1. Create a common size income statement trend using those given in the EMC case

Question

1. Create a common size income statement trend using those given in the EMC case above.

a. Analyze and report the findings

b. Is your strategy the same or different having seen the results? Why?

Exhibit 13/6: Emanuel Medical Center income Statements, Fiscal Years 1997 to 2002 (in S thousands) 1997 1998 999 2000 2001 2 2001 2002 Net Patient Revenue Other Revenue Premium Revenue Total Operating Revenue Operating Expenses: 53,787 46,654 46,329 46,700 47,457 65,653 939 1,084 1,022 1,192 1,265 7,115 7,198 8,187 ,6661.715 55,772 54,590 54,466 55,971 56,145 68,560 720 821 Salaries and Wages Employee Benefits Professional Fees Supplies Purchased Services Depreciation Utilities nsurance Interest Expense Bad Debt Other 21,516 22,336 22,339 23,640 25,274 27,506 7,405 8,486 8,336 7,883 7,887 9,073 2,749 2,590 1,783 2,271 2,368 4,643 8,879 8,981 8,487 8,750 9,093 10,081 3,603 2,981 2,749 2,897 3,1953,774 3,563 3,627 3,774 3,768 3,623 3,533 677 527 475 1,389 1,978 2,627 2,938 4,357 6,155 1,424 1381 1682 1,877 2,124 2,.248 53,587 55,784 54,801 56,702 60,284 68,692 668 591 1,552 ,777 ,765 1,584 1,303 681 826 727 920 689 405 667 393 Total Expenses Operating income Nonoperating Revenue 2,185 1,194 (335) (4,139 132) Interest and Dividend Income 9681,217 1,284 1465 2,620 2,084 Realized Gains (Losses) on Investments 1,005 2,733 3,578 7,885 5,707 (2,160) 390_299_268_415 489688 2.363 4,249 5,130 9,765 8,816 612 480 Contributions Total Nonoperating Revenue Net income Unrealized Gains on Investments Increase in Net Assets Acute and ICU Patient Days (Actual) ED Visits (Actual) 4,548 3,055 4,795 9,034 4,677 1,792 1,055) 2,394 2,848 (8,357) (2,676) 6,340 2,000 7,189 11,882 (3,680) (2,196) 26,048 25,342 23,895 25,330 25,051 27,006 36,214 34,363 32,07 37,485 38,931 41,145

