Business case no 4

• In 2015 Maharlika Specialist and Medical Center (MSMC)was granted by DEF Bank with the following
Loans:
Term Loan 1 – P400 M to finance the construction of 100 bed hospital building payable in
10 years with 3 years grace period on principal repayment
Term Loan 2- P100 M to finance the acquisition of medical equipment payable in 7 years
Short term loan line – P30 M to augment the working capital requirement of MSMC
• The project was completed in 3 years as scheduled.
• During the height of the pandemic, the revenue streams of the hospital was severely affected that it
could no longer sustain the payment of its loan amortizations.
• The founders of the hospital already made advances to the Corporation in order to sustain the
operations of the hospital including its loan servicing.
• The outstanding balance of the loan as of May 2023 is P300M
• However, the census of the hospital remains very low at an average of 18 to 20%. The hospital’s cash
flow continues to bleed coupled by difficulty to collect its receivables from PhilHealth which has
reached P80M.
• As chairman of the Board, what solution would you recommend to ease the liquidity problem of the
Company?
• What strategic solution would you recommend to improve the census of the Hospital?
 Business case no 4
1) As chairman of the Board, what solution would you recommend to ease the
liquidity problem of the Company?
The Chairman of the Board must recommend the following to the board:
a) Extensive Promotion and Marketing
• Increase revenue by focusing on increasing the census of the hospital through
extensive marketing or promotion. It should have translated into increase in
revenue and income and ultimately, have contributed to the liquidity of the
hospital, since the census of the hospital have not increased and remained at
18% to 20%.
b) Enforce collection of receivables aside from Philhealth.
• They may have problems with Philhealth but they may also have collectibles with
previous patients who have been admitted in the hospital who are not yet fully
paid.
 Business case no 4
c) Utilize financial tactics such as debt restructuring or debt refinancing.
• They may negotiate with DEF bank to lengthen the duration of the unpaid
portion of their debt, which will help them lower their loan amortization,
or they may resort to debt refinancing, if the bank will allow, to forge a new
loan agreement on the unpaid portion of the loan with longer a loan
duration based on the hospital’s ability to pay.
d) Strengthen Cash Flow Monitoring
Device ways on how cash inflows can be increased and impose cost-cutting
measures on unnecessary expenses. Enforce collection of receivables while
deferring payments of payables up the due date.
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e) Diversifying the business
Explore other sources of income in which the hospital may enter into in
order to increase cash inflow.
f) Capital Injection
Explain the real situation to shareholders and encourage them to make
additional investments, and/ or encourage board to offer new shares to
new investors.
 Business case no 4
2) What strategic solution would you recommend to improve the census of the
Hospital?
Answer:
a) Extensive marketing and promotion
At the height of the pandemic, where many patients are being admitted in other
hospitals and experiencing full capacity, they were not able to capitalize on the
opportunity to increase their revenue, because the census of the hospital remained at
18% to 20%. People maybe unaware that the said hospital is in operation. A good
promotion and marketing strategy must be put in place, such as:
• Advertisements
• Offering discounts
• Partnership with other health care providers
 Business case no 4
b) Feedback Mechanisms
• Effective feedback mechanisms from patients must be installed to easily
address issues as they arise. These will help the hospital to pin point
problems that the hospital were not able to see and to address as soon as
possible the areas that needs improvement.
c) Review Hospital Rates
• Consider reviewing existing hospital rates. They may check their hospital
rates and compare it with other hospitals or industry rates, because, the
rates that they offer may be a major reason why they have low admission.
They may be offering unreasonably high rates. Factors in determining the
correct price or rates requires cost-benefit analysis.