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INTRODUCTION In this case study, we will start by summarize the main issues in Community General Hospital and affirm the ongoing problems faced by the hospital. Root causes have been explained in details. SWOT analysis also included in order to identify its problems specifically and obtained high percentages of success in fulfilling their goals. The issues of the hospital can also be determined by evaluation through financial ratio analyses from the view of profitability, solvency and the movement of cash flow over the years. Some solutions will be recommended based on the issues by giving alternatives that had been proved and succeed by other health care industry. A complete strategy planning will also be included into this case study. Besides, pro forma statements also provided to Community General Hospital on how to recover bad debt by increasing revenue. This statement gives a concept for the hospital to understand its own real situations and achieve its financial goals in the future. Finally, as a financial consultant, several recommendations on the best solution and views on its future prospects will be given. In my opinion, the manager did not upgrade the hospitals facilities at the suitable time such as trained their staffs management knowledge. Besides, they wasted a lot of money in acquiring different administrators to cover their ongoing problems. However, the dire financial situation of the hospital became worse than before. Last but not least, the lack of knowledge in financial risk management also caused the Community General Hospital into financial distress. Without proper financial risk management it may lead to operational risk, credit risk and liquidity risk. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from external events such as World War II in this case. Besides, credit risk is economic loss from the failure of counterparty to fulfil its financial obligation. For instance, some of the patients did not pay their medicine fees due to poverty. Liquidity risk is the inability to manage unplanned decreases or charges in funding sources. From this case, we can see that the hospital was suffering fund deficit but it still purchased new equipment and installed new facility. Because of this, the bad debts increased and it leaded to liquidity risk eventually.
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CASE SUMMARY Dr. Noland Wright was nominated as a new manager of Community General Hospital. He is expert in medicine, not business. Whittaker Memorial Hospital was initial name for Community General Hospital in year 1914 which known as community-run hospital and serving the black population in Virginia. The hospital used federal funding to extend more facilities and scope to meet the synchronization of an economic expansion during World War II. In 1950s and 60s, the prosperous business come to the hospital. In the meantime, the hospital was threats to admit black patients to move on well-equipped and comfortable white hospitals in the area. It made the civic organization began concerned for the hospital survival. The hospitals reputation was started to be worse, it affected by quality of the health care. City Of Newport News will not fully responsible with the whole of hospitals costs, it just a help in small part of costs. In 1970s, the hospital took advantage on emergency fund which set up by the city. In that 1970s decade, debts became worse; the hospital suffers a lot with those losses. After 1982, patients had right to prefer the quality of facility in the hospital. Thus, they change the hospital name to Community General Hospital and equip lots of new facilities. They issue bonds and money in community pledge to allow the hospital survived. However, the deficit became worst throughout the year 1984. Private healthcare management firms keep searching for help however it just persists in short-lived. In year 1985, the hospital import new facilities and score a higher occupancy rate. Therefore, they were seven different administrators take charge of the hospital. The losses became even worst after year 1985. They tried to convince the hospitals supporters to overcome the problems. They have tried many ways included political avenues but it has failed. Be driven desperate, they think to sale the hospital to doctors investment group. The idea was rejected by the hospitals supporters. By 1990, they come to an agreement to file for bankruptcy because the overwhelmed of the debt. In year 1993, the hospital declared bankruptcy petition, relevant persons would be implicated. (354 words)

