Working Capital Challenges
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Thank you for assisting me in the past. I do need your assistance again. Can you help? How would you answer each questions stated below:
A). Health care organizations strive to manage working capital in such a way that they can reliably cover their short-term expenses while also getting the best possible benefits from their capital. In managing working capital, health care organizations face some common challenges, as well as other challenges that are particular to the institution. What challenges would a for-profit facility that has a constant stream of revenue face in managing its capital? How would these challenges differ from a military hospital that is given its funding at the beginning of the year?
B). In an health care organization what are the various challenges it might face in managing its working capital. What techniques or policies can it implement to effectively manage their working capital?
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Solution Summary
Working capital challenges are examined. How the challenges differ from a military hospital that is given its funding at the beginning of the year is determined.
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A) What challenges would a for-profit facility that has a constant stream of revenue face in managing its capital?
Many doctors are being forced to live off of Small Business Loans and Bank Loans to survive (Kavilanz, 2012). In addition, they're faced with the pressure to switch from a capitated payment environment (HMO/PPO/Medicaid) versus a fee-service environment just to make ends meet. A for-profit facility with a constant stream of revenue may have more interest payments to make on loans used to pay for any updated equipment; in addition, they may have difficulty liquidating current assets to pay off current liabilities in order to have enough working capital to invest in new current assets. As a result, depending on if the for-profit facility is getting paid via HMO, PPO, or Medicaid versus a base fee, the facility may not get paid as often as they would like through a capitated payment agencies and would have less cash on hand to invest in new current assets and the cash would have to be used to pay creditors, shareholders, or limited partners. In addition to cash issues, for-profit facilities may have challenges competing against government supported health facilities that may have cheaper prices than they have. As a result, the facility would have to spend more money in marketing or advertising to gain more customers or to keep the current customers interested to continue doing business with their facility. Also, the managers for ...
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