Essay Title: 

For a non-profit health services organization, how can the need to have revenue in excess of expenses be balanced with the organization’s mission and values (providing health care to all without regard to the patient’s ability to pay)?

March 20, 2016 | Author: | Posted in communications and media

A non-profit organization is described as an entity that exists not for the purpose of making money , but for another defined and usually charitable or developmental purpose (Rosenbaum et al , 2003 ,

. 4 . The organization is a business entity and , apart from having a tax-exempt status , operates within the parameters designated for business . The Sisters of Mercy Health System of St Louis is such an organization , and in to fulfill the component of its underlying mission that requires that it serve all patients even if they cannot pay (2003 , the hospital must [banner_entry_middle]

maintain a financially secure standing in a cut-throat business world . The hospital maintains fiscal integrity by implementing an array of strategies to both care for its community and maintain fiscal viability . The following analysis will show how the Sisters of Mercy Health System is able to survive in a competitive and risky market

Strategic management is very important to the health of any firm (David 2005 , and a clear strategic direction and a rigorous focus on accountability have contributed to Sisters of Mercy ‘s strong financial position over the years . Mercy continues to maintain the outstanding credit rating of Aa1 , the highest assigned by Moody ‘s for any healthcare system . This rating describes how risky the system ‘s fixed income is deemed to be , and measures the likelihood that an obligation might be dishonored (Moody ‘s Investor Service , 2006 . The following ratios , as of and for the year ended June 30 , 2005 , as derived from the FY 2005 audited financial statements , illustrate the System ‘s sound financial condition

Long-term Debt to Capitalization 20 .5

Maximum Annual Debt Service Coverage 4 .86 times

Cash to Debt 2 .05 times

Unrestricted Days of Cash on Hand 160 .1 days

Return on Assets 3 .3 It can be noted that the amount of capital financed through debt (20 .5 represents only a small ratio of the firm . This factor demonstrates that the system operates at low risk (Morgenson Harvey , 2002 . The debt service income is shown to be almost five times the debt , and the amount of cash available in relation to the debt is over twice as much . With 160 days cash on hand , the company stands well above the recommended number 60 ) that indicates financial health and viability (Burke , 2002 , and the percentage return on assets indicates the general profitability of the firm (Morgenson Harvey , 2002

Despite these strong ratios , Mercy faced several challenges in 2005 Along with other healthcare organizations , revenue realization continued to be a focal point as a result of continuing increases in self-pay revenue as a percent of all other revenue

and a decrease in self-pay reimbursement . Despite this challenge , days in accounts receivable were reduced by 9 to 55 days below that of the previous year , bringing this number into the range of healthy organizations (Holzberg Holton , 2003 . Overall , Mercy showed a 7 .5 increase in net patient service revenue from FY 2004 to FY 2005 , with a 1 .6 increase in acute… [banner_entry_footer]

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