| Course | HC 306 Healthcare Finance |
|---|---|
| Unit | Unit 5 |
| Paper type | Financial statement interpretation |
| Length | About 1,050 words, 6 pages |
| Format | APA 7 student paper |
| School | Herzing University |
| Program | BS in Healthcare Administration |
| Updated | October 2026 |
Free sample paper for HC 306 Unit 5
Losing $51.8 Million on Operations and Still Ending the Year Ahead: Reading NCH Healthcare System's Audited Statements for the Year Ended September 30, 2024
Student Name
Health Care Administration, Herzing University
HC 306: Healthcare Finance
Instructor Name
February 12, 2026
Losing $51.8 Million on Operations and Still Ending the Year Ahead: Reading NCH Healthcare System's Audited Statements for the Year Ended September 30, 2024
The Organization and the Statements
This paper reads the audited consolidated financial statements of NCH Healthcare System, Inc. and Subsidiaries, a not-for-profit system in Collier County, Florida, for the fiscal year ended September 30, 2024, with the prior year for comparison (NCH Healthcare System, 2025). The system's hospital corporation operates two acute care hospitals in Naples with 713 beds, 391 at the downtown campus and 322 at North Naples, along with physician practices and other services. The statements received an unmodified audit opinion, meaning the auditor found that they present the system's financial position fairly. All figures below are taken directly from the published statements.
The Balance Sheet
Total assets were $1.417 billion at September 30, 2024, up from $1.070 billion a year earlier. The largest assets are property and equipment, net of depreciation, $521.7 million; board-designated assets, money the board has set aside for future needs, $249.5 million; and $111.6 million held by a bond trustee, which did not exist the year before. The largest obligations are long-term debt of $326.4 million, excluding the current portion, up from $121.4 million, and accounts payable of $95.3 million.
The current position suggests the system can pay its near-term bills. Current assets of $283.4 million exceed current liabilities of $180.0 million, a ratio of about 1.57 to 1, slightly below the prior year's 1.61. Cash itself is small, $32.4 million, but the board-designated funds and investments are available if needed. Net assets, the equivalent of equity in a not-for-profit, rose from $747.7 million to $847.4 million, including $208.9 million restricted by donors, much of it recent gifts for capital projects. Not-for-profit statements separate net assets with and without donor restrictions, a presentation required since the accounting standard update for not-for-profit entities issued in 2016 (Financial Accounting Standards Board [FASB], 2016); only the unrestricted $637.8 million is available for general use.
The Operating Statement
Patient service revenue was $882.2 million, 97% of total operating revenue of $908.5 million, and grew 12.7% from the prior year. The other operating revenue came from other services, charitable contributions and donor funds released for operations.
Total operating expenses were $960.3 million, up 7.5%. Salaries, wages and benefits led, at $465.0 million, 48.4% of expenses. Supplies and other expenses followed at $290.2 million, 30.2%, and purchased services at $149.9 million, 15.6%, the fastest-growing major category, up from $119.6 million. Depreciation and amortization were $52.3 million, and interest only $2.9 million, since most of the new debt was issued late in the year.
Expenses exceeded operating revenue, producing an operating loss of $51.8 million, an operating margin of about −5.7%. That is an improvement from the prior year's loss of $74.9 million, or about −9.2%, because revenue grew faster than expenses.
Below the operating line, the system earned $67.0 million of investment income, up from $24.0 million, largely from gains on its investment portfolio in a strong market year. That income turned the operating loss into an excess of revenues over expenses of $17.0 million, compared with a deficit of $36.2 million the year before. Operating revenue and other income must be read separately: the core business of patient care lost money, and investment returns, which vary with markets, covered the loss.
The Cash Flow Statement
Of the three statements, this one often reveals the most. Operations generated $43.4 million of cash, less than the prior year's $53.0 million but positive despite the operating loss, because depreciation of $52.2 million is an expense that uses no cash. Investing activities used $266.7 million: $118.2 million for property and equipment, more than double the prior year's $54.4 million, and $235.2 million of investment purchases, partly offset by $87.8 million of investment sales. Financing activities provided $244.0 million, almost all from $213.7 million of new bonds issued through the Collier County Industrial Development Authority, plus $38.7 million of restricted gifts for capital.
Put together, the system borrowed and raised gifts to fund a large building and equipment program, placed unspent bond proceeds with the trustee, and ended the year with $20.7 million more cash than it began with. The new trustee-held assets on the balance sheet are the unspent bond money.
Two Things the Statements Do Not Show
Audited statements answer some questions and not others, and a careful reader says which. First, the statements do not show how much the system lost on particular services or payers. Patient service revenue is reported as one line, so whether the operating loss comes from Medicare, from uninsured patients, from physician practices or from a few costly service lines cannot be read from these pages. The notes to the statements break revenue down further, but even they cannot show margin by service. Second, the statements show the new bonds and the construction spending but not what the new facilities are expected to earn. Whether the building program will improve the operating margin, or add depreciation and interest without matching revenue, depends on plans that appear in bond offering documents and board minutes, not in the audit.
These limits matter for the unit's purpose. The statements are the right place to judge solvency, liquidity and the direction of results over two years. They are the wrong place to decide which services to grow or cut, which requires the cost and payer analysis this course practiced earlier on a single clinic visit.
