MGHI FINANCE SME TRAINING

Module 3: Advance Finance

A DVA NCED F I N AN CE T R A I N I NG

1. Fundamentals of Financial Management & Reporting

2. Forecasting and Planning

3. Profitability Analysis

4. Basic Financial Valuation

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 Good Decision Criteria
1. Accounting 2. Treasury
Cash  Cash & liquidity
& Statutory
Management management
Reporting

 Price
Negotiations
 Look for areas
3. Product
6. Supply for cost
Costing &
Chain management;
Pricing packages
Management
creation

5. Risk 4. Planning &

Management Management
& Compliance Reporting
 Active role in
BUSINESS
 Internal Audit
DEVELOPMENT
& Control
 Participation in Master
planning, infra
developments

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F I N A NCIA L R E P O RT S
Gross Revenues YTD vs. LY vs.Plan
Hospital/Ancillary Services • Compare performance vs. Last
Medicines & Medical Supplies Year vs. Plan
Room & Board
Discounts
• Profitability Measures
Net Revenues
Cost of Rendering Services
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI)
Other Income
Other Expenses
Interest Income
EBITDA
Depreciation & Amortization
EBIT
Interest Expense
Net Income (Loss) before Income Tax
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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F I N A NCIA L R E P O RT S: Revenu e
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
Room & Board
a. Revenue Contribution: % In-Out Patient Revenue
Discounts (60-40)
Net Revenues
Cost of Rendering Services
b. Revenue per In-Patient/Day; Revenue/Out-Patient
Cost of Goods Sold (Pharma & CSR) c. Occupancy Rate %
Gross Profit
Selling & Marketing Expenses
d. Average Length of Stay
General & Administrative Expenses
Net Operating Income (NOI)
Other Income
Other Expenses
Interest Income
EBITDA QUESTIONS: WHAT IS DRIVING REVENUE?
Depreciation & Amortization
EBIT WHATS PUSHING GROWTH/DECLINE VS.
PLAN VS. PY?
Interest Expense
Net Income (Loss) before Income Tax
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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F I N A NCIA L R E P O RT S: Revenu e S uppo r t
(1/2)
Report 1
2019 2018
Total Gross Ave. Total Gross Ave.
Medical # Patient Revenue Revenue Inc/Dec % Inc/Dec % # Patient Revenue Revenue
Ave LOS Ave LOS
Service Type Discharged Contribution per Day volume revenue Discharged Contribution per Day
(PHP) (PHP) (PHP) (PHP)
Medicine 1,600 4.7 157,763,749 20,838 34% 43% 1,197 4.8 110,532,436 19,293
Surgery 490 3.5 37,035,101 21,545 2% -9% 482 3.7 40,814,460 22,751
OB-Gyn 406 3.1 18,614,256 14,868 49% 50% 272 3.4 12,434,238 13,442
Pediatrics 189 4.3 7,470,701 9,257 38% 75% 137 3.6 4,257,610 8,532
Newborn 204 3.3 3,580,600 5,281 25% 9% 163 3.3 3,296,121 6,037

Report 2
2019 2018
Total Gross Ave. No. of Total Gross Ave.
No. of Length of Length of
Revenue Revenue Inc/Dec Inc/Dec % Patient Ave Revenue Revenue
Patient Stay - LOS Ave LOS Stay - LOS
Contribution per Day % volume revenue Discharge LOS Contribution per Day
Discharges (CY) (LY)
(PHP) (PHP) s (PHP) (PHP)
CHRONIC KIDNEY DISEASE 32 190 5.9 2,943,581 15,493 433% 495% 6 28 4.7 494,537 17,662
DENGUE FEVER 100 433 4.3 3,324,367 7,678 144% 152% 41 179 4.4 1,317,175 7,359
HEART DISEASE
(Atherosclerotic, ischaemic, 78 351 4.5 17,255,913 49,162 73% 72% 45 178 4.0 10,048,312 56,451
CEREBRAL INFARCTION 60 478 8.0 9,919,872 20,753 54% 90% 39 281 7.2 5,223,800 18,590
HAEMORRHOIDS 50 172 3.4 3,531,810 20,534 43% 35% 35 114 3.3 2,619,730 22,980
VIRAL INFECTION 29 85 2.9 731,359 8,604 32% 37% 22 58 2.6 532,177 9,175
ACUTE GASTROENTERITIS 66 181 2.7 1,373,612 7,589 25% 0% 53 131 2.5 1,370,961 10,465
PNEUMONIA 208 1,185 5.7 20,184,409 17,033 4% 30% 200 1,090 5.5 15,507,509 14,227
SINGLETON, LIVE BIRTH 275 762 2.8 5,935,008 7,789 3% -11% 266 875 3.3 6,637,973 7,586
CHOLECYSTITIS 147 419 2.9 12,259,628 29,259 0% -3% 147 385 2.6 12,642,946 32,839
CAESARIAN DELIVERY 83 295 3.6 4,482,694 15,196 -7% -4% 89 333 3.7 4,689,088 14,081
URINARY TRACK INFECTION 67 272 4.1 3,385,089 12,445 -12% 14% 76 256 3.4 2,981,189 11,645
HEART FAILURE 62 319 5.1 6,222,756 19,507 -16% 7% 74 375 5.1 5,797,531 15,460
HYPERTENSION 73 231 3.2 3,458,348 14,971 -20% -17% 91 302 3.3 4,164,317 13,789
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F I N A NCIA L R E P O RT S: Revenu e S uppo r t
(2/2)
• Increasing Revenue share of Out-Patient vs. In-Patient

