you are CEO newly appointed for the Continuing Care Retirement Community that is under the Hospital System.

In the transcripts provided, you are CEO newly appointed for the Continuing Care Retirement Community that is under the Hospital System. A board retreat is coming up and you must help with a critical decision: relocate the facility to a more suburban area, or stay in its current metropolitan area location. Submit a summation of three things you learned from the scenario. Be sure to do additional research in order to fully explain the concepts you choose to discuss. Your submission should be of graduate quality, in APA format, and fully referenced (a minimum of 3 peer-reviewed references).

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 1

To Move or Not to Move


In this scenario the Student fills the role of a newly appointed CEO, for the Continuing Care Retirement Community that is under the Hospital System from previous Navigate Scenarios. A board retreat is coming up and the Student must help the board with a critical decision: Relocate the facility to a more suburban area, or stay in its current, metropolitan area location. As the scenario begins, the Student meets with friend and mentor, Cheryl Noki, the former CFO of the Hospital System who promises to help the Student make sure this strategic decision is made with proper consideration given to the financial implications. The Student meets with a board member for coffee to get her input and to learn that most of the board members feel that if the facility does not move, it will not survive. Next, the Student hears from the Chairman of the Board who discusses other problems such as lower pricing necessitated by an increasingly crowded and competitive market, as well as a dramatic reduction in realized revenue due to a decrease in Medicare/Medicaid reimbursements. The Student reviews all of this new information with the Mentor and feels strongly that a move is

necessary in order for the facility to become competitive again. The mentor explains the key target

ratios that the Board is responsible for, most importantly the growth rate in equity (GRIE) in order to

convince the Student that a more financially feasible alternative should be considered. The Student is

then able to suggest to the Board that reasonable facility improvements can be made to the current

location and that, if management could focus on the key financial ratio targets and improving operations

related to it, they can not only survive while paying for these facility improvements, but thrive in the

future, too.


1. Cheryl Noki

2. Donald Bailey

3. Natalie Jones

4. Casper Diggs


1. Retirement Home Sitting Room

2. Student’s Office

3. Conference Room

4. Student’s Home

5. Coffee Shop

6. Hospital Cafeteria

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 2

Scene 1: Meeting Your Mentor

The Student meets Cheryl Noki in the sitting room of the retirement facility. They discuss the upcoming

Board retreat, the decision that needs to be made regarding relocation, and then go off together to tour

the rest of the facility.

Location Retirement Home Sitting Room

Scene setup Student faces Cheryl who stands in the sitting room.

On-screen characters Cheryl Noki

Off-screen characters None

On-Screen Text: First thing in the morning, you meet the Hospital System’s former CFO . . .

CHERYL: Hi, nice to see you again.

STUDENT: Hi, Cheryl. Thanks for agreeing to meet me this morning.

CHERYL: Anything for an old friend! Besides, as stressful as it was sometimes being CFO for the system, I

really miss it. <Looks around> This room actually looks nicer than I remember. You said you have

concerns about the facility?

STUDENT: Well, it’s the Board, really. They think our facility is out of date, and that instead of investing

in renovation, we should relocate entirely.

CHERYL: I don’t know. I guess I’ll have a better idea once we look around, but why do they feel they

should relocate? Is it because of the upsurge in lower-cost retirement facilities being built in the


STUDENT: Exactly, and as CEO, they want me to evaluate the situation and make a recommendation at

the upcoming Board retreat in a few days.

CHERYL: Where is Todd? Shouldn’t he be helping you on this since he’s the new CFO?

STUDENT: He broke both legs on vacation a week ago and, between the pain and the pain meds, he’s

admitted that he’s really no good to anyone right now.

CHERYL: That’s too bad. He was always into those extreme sports, wasn’t he?

STUDENT: I don’t know if you can call ping pong an extreme sport! He fell off a grandstand while

watching a heated ping pong match in Beijing.

CHERYL: Well, lucky for you, I don’t get so worked up over ping pong! So, before we start, what are your

biggest concerns with the Board’s suggestions?

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 3

NOTE: Must select Option 1 to proceed.

STUDENT CHOICE 1: My biggest concern is the capital outlay required for a relocation and whether we

can sustain it.