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PROBLEMS Based on the case study, Dr Noland Wright is graduated from medical study not business study. Furthermore, he has recently taken early retirement. In this situation, he is not suitable been responsible in administration aspect to manage the hospital financial problem because lack of experience and expertise. It will bring inactive administration to the hospital. The hospital is in critical situation, so it is difficult to develop a plan and make the needed financial decision done by Dr. Noland Wright. Hence, the hospital needed a professional financial planner to help in planning profitable proposal and making good financial decisions. As we can say that, financial future is very important which will affect the whole hospitals future gone into collapse, if the authority cannot manage well. Inactive administration of the hospital can also shown in between year 1979 and 1985 that seven different administrators had been in charge of the hospital but ultimately did not bring any profit and beneficial to the hospital. They did not make successful decision to cut the expenditures and losses, instead of continued difficulty in retaining continuous management. Secondly, Community General Hospital did not focus in debt management. The management team of the hospital did not expert and even having any knowledge on debt management. Thus, the losses and debts became more and more serious until it forced to grant its bankruptcy petition in year 1993. For example, the hospital started suffered losses and debts. The management team could not solve this financial problem immediately and effectively, and it brought to another budget deficit of $402, 000 in year 1983. This showed that they did not know how to do cash budget until finally came to budget deficit. They bought a lot of new facilities and equipments to expand the hospital without thinking of the ability of hospital. This is a big expenditure and it is a waste of money to the hospital since these facilities and equipments were unnecessary. Besides that, the solutions that done by the hospital in term of administrative and financial did not provide any help to the hospital for mitigate the rigorous financial situation. At the end of 1984, the fund deficit was $749,000 and it was continued losses after 1985. The worst debt was in excess of $20 million by 1990. All the debts, fund deficit and budget deficit illustrate that the hospital did not has effectiveness and efficiency in debt management and finally, it caused to bankruptcy.

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Thirdly, the hospital also faced image issue since there was desegregation movement in year 1960. The black population can admit to the white hospitals which have large and better equipped facilities. Before that, it was a community-run hospital serving the black population and in 1950s and 1960s the hospital enjoyed a busy business in the segregated health care industry. However, it was experiencing a falling reputation and started suffered from losses in year 1970. This is because the black population has various types of choices other than seek to black hospitals such as Community General Hospital. Due to falling census for the hospital, the quality of medicine and nursing service fall and resulting to deteriorate reputation. ROOT CAUSES Community General Hospital suffered financial distress for a long period is due to several root causes. One of the main root causes is World War II. During World War II, Community General Hospital enlarged its facilities by using federal funding in order to meet the needs of an economic expansion of the community. The desegregation movement in 1960s bought some imperils. Most of the patients were moved to better-equipped traditional white hospitals in the area. There was already existed a financial problem in the hospital before Dr. Noland Wright was appointed as manager of Community General Hospital. Since Dr. Noland Wright did not has financial background and was only training in medicine the financial management of the hospital was getting into the worse position. As a consequence, the hospital suffered losses and bad debts. Between 1979 and 1985, Community General Hospital was in charged by seven different managers. However, the hospital continued losses after 1985 and they failed to seek solutions to solve the ongoing problems. While some plans were suggested, they failed to access and rejected by the hospitals supporters.