Explanation / Answer

1997 1998 1999 2000 2001 2002 1997 % 1998 % 1999 % 2000 % 2001 % 2002 % Net Patient Revenue 53787 96.44 46654 85.46 46329 85.06 46700 83.44 47457 84.53 65653 95.76 Other Revenue 720 1.29 821 1.50 939 1.72 1084 1.94 1022 1.82 1192 1.74 Premium Revenue 1265 2.27 7115 13.03 7198 13.22 8187 14.63 7666 13.65 1715 2.50 Total Operating Revenue 55772 100.00 54590 100.00 54466 100.00 55971 100.00 56145 100.00 68560 100.00 Operating Expenses: Salaries and wages 21516 38.58 22336 40.92 22339 41.01 23640 42.24 25274 45.02 27506 40.12 Employee Benefits 7405 13.28 8486 15.54 8336 15.30 7883 14.08 7887 14.05 9073 13.23 Profeesional Fees 2749 4.93 2590 4.74 1783 3.27 2271 4.06 2368 4.22 4643 6.77 Supplies 8879 15.92 8981 16.45 8487 15.58 8750 15.63 9093 16.20 10081 14.70 Purchased Services 3603 6.46 2981 5.46 2749 5.05 2897 5.18 3195 5.69 3774 5.50 Depreciation 3563 6.39 3627 6.64 3774 6.93 3768 6.73 3623 6.45 3533 5.15 Utilities 681 1.22 727 1.33 668 1.23 689 1.23 667 1.19 677 0.99 Insurance 826 1.48 920 1.69 591 1.09 405 0.72 393 0.70 527 0.77 Interest Expense 1552 2.78 1777 3.26 1765 3.24 1584 2.83 1303 2.32 475 0.69 Bad Debt 1389 2.49 1978 3.62 2627 4.82 2938 5.25 4357 7.76 6155 8.98 Other 1424 2.55 1381 2.53 1682 3.09 1877 3.35 2124 3.78 2248 3.28 Total Expenses 53587 96.08 55784 102.19 54801 100.62 56702 101.31 60284 107.37 68692 100.19 Operating Income 2185 3.92 -1194 -2.19 -335 -0.62 -731 -1.31 -4139 -7.37 -132 -0.19 Nonoperating Revenue Interest & Dividend Revenue 968 1.74 1217 2.23 1284 2.36 1465 2.62 2620 4.67 2084 3.04 Realised Gains(Losses)On Investments 1005 1.80 2733 5.01 3578 6.57 7885 14.09 5707 10.16 -2160 -3.15 Contributions 390 0.70 299 0.55 268 0.49 415 0.74 489 0.87 688 1.00 Total Nonoperating Revenue 2363 4.24 4249 7.78 5130 9.42 9765 17.45 8816 15.70 612 0.89 Net Income 4548 8.15 3055 5.60 4795 8.80 9034 16.14 4677 8.33 480 0.70 Unrealised Gains on Investments 1792 3.21 -1055 -1.93 2394 4.40 2848 5.09 -8357 -14.88 -2676 -3.90 Increase in Net Assets 6340 879.68 2000 2729.50 7189 757.63 11882 471.06 -3680 -1525.68 -2196 -3122.04 Acute & ICU Patient Days(Actual) 26048 2.141 25342 2.154 23895 2.279 25330 2.210 25051 2.241 27006 2.539 ED Visits(Actual) 36214 1.540 34363 1.589 32071 1.698 37485 1.493 38931 1.442 41145 1.666 1997 1998 1999 2000 2001 2002 % % % % % % Net Patient Revenue 96.44 85.46 85.06 83.44 84.53 95.76 Other Revenue 1.29 1.50 1.72 1.94 1.82 1.74 Premium Revenue 2.27 13.03 13.22 14.63 13.65 2.50 Total Operating Revenue 100.00 100.00 100.00 100.00 100.00 100.00 Operating Expenses: Salaries and wages 38.58 40.92 41.01 42.24 45.02 40.12 Employee Benefits 13.28 15.54 15.30 14.08 14.05 13.23 Profeesional Fees 4.93 4.74 3.27 4.06 4.22 6.77 Supplies 15.92 16.45 15.58 15.63 16.20 14.70 Purchased Services 6.46 5.46 5.05 5.18 5.69 5.50 Depreciation 6.39 6.64 6.93 6.73 6.45 5.15 Utilities 1.22 1.33 1.23 1.23 1.19 0.99 Insurance 1.48 1.69 1.09 0.72 0.70 0.77 Interest Expense 2.78 3.26 3.24 2.83 2.32 0.69 Bad Debt 2.49 3.62 4.82 5.25 7.76 8.98 Other 2.55 2.53 3.09 3.35 3.78 3.28 Total Expenses 96.08 102.19 100.62 101.31 107.37 100.19 Operating Income 3.92 -2.19 -0.62 -1.31 -7.37 -0.19 Nonoperating Revenue Interest & Dividend Revenue 1.74 2.23 2.36 2.62 4.67 3.04 Realised Gains(Losses)On Investments 1.80 5.01 6.57 14.09 10.16 -3.15 Contributions 0.70 0.55 0.49 0.74 0.87 1.00 Total Nonoperating Revenue 4.24 7.78 9.42 17.45 15.70 0.89 Net Income 8.15 5.60 8.80 16.14 8.33 0.70 Unrealised Gains on Investments 3.21 -1.93 4.40 5.09 -14.88 -3.90 Revenue/Increase in Net Assets 879.68 2729.50 757.63 471.06 -1525.68 -3122.04 Acute & ICU Patient Days(Actual)Revenue/Days 2.14 2.15 2.28 2.21 2.24 2.54 ED Visits(Actual)Revenue/Days 1.54 1.59 1.70 1.49 1.44 1.67 a.)Findings based on %ages Patient revenue has decreased after 1997 and has started to increase in 2002 Premium revenue has come down in 2002 Salaries& employee benefits form the major chunk of opearting expenses followed by supplies & purchased services & depreciation. Operating income is still negative in 2002 - recovering after posting the least Op.income in 2001. Non-op.revenues had been consistently increasing till 2000 & decreasing thereafter -least in 2002 Op. Income is negative after 1997 ,but Net income is positive because of non-op. revnues. Per day revenue generated for Acute& ICU & ED visits are almost maintained. b) Comparing peformance over different years is meaningful when expressed against a common denominator- here- total revenues. It gives a very clear picture about different components of revenues and expenses which can be utilised for analysis and control purposes. So, this strategy perfectly fits the bill.

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