Finance and Business Strategy
Key Hospital Financial Statistics and Ratio Medians: Glossary of Formulas
October 17, 2012
5:26 pm
|
Average length of stay (days) |
patient days ÷ total discharges |
| Maintained bed occupancy (%) A measure of the volume and utilization of inpatient services. |
(patient days x 100) ÷ (maintained beds x 365) |
| Operating margin (%) This profitability indicator shows the income derived from patient care operations. Profitability indicators measure the extent to which the organization is using its financial and physical assets to generate a profit. |
(total operating revenue – total operating expenses) ÷ total operating revenue
|
| Excess margin (%) This measure goes beyond the operating margin to include all sources of income and expenses. Other sources of income besides those from patient care operations have become increasingly important to hospitals. |
(total operating revenue – total operating expenses |
| Debt service coverage ratio (x) A ratio that measures the organization’s ability to meet its debt repayments. A declining ratio number can indicate that an organization is in danger of becoming insolvent. |
net revenue available for debt service ÷ |
| Current ratio (x) 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 |
| Cushion ratio (x) A measure of the capital structure of the organization. This ratio is important in evaluating the financial risk position of an organization. |
(cash and cash equivalents + |
| Accounts receivable (days) A measure of the efficiency of the collections function. |
(net patient accounts receivable x 365) |
| Average payment period (days) A measure of how efficiently an organization pays its bills. |
(total current liabilities x 365) |
| Average age of plant (years) Indicates the financial age of the fixed assets of the hospital. The older the average age, the greater the short term need for capital resources. |
accumulated depreciation ÷ depreciation expense |
| Debt-to-capitalization (%) A measure of the long-term sources of debt financing. |
long-term debt ÷ |
| Capital expense (%) A measure of the capital structure and the degree of flexibility an organization might have in raising capital. |
(interest expense + |
| Would patients recommend the hospital to friends and family? | One of the questions included in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), an instrument and data collection methodology used to measure patients’ perspectives of hospital care. Information on the instrument can be found on the Hospital Compare website. |