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SWOT ANALYSIS Community General Hospital has several strengthens, weaknesses, opportunities and threats that provide evaluation for the hospitals financial performance. The SWOT analysis begins by identifying the internal strengthens and weaknesses of the hospital as well as the external opportunities and threats that affected the hospital. All potential issues will be discussed in order to seek solutions for the ongoing problems. Community General Hospital is one of the community-run hospitals that served the black population of Newport News in Virginia. Virginia is such a strategic place with high population that provides medical services for the nearby residents. During World War II, the hospital extended facilities and scope through federal funding because of the enhancement of commercial activity in order to meet the economic expansions of the community. This alternative had been provided competitive advantage for CGH emulates to their competitors. Apart from that, the hospital also acquired reliance from the American College of Surgeons in 1940s. The accreditation gained by the hospital would enhance its reputation directly. It also attracted more customers to receive treatment in hospital. Therefore, in the 1950s and 1960s, Community General Hospital experienced the bustle business in the segregated health care industry. The weakness of the hospital is difficulty in seeking some experienced managers in charge of the suitable position. Dr. Noland Wright was a new appointed manager of Community General Hospital to control its financial condition. However, he was training in medical not in business management. Consequently, he may get confused with the financial situation that he did not experienced before. In 1982, the civic board that guided the hospital became inactive. There had been seven different administrators had been employed between 1979 and 1985, however, they unable and faced difficulty in overcome the ongoing problems of the hospital. Meanwhile, they faced difficulty in convince the hospitals supporters to find alternatives to its dire financial position. Although there was an opportunity for the hospital to survive by selling it to a doctors investment group, the hospitals supporters refused to make deal with them. There were several threats that Community General Hospital has to solve. With the advent of the desegregation movement in 1960s, a lot of the black
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physicians were moved to better-equipped traditional white hospital due to their higher desired for better services they had access to. Therefore, the numbers of patients were declined which affected the profitability of the hospital. A deteriorating reputation also affected the quality of its health care to the public. The deterioration of its reputation, patients may reluctant to gained treatment from the hospital because lack of confidence to its services provided. Some of the suppliers began demanding cash payment for purchases so they may lack of liquidity to increase its fund that would aid the hospital to survive. Last but not least, after the desegregation, the competitors of Community General Hospital were increased. Patients would have more options to choose the better equipped hospital. Therefore, the competitive models of healthcare delivery would force patients to receive care in better or modern hospital instead of their local facility. After analysis the external threats, some external opportunities would help CGH for future development. The civic organization that governed the hospital began to concern about the survival of the hospital. While the City of Newport News was willing to aid, it was unable to obtain fully responsibility for the cost of hospital. In 1970s, the hospital applied for emergency fund that set up by the city to alleviate the hospitals financial situation. With a new facility, new location and future change of name from Whittaker Memorial Hospital to Community General Hospital, it would be an opportunity to give a brand new look for the patients that would help the hospital to survive. Besides, the hospital also issues $15 million bond and $1.5 million from community pledges in order to continue its operation. Political solutions for Community General Hospital were tried with some success, but ultimately, unable to help the hospitals condition. Since the main problem of the hospital was held internally, external alternative such as political avenues would not able to settle down the long term financial situation of the hospital.