• Higher Occupancy Rate: >75% average occupancy rate may warrant increase in bed cap

• Higher Patient Mix

• Average revenue/patient or out-patient increase is an indicator of high value
procedures are availed
• Rates are too high (?); benchmarking with nearby hospitals

• More consultants with sub-specialty

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 F I N A NCIA L R E P O RT S: D i sc oun ts
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
Room & Board
Discounts • All Discounts provided by the hospitals including
Net Revenues
Cost of Rendering Services government mandated discounts, suppliers discounts
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI) DISCOUNT %
Other Income
14%
Other Expenses 12%
11%
Interest Income 12% 11%
EBITDA 10%
9%
10% 9% 9% 9%
Depreciation & Amortization 8%
EBIT 8%
8%
6% 7% 7%
Interest Expense
Net Income (Loss) before Income Tax 6%
4%
Provision for Income tax
4%
Net Income (Loss) after Tax (NIAT)
2%
Adjusted For:
Revenue/ Income 0%
GGH WMC GS HSLB CMC FDM MID MMMC CMZ VRP MCM TMC MTCMC LORMA
Expenses
Tax relief (expense)
Core Income

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 F I N A NCIA L R E P O RT S: C o st o f G o o ds
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
Room & Board
• Cost of Medicine and Medical Supplies
Discounts
Net Revenues
Cost of Rendering Services
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Selling & Marketing Expenses
General & Administrative Expenses AVERAGE MARK-UP
Net Operating Income (NOI)
Other Income
MTCMC 109%
Other Expenses
Interest Income TMC 95%
EBITDA
Depreciation & Amortization WMC 86%

EBIT
GS 75%
Interest Expense
Net Income (Loss) before Income Tax MCM 72%
Provision for Income tax
GGH 71%
Net Income (Loss) after Tax (NIAT)
MMMC 67%
Adjusted For:
Revenue/ Income VRP 65%
Expenses
HSLB 65%
Tax relief (expense)
Core Income CMZ 64%

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 F I N A NCIA L R E P O RT S: C o st o f Re nder ing
S e r v ic es
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
Room & Board
• Direct cost associated with operations excluding
Discounts DEPRECIATION
Net Revenues
Cost of Rendering Services
Cost of Goods Sold (Pharma & CSR) • Cost allocation method:
Gross Profit
Selling & Marketing Expenses
• For outsourced/contract services: headcount
General & Administrative Expenses deployed
Net Operating Income (NOI)
Other Income
• For rent: actual sqm occuplied
Other Expenses • For utilities and gas: actual consumption based on
Interest Income
EBITDA
sub-meter readings
Depreciation & Amortization • If information is unavailable, hospitals will follow
EBIT
Interest Expense
the 80:20 approach. Sound judgement should be
Net Income (Loss) before Income Tax carried out by finance/accounting employees when
Provision for Income tax
Net Income (Loss) after Tax (NIAT)
determining appropriate allocation methodology
Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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 F I N A NCIA L R E P O RT S: S G A
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
• SGA refers to Selling, General and Administrative
Room & Board Expenses
Discounts
Net Revenues
Cost of Rendering Services • Refers to indirect cost incurred by the hospital including
Cost of Goods Sold (Pharma & CSR)
Gross Profit
administrative expeneses
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI)
Other Income
Other Expenses
Interest Income
EBITDA
Depreciation & Amortization
EBIT
Interest Expense
Net Income (Loss) before Income Tax
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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 F I N A NCIA L R E P O RT S: D e p rec iati on, O t h e r
I n c o me/ Exp ense
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
• Other Income/(Expense): all other income/expense
Room & Board incurred
Discounts
Net Revenues
Cost of Rendering Services • Depreciation: breakdown into Equipment, Building and
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Leasehold, Others
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI)
• Standard useful life is provided by MGHI through its
Other Income fixed asset policy.
Other Expenses
Interest Income
14%
DEPRECIATION %
EBITDA
Depreciation & Amortization 12%
12%
11%
EBIT
Interest Expense
Net Income (Loss) before Income Tax 10% 9%
9% 9% 9%
Provision for Income tax 8% 8% 8%
8%
Net Income (Loss) after Tax (NIAT)
6% 6% 6%
6%
6%
Adjusted For: 5%
Revenue/ Income
4%
Expenses
Tax relief (expense)
2%
Core Income