STUDENT CHOICE 2: I’m mostly worried about the current residents. Moving them could be tough both

financially and emotionally.

CHERYL RESPONSE 1: I understand. But, don’t worry. We can take a look at how the financial reality

matches up to this strategic decision. What do you think is the best way to go?

CHERYL REPONSE 2: Possibly, but I think there’s a bigger concern.

STUDENT: That’s just it. I’m not sure what the best decision is at this point.

CHERYL: Well, the numbers usually have the final say, so I’m happy to help put them together. But, first

let’s take a look at the rooms and the rest of the place. We want to get an idea as to why the Board

thinks they’re too outdated.

STUDENT: Definitely. It’s French toast day in the dining hall, so we’ll start there, okay?

CHERYL: Great plan! Lead the way, si vous plait!

Scene 2: Input from a Board Member

In this scene, the Student is visited by Natalie Jones, one of the Board members, who expresses concern

for the future of the retirement facility.

Location Student’s Office

Scene setup The Student faces Natalie who sits in the chair across from her desk.

On-screen characters Natalie Jones

Off-screen characters None

On-screen text: Later, you have a drop-in visitor . . .

NATALIE: Sorry for dropping in on you unannounced like this. I was hoping you had a few minutes to


STUDENT: No problem, Natalie. I always make time for a member of the Board!

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 4

NATALIE: Thanks. I know you’re busy getting ready for the upcoming retreat. We have a lot of to

prepare for ourselves, but I wanted to let you know about a concern of mine, as soon as possible.

STUDENT: What is it, Natalie?

NATALIE: Well, as you know, many of the Board of trustees want to have our facility moved to a more

suburban location. But, I don’t think they’re considering all of the financial implications. It’s almost like

they’re panicking and acting out of desperation. They think it’s a matter of survival, that if we don’t

move, we’re going to go under fast.

NOTE: Must select both options to proceed

STUDENT CHOICE 1: As you know, we offer some high-end services at our facility. Have they considered

adjusting that side of our strategic plan? It could help cut costs and boost revenue?

STUDENT CHOICE 2: Do they really think we’ll solve our market share problem by moving outside the


NATALIE RESPONSE 1: They discussed removing some of the more costly services from our roster, but

that didn’t seem to be the answer. Our high-end services are a great way to distinguish ourselves from

the more low-cost, low-quality providers. Removing these doesn’t line up with our long-term strategy.

NATALIE RESPONSE 2: Yes. They think that if we move our high quality services to a location that is

closer to the “need” population, then we will gain market share. People aren’t bringing their parents

here or moving here themselves, because the city is less-convenient for family members to visit.

STUDENT: I thought that the Board also believes our rooms look too outdated, not appealing to today’s

market population?

NATALIE: Yes, that’s true, too. So, if we moved to the suburbs and constructed a more aesthetic facility,

they believe it would solve two problems at once. Then, if we continued to provide the top quality care

and services we’re known for, the Board feels that we’ll quickly gain back our lost market share, and

even pass up the low-cost newcomers relatively quickly, too!

STUDENT: I see where you’re coming from, but what if we just advertised better and brought in more


NATALIE: That’s fine. Better advertising may bring in more prospects, but once they get here, they don’t

feel like it’s a top notch facility, simply because it feels more outdated. People make a decision to live

with us, both on a deeply emotional as well as a cost-based level.

STUDENT: I understand what you mean. Thanks for taking the time to fill me in, Natalie.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 5

NATALIE: Well I appreciate you for taking such an active role in this. I firmly believe that the Board and

Management have to work hand-in hand with both the strategic and financial planning for our future, or

we won’t get anywhere! <Looks at phone> Speaking of which. I gotta be somewhere! Nice to meet you!

See you soon!

Scene 3: A Call from the Chairman

The Student gets a video call from Donald Bailey, Chairman of the Board, who gives him more

information to consider, regarding the relocation issue.

Location Student’s Office

Scene setup The Student gets a video call in their office from Donald.

On-screen characters Donald Bailey

Off-screen characters None

On-screen text: Later, you get a call from the Chairman of the Board . . .

DONALD: Hi, how’s our intrepid CEO today? Is your head swelling from all the numbers, yet?

STUDENT: No, not yet, Donald. I am learning that this issue is more complicated than it first seemed.