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FINANCIAL RATIO ANALYSIS From the financial statements provided, we may analyze the financial condition of Community General Hospital in view of profitability, solvency and cash flow. Formulas of the items below are attached in Exhibit 1.1. A) Profitability There are three measures in evaluates profitability, profit margin, return on asset (ROA) and return on equity (ROE). In the income statement from 1994 to 1995, the total non-operating losses were declined from $908,502 to $876,817. This shows that overall profitability of the hospital was steadily deteriorate although its revenue was increased to 10.1 million in 1995 from $8.9 million in 1994. i. Profit Margin It is mostly used for internal comparison. A low profit margin indicates a low margin of safety which means higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Profit margin is an indicator of a company's pricing strategies and how well it controls costs. Differences in competitive strategy and product mix cause the profit margin to vary among different companies. It showed negative for both 1994 and 1995. It means that the percentage of losses decreased which is from -0.0883 to -0.0664. ii. Return on Asset (ROA) ROA is a measure of profit per dollar of assets. In 1994, ROA was -0.0743 and the amount increased to -0.0636 in the next year. The assets were declined from $10.6 million to $10.5 million between 1994 and 1995, so that the ROA also increased. Although CGH had high asset turnover, the poor management by Dr. Noland was led the hospital to bankruptcy in 1996. iii. Return on Equity (ROE) ROE is a measure of how the stockholders fared during the year. Our financial goal is maximizing shareholders wealth. ROE in accounting perspective is the true bottom-line measure of performance. The ROE in 1994 is 0.0497 and declined to 0.0419 in 1995. B) Solvency For solvency, it divides into short term and long solvency measures. Short term solvency includes current and quick ratio; for long term, it consist of total debt ratio, debt to equity ratio long term debt ratio and equity multiplier.
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Short Term i. Quick Ratio Quick ratio is a measure of a companys liquidity and ability to meet its obligations. It is also known as acid-test ratio and viewed as a sign of companys financial strength/weakness. The higher the ratio, the stronger the companys financial condition. There is an increase in quick ratio which is 0.5414 in 1994 to 0.6413 in 1995. Since the quick ratio of the hospital is lower than 1, the hospital was faced a bad period which unable to pay off its current debt. ii. Current Ratio Current ratio is measure of short-term liquidity. The current ratio is an indication of a firms market liquidity and ability to meet creditors demand. If the current ratio is too high, then the company may not be efficiently using its current assets or its short-term financing facilities. This may also caused problems in working capital management. We can say that low current ratio may not be a bad sign for a company with a large reserve of untapped borrowing power. Current ratio showed an increase in 1994 which is 0.6022 to 0.6754 in 1995, which the hospital still able to payback their debts in short-run. Long Term i. Total Debt Ratio Total Debt Ratio is the ratio that into account all debts of all maturities to all creditors. The total debt ratio increased from 2.4952 in 1994 to 2.5172 in 1995. They tried different ways to get fund in order to continue its hospital operation. Therefore, its debts were increasing year by year. ii. Debt to Equity Ratio Debt-equity ratio is a measure of a company's financial leverage. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt-equity ratio may be riskier, especially in times of rising interest rates. It is because the additional interest has to be paid out for the debt. Debt-equity ratio showed an increase from 1994 to 1995 which are -1.6688 and 1.6591 accordingly. This means that the hospital had been financing its growth with debts. The desegregation in the 1960s bought the hospital into fund deficit
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conditions until 1995. However, these conditions still not recover yet by getting emergency fund from the city in 1970. iii. Long Term Debt Ratio Long-term debt ratio is a way to determine a companys leverage. The greater a company's leverage, the higher the ratio. In general, companies with higher ratios are considered to be more risky because they have more liabilities and less equity. This ratio increased from 3.5887 in 1994 to 3.6771 in 1995. The hospitals current liabilities were improved to $4.5 million in 1995. This is due to the hospital demand borrowing in 1994 and started note payables with $40,000. iv. Equity Multipliers Equity multiplier was increased from -0.6688 in 1994 to -0.6591 in 1995. The equity multiplier ratio is used to measure a companys total assets against stockholders equity. It provides a way for investors to examine the level to which a company uses debt to finance its assets. A high equity multiplier indicates a more highly-leveraged company. The equity multiplier is like other leverage ratios. It can help investors to determine whether a company is heading for financial problems due to an excessive debt load. C) Cash Flow In the statement of cash flow, cash flow at the beginning of year is $193,907 in 1994 and end up with $791,893 for a net increase of $597,986. By 1995, cash flow at the beginning of year is $791,893 while cash flow at the end of year is $577,461. The net decrease in 1995 is $-214,432. As we can see, the cash flow from operating activities in 1994 is cash inflow which is $752,930. Expenses and losses in excess of revenues and gains in 1994 are cash outflow. However, the cash flow from operating in 1995 is cash outflow which is $461,838. Expenses and losses in excess of revenues and gains in 1995 are negative or cash outflow. The uses of cash are greater than sources of cash in operating activities. The cash flow from investing activities is cash outflow in 1994 and 1995 which are $-154,944 and $-55,258 accordingly. In 1994, there is no cash flow in the cash flow from financing activities. In 1995, it shows cash inflow from financing activities which is $13,893. To conclude, the net increase of cash and equivalents in 1994 is $597,986 but it decrease to $503,203 in 1995.
