513BC2012Syllabus-March27
University of Washington Executive MHA Program
HSMGMT 513B/C: Seminar in Healthcare Finance
Course Syllabus (Spring 2012)
Credits: 3 (graded)
Location: Park 140, Bellevue http://depts.washington.edu/mhap/park140
Schedule:
Session #
Date
St. Helens
Rainier
1
March 29, 2012
2
March 30, 2012
3
April 26, 2012
8:00 AM-12:30 PM 1:30 PM – 6:00 PM
4
April 27, 2012
5
May 24, 2012
6
May 25, 2012
Course Instructor: Douglas Conrad, PhD, Professor of Health Services
(dconrad@u.washington.edu); phone: (206) 616-2923
Teaching Assistant (TA): To be determined
Instructor Biography: http://depts.washington.edu/mhap/faculty
Course Description:
The purpose of this course is to advance the conceptual understanding and skills of health
administration students in financial management. The format of the course will combine lectures
on advanced concepts with case studies and problem sets, the latter as a means of ensuring depth
of conceptual understanding and ability to apply the concepts to real-world problems.
Course Objectives:
Participants in this course will be able to:
1. Evaluate the conceptual arguments for leasing versus buying real assets in health care and
construct and analyze cash flow statements for the lease versus buy alternative. Apply this
analysis to deciding between the alternative financing approaches.
2. Build a financial model of capital structure for a healthcare organization and apply that
model to choose the optimal financing mix for that organization
3. Explain the core concepts of optimal financing and investment decisions and distinguish
between the financing and investment decisions.
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513BC2012Syllabus-March27
4. Apply the core concepts of net present value analysis to conduct a bond refunding decision
analysis.
5. Value a healthcare enterprise, using the fundamentals of cash flow analysis and present value
and recognizing the nature of the organization.
6. Construct an analytic framework for valuing merger and acquisition opportunities, including
the costs and benefits of those opportunities, and apply that framework to examples of a
potential merger.
7. Define derivatives as a type of financial instrument, provide examples of different types of
options, and explain their role in financial markets for health services (including their use as
hedges versus speculative securities).
Competency Domains for the Course: (Conceptual Understanding, Skills, and Knowledge)
(1) Conceptual understanding of important sources of capital financing for the health care
sector
o Skill in valuation of debt contracts
o Skill in evaluation of various forms of lease financing and in valuing lease contracts from
the perspectives of lessor and lessee
o Ability to apply concepts of capital market efficiency to different types of financing
decisions
 Bond refunding
 Lease financing
 Issuance of new debt securities
 Derivatives and options in financial risk management
(2) Conceptual understanding of optimal capital structure
o Skill in analyzing determinants of optimal capital structure
o Skill in applying quantitative, analytic techniques to determine and justify optimal capital
structure
(3) Conceptual understanding of risk analysis
o Skill in analyzing risk
o Skill in structuring sensitivity analyses
o Skill in analyzing alternative scenarios
o Skill in defining and distinguishing the role of derivatives in risk management
(4) Conceptual understanding of capital expenditure (investment) analysis and business
valuation
o Skill in evaluating capital investment projects with financial economic decision rules
o Skill in formulating problem statements for capital investment decisions
o Skill in estimating business valuation and considerations of merger and acquisitions
o Skill and conceptual understanding of enterprise valuation
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513BC2012Syllabus-March27
o Ability to apply different stakeholder perspectives to capital investment decisions
Course Materials:
One text will be required for the course (available in the South Campus/Health Sciences
Bookstore). Three cases will be included in the coursepak, and selected readings from the
health services financial management literature will be web-linked to specific course
sessions.
Text Book: Understanding Healthcare Financial Management, 6th edition, by Louis C.
Gapenski and George S. Pink. Chicago: AUPHA/Health Administration Press, 2011.
[Referred to below as “Gapenski Chapter #__”]
Required Cases: Selected cases in the course pack at South Campus Center (Health
Sciences) Bookstore from Louis C. Gapenski (in collaboration with George H. Pink) Cases
in Healthcare Finance, 4th Edition. Chicago: AUPHA/Health Administration Press, 2006.
[Referred to below as “Gapenski Case # __”]
Ancillary Materials (See specific class sessions and the online book companion)
 Gapenski end of chapter problems for each chapter
 Text/Models for each Chapter: models and text that will help you test your
understanding of examples in Gapenski’s textbook
Assignments:
Case Assignments:
There are two finance case studies in this course for which you are responsible. The four
EMHA student teams formed in Fall 2011 for each cohort (Rainier and St. Helens) will
continue for this course. Each team will turn in a single written analysis for both of the case
studies.
Problem Sets:
Three problem sets will be completed as individual (not team) assignments. The problem sets
are designed to test your understanding of the concepts and to apply those concepts.
Working the problems also sharpens your skills for the cases you’ll be working in teams. We
will discuss the problem sets in class, and I will call on you to discuss your approach to the
problems and your solutions.