DONALD: Yes, welcome to my world! I’ve only been chairman for a year, but even the four years I spent

on the Board prior taught me one important thing: Never make a rush decision, because things are

seldom as simple as they seem!

STUDENT: Yes, I agree. I get the feeling that some of the Board members would like to simplify our

situation, though.

DONALD: Not me, that’s for sure. The fate of the entire Hospital System could hang on what we do with

this retirement facility. No pressure, of course!

STUDENT: Right, of course not! So, what side of the fence are you on? To move or not to move?

DONALD: Can’t help but feel like Hamlet when you put it that way! Only problem is, he was destined to

lose, whatever decision he made! It really is a difficult decision and I haven’t decided yet. That’s why

I’m looking forward to your input.

NOTE: Must select both options to proceed

STUDENT CHOICE 1: What do you think are our biggest challenges?

STUDENT CHOICE 2: Do you think that our facilities need to be renovated if we stay where we are at? I

toured several of them today and they did seem a bit outdated.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 6

DONALD RESPONSE 1: Our biggest challenges, I think, are revenue and market share. You know how

crowded the market has become, and so we’ve had to lower our prices to try to stay competitive. On

top of that, Medicare has reduced the amount of its reimbursements, cutting us even closer to the

bottom line.

DONALD RESPONSE 2: Yes, I think we need a major renovation, because, when you look at our growth

rate in assets and our debt policy, we won’t be able to maintain our growth rate in equity if we don’t

make a major change.

NOTE: Must select Option 2 to proceed

STUDENT CHOICE 1: Can you repeat that in English?

STUDENT CHOICE 2: Well, don’t worry. I will be considering all of those points over the next couple days.

RESPONSE TO 1 (Onscreen Text): Not the best choice here. Please try again.

DONALD RESPONSE TO 2: I’m sure you’ll do a great job. And, I heard Cheryl has offered to help too,

since Todd took his fall. The two of you will make a great team for this. But, feel free to call me with any

questions if you need to, all right?

STUDENT: Thanks, Donald. Will do.

DONALD: Talk to you soon!

Scene 4: Digging in with your Mentor

In this scene, the Student explores the key issues of the situation with Cheryl at lunch.

Location Cafeteria

Scene setup Student faces a Cheryl who sits at the lunch table.

On-screen characters Cheryl Noki

Off-screen characters None

On-screen text: That day, you have lunch with Cheryl . . .

CHERYL: Okay, now that we got that delicious meal out of the way, let’s dig in to the good stuff: the

facts and figures of our problem here!

STUDENT: I’d rather have a piece of triple layer chocolate cake for dessert, actually.

CHERYL: <laughing> Help yourself. I tend to forget that other people don’t like this stuff as much as I do!

STUDENT: That’s okay. My appetite is actually pretty weak, lately. Too nervous about this decision.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 7

CHERYL: Nothing to be nervous about. How did your talk with the Board members go?

NOTE: Must select both options to proceed

STUDENT CHOICE 1: Well, Natalie made it clear that most of the Board feels we should move as a matter

of survival. They say we’re losing market-share and need to move closer to the clientele.

STUDENT CHOICE 2: Donald seems to understand how complicated the situation is, but lost me when he

started talking about debt policies, growth rate in equity, etc.

CHERYL RESPONSE 1: Interesting. Because, when I looked at the numbers, it seems you may have a

harder time surviving if you do make a move. The sale of the current property would not be enough to

offset the cost of a move and a new facility in the suburbs, it seems.

CHERYL RESPONSE 2: It looks like Donald takes the Board’s responsibility to establish key financial policy

targets very seriously.

STUDENT: I hope you’re planning on explaining!

CHERYL: For sure! Key financial policy targets are things like you just mentioned: debt policy, and return

on equity. In order to properly plan for the future, to make strategic and financial strategies, institutions

are starting to take financial feasibility a lot more seriously. Focusing on key target areas helps keep the

data from becoming overwhelming and useless.

STUDENT: So, you start with a solid debt policy, a decision on how much we’re willing to allow

ourselves to go into debt?