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SOLUTIONS TO THE PROBLEM After analyzing the problems that faced by Community General Hospital in the case study, as a consultant, we need to find out solutions to overcome the problems. For the problem of inactive administration, we need to restructure the organization according to the ability of employees. Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. As a risk management consultant of the hospital, executives involved in restructuring often hire a professional financial planner to assist in the transaction details and negotiation as well as manage the financial problem. It may also be done by a new financial planner hired specifically to make the difficult and controversial decisions required to save or reposition the company. It generally involves financing debt, selling portions of the company to investors, and reorganizing or reducing operations. In addition, restructuring the hospital can depend on the talent of employees. Employees can assign the work according to their ability. For example, employee who has advantage of his potential in management can assign him to administration department whereas employee who talent and hardworking in the part of look after people can assign his to nursing work. There are several steps in the restructuring process; firstly, ensuring the hospital has enough liquidity to operate during implementation of a complete restructuring. Secondly, we need to produce accurate working capital forecasts. Thirdly, we need to provide open and clear lines of communication with creditors who mostly control the company's ability to raise financing. Fourthly, updating detailed business plan and consideration. Apart from that, the hospital needs to set up two ways conversation between employer and employee. It is necessary to build a closer employer-employee relationship in the hospital so that everyone can understand each other well. Employer must always concern about the well being and matter of the employee whereas the employee must always obtain the latest news from the upside management. Employer can provide either financial reward in term of bonus and initiative or non-financial reward in term of praise. For the problem of image issue, first thing that the hospital should do is rebuild reputation to attract attention and confident again from the public and patient.
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The hospital should fulfil its obligation through making social responsibility. Social responsibility is one of the newest management strategies where companies try to create a positive impact on society while doing business. All companies have a two point agenda to improve qualitatively (the management of people and processes) and quantitatively (the impact on society). The hospital can do the social responsibility by two methods, there is either doing the whole thing by itself or cooperate with other counterparty. Doing whole thing by itself is means the hospital has the ability to finish one matter by itself without having help from other party. For example, Community General Hospital can organize blood donation in whatever places for the convenience of the public and donator under the condition of having a moveable ambulance. The hospital also can assign a few volunteer doctors and nurses go to rural village and old folks house to provide free medicine. Besides that, the hospital can collaborate with other hospital or institution to organize grant civic event in order to increase the hospitals reputation and save cost. Community General Hospital can take reference from Hospital Corporation of America (HCA) in the matter of fulfil social responsibility that HCA modified its policies to provide a discount to uninsured patients who do not qualify for Medicaid or charity care on January 1, 2005. These discounts are similar to those provided too many local managed care plan. Community General Hospital can also provide a friendly service and comfortable condition to attract patients. It can increase the revenue of hospital and fulfil its social responsibility. Indirectly, it can increase the hospitals name and reputation as well as attract the capital injection from investors. After observation the financial statement of the Community General Hospital, it usually can divide into two major conditions which it was faced such as financial and managerial problem. To overcome these problem, there are several solutions can recommend to the hospital. Through the financial problem, Community General Hospital was insisting to face the bad debts condition especially substantial increasing from $ 278,389 in year 1994 to $ 544,602 in year 1995. The income statement was strongly showed that Community General Hospital was lack emphasize on debt management. Bad debt occurred when the hospital failed to collect the payment from the patient. To reduce the collection risk, Community General Hospital can co-operate with the insurance company by introduces the insurance policy to patient for buying medical card. This
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is a win-win situation for that party related because insurance company can increase their range of customer and receiving good respond from the customers when hospital recommend insurance policy to their patients. For hospital, the amount of bad debts can be reduced through the patients who have the medical card because the payments are covered by the insurance company. Revenues will be increase due to reduce the bad debt. Besides that, the successful way of Hospital Corporation of America (HCA) to increase revenue can be the reference and role model to the Community General Hospital. For instance, Community General Hospital can provide a discount to the uninsured patient who does not have Medicaid or charity care. It will be a competitive advantage of the hospital to attract more patients. The incident of Hospital Corporation of America (HCA) has proven the way is successful after launched the new policy on January 1, 2005, the revenue of HCA hospital is having increased. This is shown at Exhibit 2.1. Facility and equipment are the assets of the hospital. Since the Community General Hospital had purchased new facility and equipment, it can use the assets to generate more income to the hospital. In private hospitals, they usually rent out their operating room to another doctor to do the surgery due to the facilities and equipments are more sophisticated. Hospital also can sell the useless equipment to another party as a source of hospitals income. But it will not be the proper way to generate income in long-term financing, because the primary income resource of hospital is generated from patient by giving the services not selling the equipment. In additional, increase of the operating expenditure will reduce the hospitals revenue. Due to this, Community General Hospital can try to find the nearest medical supplier to reduce the operating cost such as transportation cost. For instance, if the supplied medicine product is originated from overseas, hospital will need to pay more for the shipping cost and exchange currency rate medication. It will burden the transportation cost. Furthermore, it also needs external cost pay to the bank to get the letter of credit when trade with other company in overseas.