Individual Class Participation:
I will pose questions in class -- rotating whom I call on, so that each student will have
multiple opportunities during the course to share his or her ideas and to demonstrate
understanding of the material. The goal is never to embarrass anyone, but instead to provide
everyone with an equal opportunity and strong incentive to participate actively and
thoughtfully.
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513BC2012Syllabus-March27
Before each class session you are expected to read the assigned material, work the assigned
chapter problems (as applicable for the session), and be prepared. Working in teams allows
one to learn from others and to gain from each other’s strengths, but there is no substitute for
each individual doing the work – reading, working problems, and working on all parts of
each problem set or case.
For the oral case presentations, each team member is expected to be knowledgeable on all
parts of the case. Your career in health administration will require your active and thoughtful
oral participation in meetings and conferences, as well as frequent oral presentations. So, by
practicing your presentation skills in the “safe harbor” of the classroom, you will be better
prepared to succeed in your chosen career.
Grading:
Total
Weight
Weight/
Assignment
Component
3 Problem
Sets
X
15%
=
45%
2 Cases
X
20%
=
40%
15%
=
15%
Class
Participation
Total
Comments
This will be comprised of three graded
individual problem sets.
Case grades are evaluated on two, equally
weighted dimensions:
 50% based on the team submission
 50% based on your team members’
collective evaluation of your overall
contribution to both cases
This portion will be evaluated by the instructor
based on your engagement in and overall
contribution to the class
100%
Disability Accommodations:
If you would like to request academic accommodations due to a disability, please contact
Disabled Student Services, 448 Schmitz, 543-8924 (V/TDD). If you have a letter from Disabled
Student Services indicating you have a disability that requires academic accommodations, please
present the letter to me so we can discuss the accommodations you might need for class.
Course Content Areas and Session-by-Session Plan
Session 1: Thursday, March 29, 2012 (Basics of Capital Budgeting & Project Risk Analysis)
Session Overview:
 Introductions, Mini-Lecture on Capital Budgeting and Risk Analysis, plus Q&A:
Financial economics and the role of managerial finance in healthcare (60 minutes)
 Break (10 minutes)
 Student Teams work in-class on the problems for Chapters 11 and 12
(60 minutes)
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



Break (10 minutes)
In-class discussion of the Chapter 11 and 12 problems (60 minutes)
Break (10 minutes)
Introductory Lecture on Bond and Stock Valuation, plus Q&A and Hints on Problems
from Chapters 5, 6, and 7 (60 minutes)
Assignments for Class:
 Required Reading: Gapenski Chapters 11 and 12
 Review All Problems before class:
o Chapter 11: Problems 1, 2, and 4 (Problem 4 for discussion only)
o Chapter 12: Problems 1, 2, and 4 (Problem 2 for discussion only)
 First Problem Set: (Individual Graded Problem Set; Submit individual responses no
later than Monday evening, April 2 @ 10:00 pm via email to: (1)
dconrad@u.washington.edu:
o Chapter 11: Problems 1 and 2
o Chapter 12: Problems 1 and 4
Session 2: Friday, March 30, 2012 (Bond Valuation, Equity Valuation, Debt Refunding,
Market Efficiency and Investment Banking)
Session Overview:
 Lecture on Context: Investment Banking and Security Valuation (60 minutes)
 Break (10 min)
 Student Teams work in-class on assigned problems for Chapters 5, 6, & 7 (60 minutes)
 Break (10 min)
 In-class discussion of Chapter 5, 6, & 7 Problems (60 minutes)
 Break (10 min)
 Student teams work on the mini-cases for Chapters 5, 6 and 7 (30 minutes; in two parts)
 Review and discussion of team solutions to the mini-case (30 minutes; in two parts)
Assignments for Class:
 Required Reading: Gapenski Chapters 5, 6 and 7
 Review All Problems before class
o Chapters 5 & 7: Problems 5 & 6 (Problem 6 for discussion only)
o Chapters 6 & 7: Problems 3 & 6 (Problem 3 for discussion only)

Second Problem Set: (Individual Graded Problem Set; Submit individual responses
no later than Monday evening, April 2 @ 10:00 pm via email to (1)
dconrad@u.washington.edu:
o Chapters 5 & 7: Problem 5 (Bond Valuation)
o Chapters 6 & 7: Problem 6 (Equity Valuation)
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First Inter-Session Teleconference and Q&A
Tuesday Evening, April 3, 2012; 7:00 – 9:00pm
Objectives:
(1) Answer Questions on Chapters 5. 6. and 7
(2) Review Chapter 8 on Lease Financing
Inter-Session Individual Assignment:
Third Problem Set: Chapter 8: Problem 3 (Submit no later than
Tuesday, April 17 @ 10:00pm via
e-mail to Doug and TA (to be determined)
Session 3: Thursday, April 26, 2012 (Lease Financing, Applications and The Medical Office
Building)
Session Overview:
 Lecture: The logic of the lease versus buy decision as one of financing (40 minutes)
 Student teams work in-class on Chapter 8: Problem 3 in class (30 minutes)
 Break (10 min)
 Student Teams work in-class on Chapter 8 Mini-case (60 minutes)
 Break (10 min)
 In-class discussion of Chapter 8: Problem 3 (40 minutes)
 Student teams work on “Case 18: Portland Cancer Center: Leasing Decisions” (50
minutes)
 Wrap-up discussion and Q&A (30 minutes)
Assignments for Class:
 Required Readings:
o Gapenski Chapter 8
o Louis C. Gapenski. Case 18: Portland Cancer Center: Leasing Decisions. In
Gapenski, L.C. Cases in Healthcare Finance, 4th edition, pp. 135-139. (Preview)
o Session 3 PowerPoint Slides
o Chapter 8 Leasing Mini-Case
 Case 18: “Portland Cancer Center: Lease Financing;” Submit team case analysis by
10:00pm, Thursday, April 26, via email to Doug and TA.