CHERYL: Actually, you start with growth rate in assets, which is basically a projection of revenue. What

services or product lines are you expecting to provide over the next five years and at what level of

activity? Once you get numbers for this, you look at debt policy. How much do you need to invest to

provide this level of service, and how much of this investment will you permit to be financed with debt?

STUDENT: That makes sense so far. So, how does equity factor in?

CHERYL: Equity is a critical part of the equation. You need to ask, can we generate enough equity to pay

the rest of the investment that is not financed by debt? You need to look at your return on equity (your

ROE) and divide it by the Reported Income Index.

STUDENT: What is the Reported Income Index?

CHERYL: I’m glad you asked! It’s simply the current net income (revenue minus expenses), divided by

your current change in equity.

STUDENT: Did you say “simply?”

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 8

CHERYL: I wish they still had that whiteboard in here, I could show you very easily. For now, just

understand that the reported income index usually balances out and equals 1.0, and so Return on Equity

becomes hugely important. It’s the primary measure of financial performance.

STUDENT: And how does our Return on Equity look right now?

CHERYL: Well, because revenue is down due to lower market share, the operating margin is off and it’s

hurting the return on equity. That’s why, as I mentioned earlier, a move that required us to take on

more debt without a significant increase in revenue projected, could sink us.

STUDENT: It’s a lot to consider. I don’t know if I’m really the right person to help put this all together.

CHERYL: I’m sure you are. Not only are you extremely intelligent, you have the vantage point that no

other person has. You see the daily operations as well as the long term vision. You see the numbers that

people like me dump on you, but you aren’t so submerged in them that you can’t keep the horizon in

sight, too. How about I do this? I’ll send you some top requirements for effective financial planning and

policymaking. I use it for my students each year and it usually helps put things in perspective.

STUDENT: That would be great. And thanks for your vote of confidence. I hope the Board votes the

same way too.

CHERYL: I’m sure they will. Look for an email later, and we’ll talk more soon!

Scene 5: Reviewing Cheryl’s Email with Natalie

In this scene, the Student receives an email from Cheryl and reviews it with Natalie via video chat.

Location Student’s Home

Scene setup Student faces laptop on coffee table. Email and video call appear on laptop.

On-screen characters Natalie Jones

Off-screen characters None

On-screen text: Later that night, you receive the mail . . .

EMAIL Effective Financial Planning

Cheryl Noki []

Hi there!

As promised, here are the top requirements for effective financial planning

and policymaking that I mentioned earlier:

1. A formally defined limit on debt financing should be established.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 9

This is called a debt capacity ceiling. It restricts using debt to balance

a financial plan to excess. (Note: If relocating the facility puts you

into more debt than staying put and renovating, you may have to

sacrifice some of your more desired programs in the long run.)

2. Return on investment (ROI) by program area should be part of the

equation when selecting programs. Too many healthcare firms are

unable to look at financial analysis by program. They look at the big

picture and can’t properly determine which programs are most

profitable and which could be cut back or removed to increase

overall profitability. (Note: If you trim unprofitable programs, you will

increase revenue and help improve solvency, especially if debt is kept


3. Non-operating sources of equity should be made part of your

financial plan. Most common examples of these sources are

investment income and gains. Since investment portfolios are

generally large in healthcare firms, a small increase in investment

yields can reap sizeable income increases. (Note: Putting more focus

on improving investments can provide a new source of funding for

the strategic plan of your system.)

Some other key requirements that may seem obvious, but are often

overlooked are: integrating the financial plan with the management

control system and updating the financial plan annually. Integrating the

financial plan into the creation of the annual budget and in determining

pricing, for example, can help keep the Board focused on improving

profitability. Also, updating the plan annually will ensure survival, as

changes in the industry and operations happen more frequently and a

dependable road-map is needed to stay on track to a better future.

** I’ll work on some actual numbers to support the above statements,

don’t worry! We’ll go over them tomorrow, okay? In the meantime, let

me know if you have any questions.

Have a good night!


The scroll bar and Close Email button flash. When the Close Email button is selected, the email


Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 10

ONSCREEN TEXT: You receive a video chat request…

Incoming chat icon flashes in corner of screen, showing Natalie Jones wants to chat.

When Incoming chat icon selected, the video conversation between Natalie and student begins.

NATALIE: Hi, I thought you might be up!

STUDENT: Yes, I was just going over some helpful information from our former CFO.