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STRATEGIC PLANNING In todays highly competitive environment, budgeting-oriented planning or forecastbased planning methods are needed for a hospital to survive and prosper. Strategic planning used to determine where a Community General Hospital is going over the next 10 years (1996-2005), it is help to define objectives and assesses both the internal and external situation to formulate strategy, implement the strategic, evaluate the progress, and make adjustment as necessary to stay on track. Mission & Objectives To provide and enhance accessible, comprehensive health-care services to our community that is quality-driven, customer-focused and cost-effective. To champion innovation and performance improvement To deliver a safe, quality and patient centred hospital care. Vision Be the Provider of Choice for the Community. Be the Employer of Choice for Our Staff. Be the System of Choice for Our Medical Staff. Values Integrity - We act openly and truthfully in everything we do. Collaboration - We work together cooperatively in contributing to the development of a high-performing exceeds what we can accomplish individually. Caring - We treat those we serve with concern, kindness and respect. Innovation - We believe that new ideas and timely access to information will lead to better health care. Health-focused - We are guided by the health needs of our population and our communities.

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Evidence-based - We use the best available evidence and experience in making decisions. Trusted- We act in a way that engenders trust and respect among members, partners and our staff. ENVIRONMENTAL SCAN This strategic planning has been developed to accomplish to our vision, mission and values with long and short term goals and objectives. This is our strategic priorities for a ten-year period, and it will be updated annually. The environmental scan included three components such as internal analysis to the firm, industry analysis and PEST analysis which are political, economic, social and technological environment constantly influence and change dynamic environment. The Environment of Community General Hospital Environmental factors internal to the hospital usually can be classified as strengths (S) or weaknesses (W), and those external to the hospital can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. There are numerous internal factors in this plan, including: Evaluating performance by Health care providers in quantitative information. Quality and patient safety have emerged as major priorities for hospitals, insurance companies and the general public. Increasing the demand from residents there for our hospital because of Virginia demographics point to a growing and aging population. Community General Hospital existing care infrastructure is adequate in 1940s. This results in access to the appropriate level of care and decreases costs. There are shortage of skilled workers and healthcare workers in Community General Hospital. Ability to fund upgrades, expansions, recruit and retain employees and physicians will become more challenging and limit because of inadequate provider payments from investors, insurance companies and public programs.

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The civil service culture presents other unique challenges for healthcare organizations, such as the acceptance and speed on change and ability to innovate. Here are some macroeconomic factor (PEST analysis) including political,

economic, social and technology factors that we have to concern to in surrounding hospital. Political factors include government regulations and legal issues and define both formal and informal rules under which the hospital must operate. Some examples include: tax policy, employment laws, environmental regulations, trade restrictions and tariffs. Economic factors affect the ability to pay of potential customers and the hospital's cost of capital. The following are examples of factors in the macro economy: economic growth, interest rates, and inflation rate. Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety. Technological factors can provide comprehensive treatment or health care to their customers the complex technology, some technological factors include: R&D activity, automation, technology incentives and rate of technology change.

