Venice Family Clinic is a prominent health facility in Los Angeles. This family clinic focuses on providing care to communities, families, and individuals. Its total revenue is about $45.9 million. The assets of this clinic are worth $38.8 million. This facility has more than 360 employees. Its revenue and asset trends are on an upward trajectory since 2014 (Venice Family Clinic). There is an increasing need for community clinics to respond to Covid-19. This facility needs to purchase an ambulance for transporting Covid-19 patients for specialized medication to other facilities. Thus, the purchase of a new ambulance is the capital budget item. It is vital for a health care facility to have ambulances for specifically meant for patients with Covid-19. This would ensure efficiency in responding to distress calls.
Proposal
Options
The Venice Family Clinic has three options: purchasing a new ambulance, trading-in, and leasing.
Option 1
The most preferred option for the health care facility is to purchase a new ambulance. It has total revenue of more than $45 million. The cost a new ambulance can cost up to $200,000. It is also important to include other costs such as licensing and insurance.
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Option 2
Trading-in is a more realistic option considering the cost of a new ambulance. The clinic can reach out to potential vendors who want prefer or have trade-in purchase arrangements. The clinic can save up to half of the initial amount of buying a new ambulance.
Option 3
Leasing is also a valuable financial tool for health care organizations. For instance, the clinic may lack the actual amount of buying a new ambulance. Buying an ambulance comes with overhead expenses such as insurance and maintenance costs. Thus, the clinic can use the budgeted funds to lease out one or two ambulances.
Financial Research
Option 1
A new ambulance can cost up $220,000 depending on the design and the manufacture (Weigand & Smith, 2013). Buying a new ambulance also comes with overhead expenses such as the cost of maintaining and insurance (Bailey, 2017).
Option 2
Trade-in costs can vary depending on a vendor. In reality, there is no market price of a trade –in. Factors such as the miles covered can influence the costs (Leich, 2019).
Option 3
The clinic should consider the available leasing options. Some of these options include capital and operating. In capital leasing, an organization enters into a close-ended contract with a vendor to make payments as agreed. This method is usually valuable if the clinic wants better quality and services. Operating lease allows an organization to make payments for a period of a time or residual value. The vendor can terminate services if the clinic fails to make payments. Overall, the company must fuel, pay the driver, and liable for any equipment (Leich, D. (2019).
Organizational Resources
Resources needed for option 2
The clinic must utilize its human, financial, and physical resources to implement the chosen option.
Human personnel/financial officer
The financial officer must assess the financial implications of purchasing and leasing an ambulance. The officer must make an informed decision based on the operating revenue and the clinic’s assets.
Financial resources
A trade-in must involve financial payments. For instance, the clinic must reach an agreement with the vendor the amount to pay to the trade-in a success.
Physical assets
The clinic must have an asset to vehicle to exchange or trade with a vendor.
Communication
Organizational meetings
The financial officer would use this opportunity to inform the clinic about the available resources in order to make a decision
The use of email and phone calls
The clinic needs to reach out to the identified vendors in order to discuss the price and available options.
Budget
Statements
The statements used include:
Revenue and asset trends
The revenues provide a detailed overview into the company’s expenses and its general financial health or performance.
Assets offer a picture of the clinic’s existing loans, inventories, and available investments.
Personnel salaries
Can provide a picture of the company’s current financial strength
Expenses
Trade in of the ambulance: $90,000
Annual salary of 2 ambulance drivers: $58,000
Annual salary of 2 ambulance attendants: $60,000
Annual cost of gas: $7,000
Annual cost of insurance: $6,500
Annual cost of first aid kits and protective clothing: $30,000
Annual maintenance costs: $9,000
Budgetary Accounts
Budgets accounts affected include:
Outpatient revenues
Salaries
Medical supplies
Repairs and maintenance
Insurance
Legal fees
Equipment
Equipment lease
Utilities
Reasoning
Expenses – The clinic will incur expenses in terms of salaries. For instance, it has to hire new ambulance drivers and attendants. Other care professionals must also accompany ambulance attendants during distress calls.
Supplies and other expenses – The clinic must prepare to equip the ambulance with medical supplies, including office equipment such as phones. Other expenses include fuel, insurance, and legal fees.
Ratios
RIO or Return on Investment – ascertains the profits for the proposed investment
Current ratio – determines the clinic’s stability to finance on-going or future investments.
Payback period – Calculates the amount needed to recover money spent for investments.
Ratio Calculations
Current ratio = the sum of current assets/current liability
Based on the excel budget, the sum of current assets = $2,584,984
Current asset liability = $2,939,984
= $2,584,984/$2,939,984 = 0.8
ROI = Net return/investment cost
Based on the excel budget,
$4,200,000-10,784,984 = 0.38
Payback period – initial investment/the flow of cash
Based on the excel budget,
$261,000 (cost the ambulance project) divide by $4,200,000 (yearly revenue) = 0.06, which is less than one month.
References
Venice Family Clinic . (n.d.). Cause IQ | Web-based tools and information on the nonprofit sector. https://www.causeiq.com/organizations/venice-family-clinic,952769432/
Weigand, O., & Smith, C. (2013, April 1). EMS groups take a hit as costs of ambulances rise . TribLIVE.com. https://archive.triblive.com/news/ems-groups-take-a-hit-as-costs-of-ambulances-rise/
Bailey, M. (2017, November 17). Ambulance trips can leave you with surprising — and very expensive — bills . The Washington Post. Retrieved June 6, 2020, from https://www.washingtonpost.com/national/health-science/ambulance-trips-can-leave-you-with-surprising--and-very-expensive--bills/2017/11/17/6be9280e-c313-11e7-84bc-5e285c7f4512_story.html
Leich, D. (2019, September 25). The secrets to ambulance financing: What to watch for & watch out for . JEMS. Retrieved June 6, 2020, from https://www.jems.com/2008/03/31/secrets-ambulance-financing-wh/
