Case Scenario:
Cactus Health, Inc. is a large healthcare system in Sun City, Arizona, with several lines of business, including health care service delivery as well as performing as a managed care organization with the Medicare business. Cactus Health, Inc. has been in existence for twelve years. The corporation began when a small group of investors purchased several nursing facilities and assisted living facilities. After much success in managing the nursing facilities and assisted living facilities, with positive patient outcomes, positive cash flow, and substantial net profits, investors approached Cactus Health, Inc. to partner with them in other healthcare business ventures. Through these ventures, Cactus Health, Inc. earned substantial assets and established outstanding credit. Cactus Health, Inc. is not currently participating in any outside business ventures.
Cactus Health, Inc. operates the following health care facilities accompanied by some current financial information about each line of business:
Two small acute care hospitals One of the acute care hospitals made a substantial profit while the other hospital had a net loss. The hospital had three very large unanticipated expenses that negatively impacted the bottom line. Had it not been for these unanticipated expenses, the hospital would have made at least a marginal profit.
Four staff model community health centers Making a significant profit.
Twelve nursing homes Revenues have maintained while the costs have risen resulting in marginal profits.
Seven assisted living centers for the elderly Revenues have maintained while the costs have risen resulting in marginal profits.
Other various small healthcare facilities (i.e., home health)
Cactus Health, Inc. also manages the healthcare of 29,000 Medicare service provider individuals. Of the 29,000 individuals, 19,000 are exclusively Medicare eligible. The remaining 10,000 have additional insurance either through a private plan or through a Medicaid health plan. The recipients who are enrolled with Cactus Health, Inc. primarily live in Sun City. The population in Sun City, Arizona, is mostly comprised of retirees with a median age of 68, average annual income is $52,000, 85% have Medicare health insurance, and 22% of those have a second health insurer. The satisfaction surveys for the service provider participants shows a steady increase in satisfaction over the past few years.
Cactus Health, Inc. hired you as the Administrative Director for one of the Sun City, Arizona, assisted living centers. The new position is faced with the following challenges:
There are no plans for managing or reducing risk within the organization.
Clinical resources are not correctly allocated according to care priorities.
Financial and professional resources are not clearly identified and there is no clear strategy for potential capital sources.
There are no expenditure guidelines.
Financial and clinical resources are not efficiently utilized
There are various proposals that have been brought forward regarding how the company should use and allocate its capital resources. Based upon the written scenario, you have been asked to help decide how any new capital should be allocated for the facility.
Problem:
Write a brief issue paper that discusses, at a macro level, recommendations on how the company's current assets could be utilized to maximize the use of its capital surplus.