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Your team is the Executive Committee at St. Everywhere Health System. The system consists of five (5) hospitals totaling 1,775 beds, thirty (30) affiliated physician practices including 240 physicians of a variety of specialties, two (2) long-term care facilities, and ten (10) urgent care clinics.

Overall, these divisions of the health system generate the following proportions of revenues for the system:

Hospital - 50%

Physicians - 30%

Long-term care - 15%

Urgent care - 5%

You are considering adopting a unified policy on bad debts. Currently each division has its own bad debt policy where the division considers a patient account to be a bad debt and recognizes bad debt expense when an account gets to a certain age. The bad debt policies for each division are:

Hospital - 180 days

Physicians - 120 days

Long-term care - 90 days

Urgent care - 60 days

Your team is considering a change to make bad debts recognized across all divisions at 120 days. Your team must make a recommendation to the Finance Committee of the Board next week. Your assignment is to develop that recommendation and include the following items:

Arguments for and against the proposed change;

Estimated impacts to the income statement and cash flows;

Your team's recommendation with rationale.

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