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513BC2012Syllabus-March27
Session 4: Friday, April 27, 2012 (Leasing Case Study and Introduction to Capital
Structure)
Session Overview:
 Case Discussion: “Portland Cancer Center: Leasing Decision” Team Presentations
will occur in the order listed below:
o Cowlitz/Lewis Qs 1-6 (40 minutes)
o Snoqualmie/Toutle Qs 7-12 (40-minutes)
o Break (20 min)
o Puyallup/Columbia: Comparison/contrast responses to Qs 1-6 (30 minutes)
o Nisqually/Chehalis: comparison/contrast responses to Qs 7-12 (30 minutes)
o I will offer summary comments on the case analysis (20 minutes)
o Break (20 min)
 Introductory Lecture on Capital Structure and Q&A (30 minutes)
 Student teams will begin work on the RN Temps case (40 minutes)
Assignments:
 Required Readings
o Kaufman and Hall (2009): Capital Structure Planning
 Present Team Case Analysis
Second Inter-Session Teleconference:
More on Capital Structure & Q&A on RN Temps Case
Tuesday evening, May 8, 2012; 7:00 – 9:00pm
Objectives:
(1) Review principles of optimal capital structure
(2) Examine Case 17 and apply economic principles to basics of case
Assignments for Teleconference:
 Required Readings
o Gapenski Chapters 9 & 10
o Review Gapenski Case 17: “RN Temps, Inc.: Capital Structure
Analysis”
o Review Chapter 10 Mini-Case on Capital Structure
Session 5: Thursday, May 24, 2012 (Capital Structure Decisions and Case Study)
Session Overview:
 Case Discussion: Gapenski Case 17: “RN Temps, Inc.: Capital Structure Analysis”
Teams will present in the order listed below:
o Puyallup/Columbia: Qs 1 - 3 (30 minutes)
o Nisqually/Chehalis: Qs 4-7 (30 minutes)
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513BC2012Syllabus-March27
o Break (20 minutes)
o Cowlitz/Toutle: compare/contrast Qs 1-3 (20 minutes)
o Snoqualmie/Lewis: compare/contrast Qs 4-7 (20 minutes)
o I will offer summary comments on the case analysis (20 minutes)
o Break (10 minutes)
 Introducing financial risk management and derivatives:
o Mini-lecture: financial risk management and Q&A (40 minutes)
o Student teams meet to discuss selected abstract from US Financial Crisis Commission
Report (30 minutes)
o Break (10 minutes)
o In-class discussion of US Financial Crisis Commission Report (40 minutes)
Assignments:
 Present Team Case Analysis:
Gapenski Case 17: “RN Temps, Inc.: Capital Structure Analysis”
Team Case 17 analysis due via e-mail to Doug and TA no later than Wednesday
evening, May 23 @ 10:00pm
Reading: Excerpts from US Financial Crisis Commission Report (January 2011): Focus on
(1) Conclusions: p. xv - xxviii; (2) Chapter 2, Shadow Banking: pp. 27-33; (3)
section on (Securitization and Derivatives) Structured Finance: pp. 42 - 51; (4)
(Subprime Lending) pp. 68 - 74.
Session 6: Friday, May 25, 2012 (Enterprise Valuation and Financial Risk Management)
Session Overview:
 In-class discussion of derivatives, including examples from US Financial Crisis Commission
Report, January 2011 (30 minutes)
 Mini-lecture on enterprise valuation and mergers (50 minutes)
 Break (15 minutes)
 Student teams review and sketch solutions to the St. Jerome Case (# 22) on merger analysis
and valuation (50 minutes)
 In-class discussion of St. Jerome case study and sketch of solutions (50 minutes)
 Break (15 minutes)
 Course review & Q&A (50 minutes)
 Course evaluations (10 minutes)
Assignments:
 Required Reading
o Gapenski, Chapter 18: Financial Risk Management
o Gapenski, Chapter 16: Business Valuation, Mergers, and Acquisitions
o (Review) Case 22: St. Jerome Teaching Hospital (Merger Analysis and Valuation)
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