NATALIE: That is so great that Cheryl is helping you. I just love her. So, is a good plan starting to take


NOTE: Must select Option 2 to proceed

STUDENT CHOICE 1: Yes, it looks like moving to the suburbs is the right choice after all.

STUDENT CHOICE 2: Actually, I’m pretty surprised. Moving may not be the right answer after all.

NATALIE RESPONSE 1: Really? Are you sure?

NATALIE RESPONSE 2: What makes you think that? You seemed to think earlier that the majority of

Board members were right.

STUDENT: I won’t have actual numbers until tomorrow, but it looks like survival doesn’t depend on

moving. It depends on things like keeping debt low and improving ROI by program, and boosting non-

operating sources of equity.

NATALIE: Interesting. I looked at some estimates earlier and was starting down the path to relocation,

myself, but now you’ve got me stopping in my tracks.

NOTE: Must select Option 2 to proceed

STUDENT CHOICE 1: You just leave the number crunching up to Cheryl and me, okay?

STUDENT CHOICE 2: That’s great that you’re getting so actively involved. What numbers were you

looking at?

STUDENT CHOICE 3: Just remember. Even though it’s the suburbs, the grass isn’t always greener on the

other side!

RESPONSE TO 1 and 3 (TIMED ONSCREEN TEXT): Are you sure you want to say that? Better choose


RESPONSE TO 2 (NATALIE): Looking at some similar facility improvements versus selling our place and

constructing a new place outside the city, there was a big contrast. Roughly $15 million in debt to

renovate, and nearly $65 million to relocate, and that’s assuming we get at least half of the proceeds

from the sale of the land. Even with this difference, though, I figured we’d be on a better track to future

success due to the projected increase in market share that a move to suburbia would bring.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 11

STUDENT: Now, what do you think, though?

NATALIE: Now, I think I like the safer road, like you said. And if we can improve our revenue flow with

the suggestions you just made, I think it will make all the difference. There is only one problem, though.

STUDENT: What’s that?

NATALIE: Convincing the rest of the Board. Even if you lay out the numbers, it’s still a judgment call.

Staying put may seem like the safer bet, but there’s no guarantee the clientele will come, even if we

make renovations and improve programs. Plus, you know how people get when they’re desperate. They

tend to think only a big, dramatic change will save the day. They’d rather jump off the ship than go down

with it, you know?

STUDENT: Well, as the Captain, I’d rather keep the ship afloat than go down, believe me. I’ll work on the

rest of the Board, but I appreciate whatever help you can provide.

NATALIE: Count on me to back you up, O’ Captain, my Captain—a little Walt Whitman, there. Thanks for

talking. Goodnight!

Scene 6: Convincing Casper

In this scene, the Student meets with Casper, another Board member with a strong point of view.

Location Retirement Home Sitting Room

Scene setup Student faces Casper who stands in sitting area.

On-screen characters Casper Diggs

Off-screen characters None

On-screen text: You run into another Board member the next day . . .

CASPER: <walks up, file folder filled with papers under his arm> There you are! I’ve been looking all over

for you. I’m Casper. Casper Diggs, from the Board.

STUDENT: I know who you are, of course, Casper. How are you today?

CASPER: Not good. Not good. I hope you have a minute.

STUDENT: Just a brief one, yes. I have a meeting in a few. What can I do for you?

CASPER: I’ve been pouring over the numbers from our financial plan. Look at all this! <indicates papers>

This is frightening.

STUDENT: I appreciate your concern, Casper. But aren’t you–?

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 12

CASPER: A retired foot surgeon, yes. But, the numbers don’t lie. We need to get out of this run-down

facility before it’s too late. Our volume is dropping, not increasing like we projected in this plan. As you

know, if the people don’t come, they can’t pay. And if they can’t pay, we can’t keep our doors open for


NOTE: Must select both options to proceed

STUDENT CHOICE 1: Let me ask you this, Casper. If I had a sixth toe I needed to remove, would you

recommend I do it myself?

STUDENT CHOICE 2: I understand, Casper. But, I have changes I’m going to propose to the financial plan

that will make staying where we are and remodeling the smarter decision.

CASPER RESPONSE 1: What is that supposed to mean? I don’t think you understand how serious this

situation is!