0%
MTCMC LORMA CMZ GGH MCM CMC MMMC MID TMC VRP GS HSLB
12 WMC FDM
 F I N A NCIA L R E P O RT S: E B I TDA
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
Room & Board
Discounts
Net Revenues
Cost of Rendering Services
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI)
Other Income
Other Expenses
Interest Income
EBITDA
• Gauges the strength of the hospital’s cash flow
Depreciation & Amortization • MGHI’s target is a 25% EBITDA/Gross Revenue ratio
EBIT
Interest Expense
Net Income (Loss) before Income Tax
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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 F I N A NCIA L R E P O RT S: I n ter est
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies INTEREST COVERAGE RATIO
16.00 15.05
Room & Board
Discounts 14.00
Net Revenues 12.31
Cost of Rendering Services
12.00
Cost of Goods Sold (Pharma & CSR)
Gross Profit
10.00 9.04
Selling & Marketing Expenses
General & Administrative Expenses
8.00 7.12
Net Operating Income (NOI)
Other Income
6.00 5.29 5.30
Other Expenses
Interest Income 3.87
4.00 3.00
EBITDA
Depreciation & Amortization 2.08
2.00
EBIT
Interest Expense
-
Net Income (Loss) before Income Tax
FDM WMC HSLB GS TMC GGH MTCMC MCM LORMA
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
• Interest from loans and advances; Accrue monthly
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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 F I N A NCIA L R E P O RT S: Ta xes
Gross Revenues
Hospital/Ancillary Services
Medicines & Medical Supplies
• Hospitals are required to accrue 30% tax on EBT for
Room & Board management reporting purposes. Actual tax paid will be
Discounts
Net Revenues
addressed during year-end audit.
Cost of Rendering Services
Cost of Goods Sold (Pharma & CSR)
Gross Profit
Selling & Marketing Expenses
General & Administrative Expenses
Net Operating Income (NOI)
Other Income
Other Expenses
Interest Income
EBITDA
Depreciation & Amortization
EBIT
Interest Expense
Net Income (Loss) before Income Tax
Provision for Income tax
Net Income (Loss) after Tax (NIAT)

Adjusted For:
Revenue/ Income
Expenses
Tax relief (expense)
Core Income

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T R E N D S TO WATC H O U T FO R :
1. Increasing Cost of Goods or Cost of Rendering Services; Lower Average Mark up
• Inability to change selling price despite increase in supply price
• Revisit Mark-up Policy
• Case mix of more expensive, low margin cases
• Issuance of drugs and supplies not properly charged

2. SGA sudden increase/decrease

• Increase in PM
• Increasing utilities expense
• Headcount rationalization
• ACCRUAL: are we accruing all expenses correctly and timely (i.e. retirement, etc)

3. Depreciation increase
• Increase in depreciation without a reasonable increase in revenue may mean overspending
in CAPEX; CAPEX is non-income generating
• Determine appropriate useful life for assets based on MGHI’s standards

4. EBITDA
• Increase EBITDA means a good steady cash balance to cover expansion or acquisition.

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F I N A NCIA L R AT I OS

Hosp/Ancillary-to-Room Ratio 4.9

Medicines/Med Supplies-to-Room Ratio 4.4
AMMS-to-Room Ratio 9.3
Discounts/Gross Revenues % 9%
Average Mark-up 65%
GP Margin % 35%
SGA/Gross Revenue 12%
NI/Gross Revenues % 10%

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G RO SS P ROFI T %
• Calculates gross profit as a % of gross revenues. Gross profit is defined as the hospital’s gross
revenues after deduction of all direct expenses, excluding depreciation.

• MGHI’s mid-term target is a GP% of 40%.

