Financial health of hospital
Financial indicators used by financial executives to assess the financial status of a hospital:
Financial indicators used by financial executives to assess the financial status of a hospital:
Bed occupancy (percentage).
This indicator is a measure of the volume and utilization of
inpatient services.
total patient days / [total beds x 365]
Average length of stay (days).
This indicator describes the average stay of all or a class of inpatients
discharged over a given period. It is used as an indicator of efficiency in
containing inpatient service costs.
total patient days / total discharges
Operating margin (percentage).
This profitability indicator shows income derived from patient care operations. It is used to assess the extent to which the
organization is using its financial and physical assets to generate a profit.
(total operating revenue - total operating expense) / total operating revenue x 100
A hospital's operating margin percentage is
one of the most important indicators of financial viability. The operating
margin should be positive.
Current ratio. This liquidity indicator shows the
number of times short-term obligations can be met from short-term creditors.
Because it provides an indication of the ability to pay liabilities, a high
ratio number is one way short-term creditors evaluate their margin of safety.
total current assets / total current liabilities. A current ratio over 1 is desirable.
Cash on hand (days). This solvency
indicator measures the number of days an organization can pay its cash
operating expenses if none of the accounts receivable were collected. This
liquidity indicator shows the minimal survival period of an organization.
(cash on hand + market securities) / ([total operating
expense - depreciation expense] / 365)
Accounts receivable (days).
This indicator is a measure of the efficiency of the collections function.
(accounts receivable - allowances for uncollectible) /
(total operating revenue / 365)
Average payment period (days).
This indicator is a measure of how efficiently an organization pays its bills.
total current liabilities / ([total operating
expense + total other expense depreciation] / 365)
Inpatient gross revenue (percentage).
Hospital revenue typically consists of inpatient and outpatient services. This
measure reflects inpatient revenue as a percentage of total.
total
inpatient revenue / total patient revenue