CASPER RESPONSE 2: You can’t change the financial plan. It’s a five-year plan! We all agreed on it. We

voted it in last year, remember? I don’t know what you’re thinking!

STUDENT: Calm down, Casper. We need to remain calm and try to be open to new ideas.

CASPER: Really? I need some clear answers or I’m going to recommend the Board bring in an outside

consultant to handle this.

STUDENT: I have hired a temporary outside consultant, Cheryl, our former CFO, remember? Don’t

worry, Casper. We have it under control.

CASPER: I hope so! <sighs> I’m sorry—I didn’t mean to get so upset. It’s just—I’ve watched this hospital

struggle through tough times and I’d hate for it to go under because of a bad decision now.

STUDENT: I feel the same exact way, and I’ll be sure to lay out the plan clearly before we make any

decision, I promise.

CASPER: Sounds good. I’ll let you go. I know you’re very busy. But, hey, just let me know if you want me

to take care of that sixth toe, okay? I do a little moonlighting still. I can just nip that little piggy off, no big


STUDENT: It was just a metaphor.

CASPER: Whatever you say. Just let me know, though. I’m free most nights, except Thursdays. See you


Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 13

Scene 7: Informal Meeting with Cheryl

In this scene, the Student meets with Cheryl to review the numbers.

Location Student’s Office

Scene setup Student faces Cheryl on the other side of the desk.

On-screen characters Cheryl Noki

Off-screen characters None

On-screen text: Meeting with Cheryl . . . In your office, after filling Cheryl in on your discussion with


CHERYL: So, are you going to do it, then?

STUDENT: No, I don’t have a sixth toe. I was just using that as an example!

CHERYL: No, I get that. You were trying to help him understand that he was a little out of his depth. I’m

sure you appreciate the Board being so actively involved, but you also want them to be patient while

you have the situation analyzed properly.

STUDENT: Exactly. He was so adamant about not changing the financial plan. But, according to your

email, you think the plan should be changed annually?

CHERYL: Yes, in order to keep up with changing times, and to properly evaluate whether the plan is

working, the latest thought is that financial plans should be updated annually.

NOTE: Must select Option 2 to proceed

STUDENT CHOICE 1: I don’t think I can go through this every year. No, I think maybe three years is


STUDENT CHOICE 2: That makes sense. But, what good is updating the plan if no one can understand it?

CHERYL RESPONSE 1: A lot can change in that time. Really, if you make an annual update part of your

organization’s overall strategy, it will pay off in the future, I promise. I pushed for this before I left, but

no one wanted to listen. Now, at this critical juncture, I really think they will.

CHERYL RESPONSE 2: That’s what I wanted to talk to you about today, something to help bridge the gap

between creating a financial plan and actually using it; something to integrate the financial plan with

management control. Do you know what “financial ratios” are?

NOTE: Must select Option 3 to proceed

STUDENT CHOICE 1: It’s not a breakfast cereal for accountants, is it?

STUDENT CHOICE 2: I think they are realistic goals that we can set for future growth.

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 14

STUDENT CHOICE 3: Aren’t they figures that help us to determine the accuracy of our financial plan, so

we can make adjustments on an annual basis?

RESPONSE TO 1 and 2 (ONSCREEN TEXT): Not quite. Try again!

RESPONSE TO 3 (CHERYL): Yes, financial ratios provide the necessary structure that helps integrate your

financial plan with your management control process. For example, when assessing your annual return

on equity, you would consider four major ratios: Operating margin ratio, Total asset turnover ratio,

Equity financing ratio, and Non-operating revenue ratio.

STUDENT: You wouldn’t happen to have those ratios for our facility, would you?

CHERYL: <laughing> What do you think I’ve been working on? Of course I do! So, a primary indicator

needs to be established for each ratio, based on the last financial plan. This is something to measure the

current ratios against. By doing this, we can then see clearly which areas need improvement. As you can

see here in this chart, we’re a little off in a couple key areas:

NOTE: The following chart appears next to Cheryl illustrating:

Results for this year Primary Indicator Actual

Operating margin 1.3% 1.0%

Total Asset Turnover .93% .93%

Equity Financing .44% .44%

Non-operating revenue 2.7% 2.6%

ROE 8.4% 7.6%

NOTE: Must select Option 2 to proceed

STUDENT CHOICE 1: Yes, it looks like Equity Financing and Total Asset Turnover are off.

