Capital Structure Strategies in Health Care Financial System

Running Head: HEALTH CARE FINANCE
HEALTH CARE FINANCE
Name of the Student
Name of the University
Author Note

1HEALTH CARE FINANCE
Capital Structure Strategies in Health Care Financial System
The aim of this assignment is to do the analysis of the capital structure strategies in
the Health Care Financial System.The structures of capital of the leading health care systems
are generally viewed as the strategic components of the financial plans.For any health care
organization, accessing to the financial capital is the important part, which would respond to
the changes in their community, acquisition of the new technologies, replacement of the old
equipment, offering new services or programs and many so on. Therefore, much of the
attention is given on the future aggregates needs of the hospitals for the financial capital. The
sources of the capital funds of the health care providers are grants or the other appropriated
money granted by the government, funds that are accumulated from the operations from past,
sales of the short and long-term instruments of debt, philanthropy as well as sales of the
ownership certificates (Baker, Baker & Dworkin, 2017). Moreover, as the group of hospitals
for not-fir profit has maintained the constant levels of the debt over the last few decades, the
hospitals that are investor-owned as well as the group of the leading health care system has
able to reduce the relative use of the debt. In addition to the reduction of the debt due to less
favorable incentives of reimbursements, the focus has been maintained on the high ratings of
the bond. The levels of the debt has been reduced sharply in these systems of health care as it
has in hospitals of investor-owned because part of the debt uses is done for supporting
investments in the financial markets. These are the systems of the health care that does not
have easy access to the equity; ratings of bond as well as earnings of central investments are
considered as central to their policies of the capital structure of the preservation for accessing
to the debt market (Ginter, Duncan & Swayne, 2018).
a)
PROJECT NAME

2HEALTH CARE FINANCE
ORGANIZATION NAME: MERCY HOSPITAL
BUSINESS ADDRESS
CITY, ST, ZIP
TELEPHONE NUMBER
FACSIMILE NUMBER
WEBSITE ADDRESS
EMAIL ADDRESS
b)
Capital Structure Theory
Capital structure is the debt amount or the equity, which is employed by the firm for
funding their operations as well as financing their assets. It is the way the company finances
their overall operations as well as growth with the help of using the different sources of the
funds. Debt is in the form of issuing of the debt or the long-term notes payable, however, the
equity is in the form of the preferred stock or the common stock. Moreover, the capital
structure theory is the systematic approach that finances the activities of the business by the
composition of the liabilities and the equities. Different theories of the capital structure
explains the relationship between the equity financing, debts financing and the firm’s market
value (Hugonnier, Malamud & Morellec, 2015). Following are some of the theories of capital
structure:
 Net Income Approach: Durand has suggested this approach, as he was in the favor
of the decisions of the financial leverage. As per his approach, the changes in the
financial leverage would be changing the cost of the capital. If there is increase in the