Health organizations have different ways of implementing a specific approach to the management of working capital. Despite the differences in approaches, the aim of each organization is to have a positive working capital so as to meet its short-term obligations within the shortest time possible. This paper is going to analyze the working capital of the Saint Peter’s University Hospital in the United States, the factors that impact it, and if it is sufficient for day-to-day operations of the organization.
Computation of working capital is based on the current assets and liabilities of a particular organization (Zelman, McCue, Glick, & Thomas, 2014). The financial year in consideration is the year ended June 30, 2015. The total current assets as at the end of the financial year were $113,678,000 while the total current liabilities were $ 91,331,000 (Saint Peter’s University Hospital, 2015). Based on the definition of the working capital, it is obtained by subtracting $ 91,331,000 from $113,678,000 which gives a value of $22, 347,000. The working capital requirements can be affected by certain aspects such as regulations, business plans, and economic dynamics. Regulations such as the affordable care act would increase the number of people accessing healthcare. In turn, this may have an effect on the current assets in terms of third party payer settlements and patient account receivables. The business plans of the organization have an effect on the working capital since the budget predictions assist in estimating working capital requirements. Finally, the economic dynamics have an effect on the working capital due to economic fluctuations which result in the need of inducing more fixed capital that in turn leads to the requirement of more working capital (Altig, Christiano, Eichenbaum, & Linde, 2011). Since the working capital is positive and large, it is sufficient to meet the business operations of the organization.
Working capital is an important aspect in determining the efficiency, liquidity and overall health of an organization. The working capital requirements of the Saint Peter’s University Hospital have been affected by regulations, business plans, and economic dynamics. Despite this, the organization has been able to maintain a positive working capital which has been sufficient to its business operations.
References
Altig, D., Christiano, L. J., Eichenbaum, M., & Linde, J. (2011). Firm-specific capital, nominal rigidities and the business cycle. Review of Economic Dynamics, 14(2), 225-247.
Saint Peter’s University Hospital. (2015). 2014-2015 annual report for Saint Peter’s University Hospital.
Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. S. (2014). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (4th ed.). San Francisco, CA: Jossey-Bass.