STUDENT CHOICE 2: I see. It looks like Non-operating Revenue and Operating Margin are off. That

supports what we were talking about yesterday.

CHERYL RESPONSE 1: Are you sure about that?

CHERYL RESPONSE 2: Yes! So, the numbers actually line up to our tentative plan. Keeping debt low by

renovating the current facility, while boosting revenue by trimming away unprofitable programs and

boosting profitable programs, plus focusing more on our non-operating revenue is the best way to


Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 15

STUDENT: Great! I just don’t know if the Board is going to see it our way. Donald and Natalie are open to

new ideas, I know. But, unfortunately, the rest of the Board tends to fall into the Casper category.

CHERYL: Yes, they seem quite reactive. But, laying it out clearly, using these financial ratios will make a

huge difference, I’m sure. Why don’t you try your theory out on a select few members of the Board

before the retreat? This way, you can test the waters ahead of time.

STUDENT: Great idea, Cheryl. I appreciate it!

CHERYL: I’m happy to help. Let me know how it goes!

Scene 8: Testing the Plan Out

In this scene, the Student meets Natalie, Donald and Casper in the conference room and makes the

recommendation to stay. They react favorably, much to the Student’s relief.

Location Conference Room

Scene setup Student faces Natalie, Donald and Casper at the table.

On-screen characters NATALIE, CASPER AND DONALD

Off-screen characters None

<NOTE: The chart from the previous scene is projected on the screen at the end of the table.>

On-screen text: Testing out your recommendation . . .

STUDENT: And, as you can see here, the recommendation to stay where we are and make

improvements both to the facility and to our financial plan is supported by these financial ratios.

DONALD: Very interesting. That makes a lot of sense to me. To tell you the truth, it would be a relief not

to have to move. There’s no guarantee that a big move to the suburbs would actually pay off.

NATALIE: Right, and now we see a clear path to solving our financial crisis right where we’re at. I like it.

Especially since we’ll continue to have these financial ratios in place to help monitor whether the

financial strategy is working or not.

STUDENT: Yes, and we can do it on a yearly basis, too. This will help us tremendously in the long run.

CASPER: I agree that evaluating the financial plan yearly is a good thing. I just think that we’re still

missing something here.

NATALIE: What are we missing? Does it have something to do with the fact that you live in the suburbs,

Casper and were hoping for less of a drive-time to get here?

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 16

CASPER: No, of course not! Well, uh, it’s not just me! People in the suburbs don’t want to have to drive

in to the city all of the time to see their family members. It’s a real pain, let me tell you.

NOTE: Can select either option to proceed

STUDENT CHOICE 1: When you look at the decline in market share, it’s really only 2% over the last three

years. I think we can pick that back up easily.

STUDENT CHOICE 2: There’s always public transportation!


CASPER: So, you think we’ll gain back our market share by improving the facilities, and we won’t

have to raise prices to make up for it?

DONALD: No, we won’t. We have a long history of providing top quality services right where

we’re at. We just need to remind people what an important part of the community we are.


CASPER RESPONSE 2: No way. I get sick if I ride on a bus for more than a few minutes.

DONALD: We have a long history of providing top quality services right where we’re at. We just

need to remind people what an important part of the community we are.

STUDENT: Yes, Natalie was suggesting a boost in advertising, and I think you’re both right.

NATALIE: We could even do a grand re-opening and a series of open houses to draw people back.

Maybe we’ll rent vans and organize free transportation to some special events, to make it easier for

people to come see us again.

DONALD: These are all very good ideas, and I’m sure they’ll go over well with the rest of the Board at

the retreat. <to Student> Nice job! Now we can all breathe a little easier about the upcoming retreat

and be more productive with a clear direction like the one you’ve laid out here.

STUDENT: Thank you all for letting me test the plan out on you. See you at the retreat!

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 17

Scene 9: Follow-up with Mentor

The Student meets Cheryl in the retirement facility sitting room again a week later, to report good news.

It’s after the Board retreat has taken place.