What the Three Statements Say Together
NCH is financially stable in the short term but losing money on patient care. Its balance sheet is strong, with substantial reserves and a comfortable current position, and it has chosen to invest heavily in facilities, financed largely by new debt and donations. The risks are clear from the statements. Operating losses, even narrowing ones, cannot be covered by investment income every year, and the new debt adds interest and principal payments that will appear fully in the next year's expenses. The most important figures to watch in the next report are the operating margin, whether purchased services keep growing faster than revenue, and whether cash from operations keeps pace with the new debt service. The course text's guidance on reading not-for-profit statements, separating operating results from nonoperating gains, underlies this reading (Pink & Song, 2020).
References
Financial Accounting Standards Board. (2016). Accounting Standards Update No. 2016-14: Not-for-profit entities (Topic 958): Presentation of financial statements of not-for-profit entities.
NCH Healthcare System, Inc. (2025). Consolidated financial report: September 30, 2024 [Audited consolidated financial statements]. https://nchmd.org/wp-content/uploads/2025/02/2023-and-2024-Financial-Statements-of-NCH-Healthcare-System.pdf
Pink, G. H., & Song, P. H. (2020). Gapenski's fundamentals of healthcare finance (3rd ed.). Health Administration Press.
HC 306 Unit 5 instructions, in plain terms
Unit 5 asks you to interpret the financial statements of a real health care organization. Expect to describe the organization and the statements, read the balance sheet, the operating statement and the cash flow statement, note what the statements do not show and explain what the three say together. Students often ask where to find statements and which figures matter. Not-for-profit systems publish audited statements, often through bond disclosure sites. Take figures directly from the statements and cite them. Compare with the prior year. Explain how an operating loss can coexist with positive cash from operations, since depreciation uses no cash. Say plainly what the statements cannot tell you, such as margin by service.
Inside the HC 306 Unit 5 example
The paper opens with the system, its hospitals and the audit opinion. The balance sheet section reports total assets, the largest assets and obligations and the current ratio near 1.57. The operating statement section breaks revenue and expenses into major categories, noting that purchased services grew fastest. The cash flow section shows cash from operations, heavy capital spending and new bond financing, and explains why cash flow stayed positive despite the loss. The limits section explains that revenue is reported as one line, so losses by payer or service cannot be seen, and that future earnings from new buildings are not shown. The closing section summarizes short-term stability, operating losses and rising debt as the figures to watch next year.
HC 306 Unit 5 rubric: what full points look like
Herzing's rubric for financial statement interpretation usually covers the organization, each statement, limits and the overall reading. Linking the three statements into one story weighs most, because each statement alone can mislead, as an operating loss does when cash from operations is still positive. Organization points reward the audit opinion and period. Balance sheet criteria look for major assets, debt and liquidity. Operating statement credit goes to revenue and expense categories with growth rates. Cash flow points reward explanation of depreciation and financing. Limits should be specific. Figures must match the source statements. NCH's audited consolidated statements, FASB's not-for-profit reporting standard and Gapenski's healthcare finance text support the reading.
Common HC 306 Unit 5 mistakes, and how to avoid them
Statement interpretations in HC 306 Unit 5 often come up short by listing figures without explaining what they mean. Another frequent problem is reading the operating statement alone and missing positive cash flow. Students often confuse total assets with cash. Prior year comparisons are skipped. Debt growth is noted without asking how it will be repaid. Limits of audited statements are not discussed. Figures are rounded inconsistently or taken from news reports rather than the statements. The audit opinion is not mentioned. Finally, read the three statements together, because graders reward a paper that tells a reader whether the organization is healthy and what to watch in next year's report.
Get a HC 306 Unit 5 example written to your instructions
Send the Unit 5 instructions and the rubric from your HC 306 classroom, plus the organization whose statements your section assigned. We write a custom example that reads each statement for what it alone can answer, pulls out the largest lines and reconciles the three into one verdict, back in 24 to 48 hours. The first custom sample is free.
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HC 306 Unit 5 questions, answered
Where do I find statements I am allowed to read?
Nonprofit health systems publish audited annual reports, and many post them openly alongside their community benefit filings. Publicly traded companies file complete statements that anybody can download. Either source gives you three real documents with notes attached, which beats a textbook exhibit because the notes are where the interesting detail hides. Say in your opening which report and which period you worked from.
Should the interpretation include ratios?
Check your instructions, since some sections keep ratios for a later unit and want plain reading here. Where they are welcome, two or three are plenty, and each needs something to be measured against: the prior period, a published benchmark, or a comparable organization. A ratio quoted on its own cannot be strong or weak, and a grader will read it as arithmetic performed for its own sake.
What if the statements use unfamiliar labels?
That is normal, because health systems label lines differently and nonprofit reporting differs from corporate reporting. Work from the notes, which usually define what a line contains, and say in your paper how you read an ambiguous label. Naming the uncertainty is treated as careful reading; guessing silently and building an argument on the guess is where the marks disappear.
Where can I find a free HC 306 Unit 5 sample paper?
The full HC 306 Unit 5 financial statement interpretation is free on this page, NCH Healthcare System's 2024 audited statements read together with limits noted. An interpretation of another system's statements can be written to order.
How can a hospital lose money on operations but have positive cash flow?
Depreciation is an expense that uses no cash, so cash from operations can be positive even with an operating loss. This sample explains that pattern in a Florida system's 2024 statements.