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STRATEGY FORMULATION After all the discussion, the essential step that Community General Hospital needs to be taken is to change the administration. Although Community General Hospital has changed several times of administrators, but still this is the vital step that needs to be taken. Firstly, the admission criteria of the administration need to be tightening. For example, a Professional Marketing Manager is needed instantly to rebranding the hospital in order to enhance the reputation. Community General Hospital can join venture to do social responsibilities with another hospital in order to share the cost that needed. Although this activity is costly, however it is necessary to be done. Next, we need to restructure the whole organization of the hospital. The organization need to be restructured base on their criteria so that they can utilize their knowledge to help the hospital. When the reputation of the hospital has been grown, it will ease the financial planner to generate more resources. By increasing the reputation, the hospital will have more opportunity to comfort the outsiders. This is important for the hospital to restore liquidity and rehabilitate so that it can continue its operations. Equity funding is needed to be done to generate more sources to the hospital. The benefit of equity funding is the hospital can generate more funds but no need to pay interest to the investors. When there are more investors invest into the hospital, there will be excessive resources to overwhelm the solvency problem. Since Community General Hospital has purchased excessive facilities, thus, we can sell some of the assets such as machine or property to generate funds. The debt for Community General Hospital is extremely high so debt restructuring is needed instantly to reduce and renegotiate its delinquent debts in order to improve and restore the liquidity so that it can continue its operations. In order to reduce cost, we have tried to identify new suppliers which are nearer to our hospital to reduce the transportation cost. With the lower cost, Community general Hospital will have a cost advantage against its competitors by producing same services in a lower cost. This will help to increase the number of customers. Meanwhile, to reduce the probability of non-paying patients, Community General Hospital has affiliation with AIA insurance company. For the patients that have bought any medical insurance, the cost will be bare mostly by the insurance
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company. Besides, Community General Hospital also indulges themselves as a medical adviser to certain corporate companies. In order to need more customers, Community General Hospital is trying for more corporate companies. To defend against competitive forces, several steps of generic strategies also have been made to reduce the costs for the hospital. STRATEGY IMPLEMENTATION On top of that, strategy implementation also is essential. Community General Hospital will provide several technical training programs to enhance the ability of the employees. Community General Hospital will implement regularly schedule programs. By implementing routine programs such as short training forums or discussion, employees will be exposed to the condition of the hospital regularly. Besides, Community General Hospital will run managers training analysis workshop to assess their department training needs, they will be exposed by the latest knowledge and information that can continuously compete with the competitors and to avoid losses to the hospital. Community General Hospital will also develop a community outreach program. By establishing network within the community, the Technology Training Program will gain a reputation for being innovative resource. Workshop for doctors also will be provided to improve the criteria to the doctors. With the latest knowledge, doctors can provide excellent service to the customers. Without the staff, there are no ways to success. In order to achieve the mission and objectives, incentives like provide a luxuries trips to the top ten employees. Besides all of the employees will have health and medical insures by the AIA insurance companies. Although this step is costly, however, it is a must to be done to motivate and provide self-enrichment to the employees to perform more in their workforce to achieve the objectives of the hospital and keep the progression of hospital on track.

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PRO FORMA ANALYSIS Pro forma financial statements are an analysts best guess as to how a target company will perform in the future. These estimates reflect the cost reductions and synergies, as well as revenue enhancements. In the process of developing pro forma financial statements, it is a necessity to make numerous assumptions about events that have yet to occur. The preparation of the pro forma statements is normally follows six-step process. Forecast revenues for the target company. Forecast operating expenses. Forecast the change and composition of total assets on the balance sheet. Set total equities equal to total assets and forecast the long-term financing. Complete the pro forma income statement and balance sheet by forecasting interest costs and income taxes. Derive the pro forma statement of cash flows from pro forma income statements and balance sheets. To illustrate the types of forecasting and modeling decisions inherent in the preparation of pro forma financial statements, we begin with Exhibit 1 and 2 given, which contains the condensed historical income statements and balance sheets of Community General Hospital for year 1994 and 1995 respectively. We assume that the revenue growth will be at 25% after the hospital implemented solutions that guided by financial professions. In 1995, the hospital expensed around 95% in its operating expenses over the sales. But, in the next year, we assume that the expenses will reduce by 25% through the cost reduction plans. Excess of revenue will be treated as retained earnings in income statement. We use the common-size percentage from balance sheet 1995 to forecast the changes of current assets, current liabilities and net fixed assets will be as direct proportion to sales. In addition, we assume that the amount of other assets, fund deficit and nonrecurring bad-debt write-off are remained constant over the years. The value of debt in balance sheet is the long term liabilities, which we sum up the capital lease and liabilities subject to compromise. By doing so, we can easily observe that amount of debt will be decrease due to incremental of revenue and reduction of operating expenses.

