Other Essay Example | Topics and Well Written Essays - 1000 words - 1

Other - Essay Example Moreover, debt is the cheapest source of financing for long-term since it provides deductibility of interest proportion to tax and during inflation, the rate of debt repayment is cheaper. Moreover, the capital access will help to keep this facilities updated with information, technology and improve the quality initiates. However, once considered in higher levels, it will pose financial risks in the attempt to meet interest repayments and the principal. Accordingly, it becomes difficult in raising funds leading to elevated capital cost (Anwer.com, 2013). According to Fitch Rating CEO, John Well (2013), hospitals are becoming sophisticated by the use of complex debts to achieve lowered cost of debt but with certain risk of not all hospitals can afford to take the debts. As a result, Health Care Financial Management Association CEO (2013) suggests that their issue will not be different to personal investment and to avoid the succumbing to various risks, the management is being advised o n scrutinizing debt structures and the current trends in the capital market. As result, they should always be considered as long as the returns it gives are much higher than its cost. Additionally, for the usage of debt to be effective, the management in health care organizations needs to know the current changes in capital market and the currently available types of finances (Lee, 2013). Case Scenario Market, Strategic, and Financial factors Improve a Hospitals Credit Rating Moody Investor Service, (2009, as cited in William, Michael, & Noah, 2009). According to William, Michael, & Noah, (as cited in Moody Investor Service, 2008), Moody Investor Services improved the credit rating of tax-exempted bonds of Evanston Northwestern Healthcare from Aa3 to Aa2. According to them, they cited improvements to have been achieved from improved factors such as market, strategic and financial aspects. As a result, Evanston has expanded in various sectors such as the patient base since it has bee n able to align with several specialists’ medical groups. Moreover, it financial earnings has improved to a cash flow of 4.2 times payment at the debt service. As a result, in 2007, the hospital had managed to raise it cash flows to 10% compared to 2006, which stood at 9.4%. in fact, the accrued raised gaining were observed to have risen from the expanded medical group, more revenue from outpatient, and establishment of current, advanced technologies in information sector. Additionally, the hospital is cited to be maintaining strong positions of liquidity whereby the unrestricted and restricted capital sums up to $1.6 billion, which can be explained as cash on hand for 509 days. As William, Michael, & Noah, (2009, as cited in Moody Investor Service, 2008) suggests, Over the next few years, the hospital is expected to increase its capital outlay to be more than $100 each year. As a result, the capital will be used for expansions or replacement needed in care unit, operation ro oms, and centers for treating cancer. However, William, Michael, & Noah, (2009, as cited in Moody Investor Service, 2008) concludes that Moody has a concern over the competition in hospitals that are increasing their service areas and Evanston depend only on commercial that have seen its patient revenue rising to 25%. Pros