298796794.96. The direct patient care 
expenses amount to $1117776778.57 and the indirect patient care expenses amount to 
$44944869.28 
Considering at the time of financial crisis, the hospital needs to have a strong focus on 
minimizing its costs. There are two scenarios that need to be considered in this paper. 
Strategic Plan: 
The hospital is planning for two different scenarios which are: 
Scenario 1: The nursing union has begun bargaining and has demanded a 10 percent 
increase in salaries, a guarantee of no lay-offs, and an increase in pension benefits. The increase 
in pension benefits has a $1 million annual impact. 
 From the income statement of SMH we can say that other salaries are the salaries of 
nurses whereas salaries officers are the salaries of physicians. We have considered, the other 
salaries for clinical services presuming that this salary pertains to the salary of nurses.  
FINANCIAL CRISIS – SMH HOSPITALS                3 
Thus, 10% increase in salary will result to the total salary of $174716440. The total expenses of 
the company will increase by 15883313. With the increase in the pension expenses by $1 
million, the total expenses of the company will increase to $533529243.

SMH and Economic Downturn SMH is facing the possibility of economic recession. Let’s get back to the analysis of our fictitious facility. While the SMH data for 2007 suggests that its financial...

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