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Sales growth Expenses/sales Interest rate (debt) Depreciation rate Current assets/sales Current liabilities/sales Net fixed assets/sales Interest rate (cash)

25% 70% 0.48% 10% 25% 45% 68% 8%

Table above shows the assumptions made when we propose the pro forma financial statements. Community General Hospitals pro forma results from year 1996 to 2005 presented in Exhibit 3.1 to 3.2. In pro forma income statement, we may observe that the expenses & losses in excess of revenues and gains had been changed from deficit value to positive value over the years. Incremental revenue and cost reduction have covered the cash outflow activities and proposed to gain in future. For pro forma balance sheet, the amount of cash became zero from year 1996 until 2004 because cash is used to pay bills and recover debts until debts became zero at 2005. Then, excessive cash will be invested to earn interest on it. No cash in hand may be dangerous and unrealistic, but it is just a forecasted financial statement. CONCLUSION For the managerial aspect, as a financial consultant of the Community General Hospital, we suggest that the hospital should have good leadership in the management team. The leaders must have sufficient knowledge and experience to manage the operation of the hospital and employees. Effective leaders manage performance by setting their expectations clearly and concisely as well as make right decision in right condition. For the financial aspect, as a good consultant should know the hospitals financial situation clearly when overcome the problems such as generate more revenue instead of reduce the bad debt. Through the financial ratio analysis, SWOT analysis and strategic planning, we can more able to understand the weakness and the strength of the hospital. In short, Community General Hospital is facing significantly crisis problem. All solutions needed to be done in financial and managerial aspect instantly. Strategic planning is vital to budgeting and forecasting the hospital to survive and establish a future growth. With all the aspects, Community General Hospital will definitely able to overwhelm the problems.

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REFERENCES
CPACLASS. (n.d.). Accounting Ratios for Financial Statement Analysis. Retrieved 1 March, 2012, from http://cpaclass.com/fsa/ratio-01a.htm Hospital Corporation of America. (n.d.). Annual Reports. Retrieved 1 March, 2012, from http://media.corporate-ir.net/media_files/irol/63/63489/pdfs/05AnnualReport.pdf QuickMBA. (n.d.). The Strategic Planning Process. Retrieved 2 March, 2012, from http://www.quickmba.com/strategy/strategic-planning/

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APPENDIX Exhibit 1.1 - Formula of Financial Ratio A) Profitability i.

Pr ofit m arg in

net income sales

1995 671004 PM 0.0664 10112009

1994 787446 PM 0.0883 8914668

ii.

Re turn on asset ( ROA )

net income total asset

1994 787446 ROA 0.0743 10600209

1995 671004 ROA 0.0636 10543410

iii.

Re turn on equity ( ROE )

net income total equity

1994 787446 ROE 0.0497 15849492 B) Solvency Short Term i.

Quick ratio

1995 671004 ROE 0.0419 15996631

current assets inventories current liabilities

1994 2696392 QR 0.6022 4477630

1995 3065309 QR 0.6754 4538653

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BWFF 3193 SEMINAR IN FINANCE

ii.

Current ratio

current assets current liabilitie s

1995 3065309 277191 CR 0.6143 4538653

1994 2696392 271997 CR 0.5414 4477630 Long Term i.

Total debt ratio

total assets total equity total assets

1994 10600209 15849492 TDR 10600209 2.4952

1995 10543410 15996631 TDR 10543410 2.5172

ii.

Debt / Equity ratio

total debt total equity

1994 26449701 DER 1.6688 15849492 iii.

1995 26540041 DER 1.6591 15996631

Long term debt ratio

long term debt (long term debt total equity)

1994 21972071 LTDR 21972071 15849492 3.5887

1995 21972071 LTDR 21972071 15996631 3.6711

iv.

Equity multiplies

total assets total equity

1994 10600209 EM 0.6688 15849492

1995 10543410 EM 0.6591 15996631

22

BWFF 3193 SEMINAR IN FINANCE

Exhibit 2.1 Income Statement of HCA

23