Location Retirement Home Sitting Room

Scene setup Student faces Cheryl who stands, holding a greeting card.

On-screen characters Cheryl Noki

Off-screen characters None

On-screen text: One week later . . .

CHERYL: Hi, I was hoping to catch you! I really appreciate the “thank you” card and the restaurant gift

card! You didn’t have to do that.

STUDENT: Are you kidding? It’s the least I can do. I hope you and your husband like Japanese.

CHERYL: Oh, we love this restaurant. Go to it all the time. So, how do you think the Board retreat went?

I’m hearing nothing but good things from my old friends.

STUDENT: Thanks to all your help, it went even better than I expected. The Board approved the new

plan on the first day, and we were able to focus on the nuts and bolts the rest of the retreat.

CHERYL: Great. And I heard Todd was even able to make it to some of the retreat too, huh?

STUDENT: Yes, but he slipped in the steam room and broke his collar bone, so yeah, he’s not a happy


CHERYL: Poor guy. You’ll have a lot to tell him about though, once he finally gets back, huh? Especially

about the ground you all covered on the relationship between financial planning and strategic planning.

NOTE: Must select option 1 to proceed

STUDENT CHOICE 1: Yes, the two definitely should go hand in hand, with the Board and management

actively participating in both.

STUDENT CHOICE 2: Right. From now on, we keep everything separate. It was far too complicated this


CHERYL RESPONSE 1: That’s right! So, what key financial policy targets do you plan on focusing on in the


CHERYL RESPONSE 2: I wouldn’t say that. Why don’t you try again?

Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 18

NOTE: Must select option 2 to proceed

STUDENT CHOICE 1: Net working capital, current ratios, and debt service coverage.

STUDENT CHOICE 2: Growth rate in assets, debt policy, and return on equity.

1 CHERYL RESPONSE 1: No. That’s not it.

2 CHERYL RESPONSE 2: Yes, good plan. So what new policies do you think you should consider when it

comes to financial planning?

NOTE: Must select option 2 to proceed

STUDENT CHOICE 1: We should keep the review process limited to management and only assess the

plan every two years.

STUDENT CHOICE 2: We should put a formally defined limit on debt financing, consider ROI by program,

and put more focus on non-operating sources of equity.

1 CHERYL RESPONSE 1: No, not quite. Try again.

2 CHERYL RESPONSE 2: Good! So, what ways can you integrate financial planning with management


NOTE: Must select option 1 to proceed

STUDENT CHOICE 1: By using key financial ratios and evaluating the plan on a yearly basis.

STUDENT CHOICE 2: By using key financial ratios and evaluating the plan bi-annually.

1 CHERYL RESPONSE 1: Exactly! You really have come a long way on this journey.

2 CHERYL RESPONSE 2: Close! Try again!

STUDENT: Yes, now let’s hope our clientele from the suburbs will come a long way to see us after our

renovation is done.

CHERYL: I’m sure they will! If people can drive into the city for a night at the theater or to visit a favorite

museum, I think they’ll appreciate a top-level facility like yours and have no problem justifying the drive.

STUDENT: Great points as always. Thanks again for everything, Cheryl. I’m sure I’ll be calling on you

again for more help!

CHERYL: Any time! Take care!


Health Care Finance Navigate 2 Scenario: To Move or Not to Move

January 2, 2018 19

Scene 10: Assessment

If all previous scenes have been completed, a 10-question assessment is presented to the student.

Answer the following 10 questions to show what you know about health care ethics for equipment

purchasing. Good luck!

The student answers the questions and then sees the assessment results.

Assessment Results

Here are your results. Click Save Results if you are satisfied with the outcome. Or you can click Try Again

if you want to try and improve your score.

NOTE: The student can retry the assessment by clicking the Try Again button, or can continue to final

scene by clicking the Continue button.


  • To Move or Not to Move
    • Scene 1: Meeting Your Mentor
    • Scene 2: Input from a Board Member
    • Scene 3: A Call from the Chairman
    • Scene 4: Digging in with your Mentor
    • Scene 5: Reviewing Cheryl’s Email with Natalie
    • Scene 6: Convincing Casper
    • Scene 7: Informal Meeting with Cheryl
    • Scene 8: Testing the Plan Out
    • Scene 9: Follow-up with Mentor

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