• Formula: = Gross Revenues - Discounts - Cost of Goods - Cost of Rendering Services

GROSS PROFIT %
45%

40% 40%
40%
37% 38% 38%
36% 36% 36% 36%
34% 34% 35%
35%
32%
30%

25%

20%

15%

10%

5%

0%
CMC FDM TMC CMZ MCM HSLB VRP MID GS WMC MTCMC GGH MMMC

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N E T I N C O M E A F T E R TA X %
• Calculates total net income as a % of gross revenues. NIAT is defined as gross revenues after
deduction of all expenses, including depreciation, interest and taxes.

• MGHI’s short-term target is a NIAT% of >10%

• Formula: = Gross Revenues - Discounts - Cost of Goods - Cost of Rendering Services - Selling
General and Administrative Expenses + Other income/(expense) - Interest, Depreciation, Taxes

NET INCOME AFTER TAX %

16%
14% 15%

14%
13%

12% 11%
10%
10%
9% 9% 9% 9% 9%
8%
8% 7%
6%
6%

4%
4%

2%

0%
FDM HSLB WMC MCM TMC CAPITOL LORMA GS MID CMZ VRP MTCMC MMMC GGH 19
TOTA L P RODU CTI VI T Y R AT I O
• Measures the peso value of output vs. every peso of input. Output is measured through gross
revenues while input refers to all cost of goods + rendering services, interest, depreciation and
taxes.

• Formula: = Gross Revenues/ (Direct Expenses + Overhead)

TOTAL PRODUCTIVITY RATIO

1.60

1.40 1.41
1.40 1.32 1.33
1.26 1.28 1.28 1.28
1.23
1.20 1.15
1.09 1.11

1.00

0.80

0.60

0.40

0.20

0.00
FDM WMC HSLB GS MCM MID CMZ TMC VRP GGH MMMC MTCMC

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L A B O R P RO DUCT I VI T Y R AT I O
• Measures the peso value of output vs. every peso of labor input. Output is measured through
gross revenues while labor input refers to salaries & wages, benefits, bonuses, government
remittances, retirement liability, outsource and contract labor fees.

• Formula: = Gross Revenues/ (Total comp & ben including outsource services and contract labor)
LABOR PRODUCTIVITY RATIO
7.00

6.02
6.00
5.51
5.07
4.94
5.00
4.36 4.41 4.42 4.43 4.43 4.47
3.94 4.05
4.00

3.00

2.00

1.00

0.00
HSLB CMZ WMC FDM GS GGH MID TMC VRP MTCMC MCM MMMC

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B A L A N CE S H E E T
ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories-Net • Reasonable amount of Inventory: MGHI short
Other current assets
Total Current Assets term target is 30-40 days depending on the area
Property and Equipment -Net
Intangible Assets - Net
Other Non Current Asset
• Accounts Receivable: Quicker receivables turn-
Total Non Current Assets around; proper provisioning based on most
TOTAL ASSETS recent accounting standards
LIABILITIES AND EQUITY
Trade and Other payables
Other Current Liabilities
• Trade Payables: Maximization of payment terms
Income Tax Payable from suppliers
Total Current Liabilities

Long Term Debt/Payables - Net of current

Other Non Current Liabilities • Retained earnings: valuable to shareholders due
Total Non Current Liabilities
to ability to declare dividends if RE is positive
Equity
Capital Stock (Common / Preferred)
Additional Paid in Capital
Deposit for Future Stocks Subscription
Retained Earnings
Total Equity

TOTAL LIABILITIES AND EQUITY

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C A S HFLOW R E P ORT
Income Before Tax
Add/(Deduct) non cash items:
Depreciation and Amortization
Provision for Inventory Obsolesence • Internally generated funds or income from
Interest Income
operations to fund CAPEX. Priority of CAPEX
Income before Changes in Working Capital funding:
Changes in Receivables 1. Cash from Operations
Changes in Other Current Assets
Changes in Trade Payables & Other CL
2. Bank loans/ bank financing
Income Tax Payments 3. Shareholders Advances
Interest received
Cash from Operating Activities 4. Equity Infusion
Capital Expenditure
Changes in other non-current assets
Additional investment
• Enough cash to payout dividends to shareholders
Additional deposit for future stock subscription
Cash from Investing Activities
• Enough cash to COVER at least 2 MONTHS of
Long-term Debt (Net Movement)
Issuance of Capital Stock and others
operating requirements. Exemptions possible as
Deposit for future stock subscription long as strict cash monitoring is implemented.
Changes in Due to/Due from Related Parties
Dividends
Purchase of treasury shares
Changes in other non-current liabilities
• Always present FORECAST CASHFLOW
Cash from Financing Activities

Net Cash flows

Cash and cash equivalents - Beginning
Cash and cash equivalent - Ending

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