Elijah Heart Center

Elijah Heart Center (EHC) is a hospital based in New York that holds 140 beds and specialized cardiac catherization laboratories, provides surgical sites for open heart surgeries, necessary equipment for radiology, laboratory, nephrology, pulmonary, and other services that are needed to provide support to all cardiovascular patients. However, EHC is having financial problems. This paper will create an alternative working capitol policy to help to reduce future difficulties for EHC.

Included in the policy will be alternative sources of short-term financing. Explain how accounts receivable and inventory has an effect on the business policies of EHC, review the cash conversion cycle, provide recommendations to reduced future risks, and provide recommendations to make EHC a better hospital in the future. There are varieties of short-term financing that are available to EHC. Improving the cash flow is necessary and to do that EHC is going to have to implement the correct cost cutting measure that will not have a negative effect on patients and patient care, while saving as much money as possible.

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EHC has set a goal of $900,000 savings this year. EHC will also be receiving a quarterly payment of $2,300,000 from Medicare and other managed care companies. Reducing Agency staffing and hiring an untrained assistance to help the trained employee (nurses) to handle some of the less important tasks will save EHC $3,515,134 this year, and will only have a slight effect on their patients.

This far exceeds the goals set forth by EHC and will end the cash flow issues.Accounts receivable affects the financial stability and growth of an organization. Accounts receivable is the payments from the patients for services rendered. The incoming money must be received within a reasonable time, if not EHC will not have sufficient money to pay their bills, this will place EHC in the negative. In health care, accounts receivable is an issue because patients do not pay their bills in adequate time. EHC??™s accounts receivable has a major factor because of the less income that is coming in due to reduced costs to insurance providers and less reimbursement from Medicare. Delinquent patients are not what have caused EHC??™s financial difficulties, but rather the reduction from insurance companies. Inventory has also problem due to the indication that there is ???unused equipment being placed in patients??™ rooms and not being billed??? (Simulation reference needed).

If appropriate inventory of medical equipment used for the patient and billing for these pieces of equipment does not occur, then there are some additional dollars that can be accounted for to balance the potential loss. Overall, it will not alleviate the financial situation at EHC, however, if this can be avoided, it will bring more money to Echo??™s cash flow statement every year and help to prevent future cuts. Cash Conversion Cycle is used to determine length of time to convert receivables to cash flow. This cycle it is very important in EHC hospital to measure its services and production process. The cash conversion cycle has the following steps that occur.

The steps are; Cash, purchase of resources, availability of resources, production/patient treatment, patient release, billing, receivable, and finally collection (Cleverly & Cameron, 2007). There is no such thing as a completely safe company. There are risks associated throughout the business world. Some are more risky however than others are. Healthcare is a very risky business to venture into, due to the constant changes in medicine along with the growing need for healthcare with reimbursement from insurance companies likes Medicare falling. The other risk facing EHC is not from a financial standpoint, but on the part of patient care. With the reduction of staffing and hiring untrained staff to replace them put the hospital at a great risk for a malpractice suit. Making sure every area is still properly covered with trained nursing staff is critical to the welfare of the patients.

An untrained staff member may be saving the hospital money in salary, but one mistake could cost EHC to lose all the money they saved, plus more. To help prevent this risk from occurring, proper training is going to vital to all untrained personal. Not only to know what they can and cannot do, but to know signs of a potential medical emergency happening and who to call as quickly as possible. Also training for the manager of each effected area to emphasize the importance to having enough properly trained nurses on staff at all times to ensure patient safety. EHC has gotten into this situation because of poor financial planning and has cause some employee to unfortunately loose their jobs, These measures needs to be viewed not as a solution to the problem but as a failure on their part that a band-aid has been placed over it.

Without taking necessary performance measures, EHC will be in this predicament again and may not be able to come to such a simple solution. The first and most important performance measure would be to hire a financial planner that will not only look at the short-term financing that has been done here, but able to look long term into the future of EHC and be able to help them thrive long into the future. The second would be to create a nursing program with another higher education institution that will allow the untrained staffing to become full-time nurses at EHC and already employees familiar will policies, computers systems, and will not have to go through orientation of the EHC. This program will also help to decrease the shortage of nurses that has only been worsened by the recent layoffs.