Assessing Debt Capacity During an Economic Downturn
Client/Profile
Community hospital
Challenge/Situation
To evaluate the ability of the hospital to finance a contemplated capital renovation based on projected volumes, profitability, and overall financial position. As a result of the economic downturn, capital availability was extremely limited, even to financially solvent entities.
Process
The hospital had plans to launch new and enhanced product lines, which would directly impact utilization and profitability. Veralon worked with the Hospital to develop patient volume estimates which reflected historical trends, current and recent developments in care patterns, strategic and programmatic plans and the facility plan for the renovation project. We developed prospective financial estimates for three different scenarios, a comprehensive financial ratio analysis, and comparison to industry benchmarks.
Results
Veralon provided the client with a succinct summary of the financial impact of the capital renovation project, prospective financial ratios and position for the institution and its likely overall creditworthiness. As a result, the hospital’s management and board were comfortable with moving forward on the project.