DQ 1.
The greatest financial challenges to a health care provider are its revenue cycle and receivable management. The revenue cycle is the process that includes all the administrative as well as the clinical functions that are essential and important for capturing, managing, and collecting the patient service revenue whereas the receivable management deals with the planning, organizing, directing, and controlling the receivables. Therefore when all these are taken into account with proper measures they can serve well in making the health care provider sustainable in financial decision. Well if we look at the health care organization we can concatenate many of these who are actually available for the discussion of their alternative to the
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In general there are 10 ratios that govern the finances of an organization. But, we have been given only three ratios though all the ratios are essential because they acquire nearly 90 percent of the information contained in the financial statements. These can be any but we have to choose the best three that certainly makes the difference. The major three ratios would be the operating margin, it is an essential ratio that deals with the organization’s profitability from the operations, and it also includes other decisions related to the investment t and interest and depreciation expense. The other ratio that is required by a health care organization is the day’s cash on hand, his ratio is incubated in the liquidity measure, it is the measure of an organization to hold and support its operating expense without collecting any additional cash for them. The last in the list is the capital spending, it is the measure of an organization which measures the capital expenditure as a percentage of annual depreciation expense. The limitation of financial ration and operating indicator analysis are as follows, it is an retrospective approach because there is no prospective examination, the ration data is not based on the economic data rather than the accounting, it doesn’t capture significant off balance sheet its and the financial statement
Financial statement analysis is the process of identifying financial strengths and weaknesses of a firm by appropriately establishing a relationship between the items of the balance sheet and the profit and loss account. Financial statement plays an important role in setting framework of managerial decisions. Operating indicator analysis are quantifiable measurements that help an organization define and measures progress towards organizational goals that have been defined and agreed upon by management. These goals may change as an organization’s goal change. Operating indicator analysis in health care are part of the health service manger’s quality and risk management plans. Plans are chosen based on the operating indicator analysis based on several factors such as regulatory and accrediting body initiatives and recommendations as well as identified organizational improvement areas. Generally, this analysis for health services is aimed at making sure program or service does what it is intended to do and do it well. Health service managers need the information provided by financial statement analysis. They need to know how their organization is doing financially, what their rate of profit is and whether or not they are they are managing their inventories and accounts receivable efficiently. This can help managers to decide if any changes need to be made and how to allocate their financial resources. Many managers of healthcare facilities use their organization’s financial statement analysis to calculate various ratios and
Financial statements paint a picture of financial health of an organization. Important aspects of the financial statement of a health care organization are ratios. Analysis of ratios show how two numbers relate or compare to one another. Ratios are a way for organizations to make comparison. These comparisons not only encompass what is happening presently but can also be used to make comparisons about numbers and ratios over time. Ratios are a way for organizations to compare themselves with competitors and the industry. (Finkler, Kovner, and Jones, 2007). There are four major ratios that financial statements analyze 1) liquidity 2) activity 3) leverage and 4) profitability. The financial statement for Mayo Health System
The use of financial ratios assists the auditor in analyzing any unusual deviations from the expected results, (Gupta, 2004). The financial ratios are then compared with the entity 's ratios for prior periods as well as with ratios for other businesses in the same industry. A comparison with the industry ratios would have warned BDO of some irregularities in Leslie Fay 's financial statements. BDO Seidman should have been interested some important ratios that would help in determining the accuracy of the financial statements that had been prepared by Polishan and his staff. The important ratios include the liquidity ratios, the profitability ratios and the operating ratios, the
After reading the following, “From bottom to top: How one provider retooled its collections” (Souza &McCarty, 2007). The article sheds light on the fact that Sutter Health is a non-profit public based- healthcare system. Not to mention it is based in Sacramento, in the northern part of California. This type of healthcare systems services patients and families where the system providers have joined force and share their expertise that have helped progress and advance the quality of healthcare. According to Souza & McCarty, they reference the fact that the non-profit network has initiated the interface having the intentions of developing revenue collection for healthcare facilities that can collect from self-paying patients. (2007, p.68). However, with a traditional payment system it does have its disadvantages meaning there are delays in the payment process of the effective revenue system in healthcare facilities. Mainly, is the limitations of the processing because of the result of not having the accessibility of precise information on accounts. Souza & McCarty further discuss that fact that Patient Financial Services staff are not in a position to have the real-time information that aids in processing the financial and operational indicators of the healthcare facility. (2007, p. 70). There were also unproductive and incompetent performance measures in the
Ratio analysis is a very useful tool when it comes to understanding the performance of the company. It highlights the strengths and the weaknesses of the company and pinpoints to the mangers and their subordinates as to which area of the company requires their attention be it prompt or gradual. The return on shareholder’s fund gives an estimate of the amount of profit available to be shared amongst the ordinary shareholders; where as the return on capital employed measures an organization 's profitability and the productivity with which its capital is utilized. Return on total assets is a profitability ratio that measures the net income created by total assets amid a period.
The American economy continues to evolve in the wake of the financial crisis. Fluctuations in the stock market and uncertainties about future economic stability lead Americans to seek the greatest value for their dollar (McCambridge, 2009). The health care industry is not immune to these fluctuations. Chief Financial Officer Kevin Brennan of Geisinger Health Systems reports the following challenges currently facing the health care industry: pressure of constrained revenue streams, business model changes, and pressure to demonstrate efficiency and create value for payors (Healthcare Financial Management Association, 2014).
The healthcare financial executives encounter numerous challenges for their day-to-day operations. Consequently, the health care industry is a highly competitive market and the access to capital is limited, which increases the stakes and the importance of strategic planning (Sussman, Grube, & Samaris, 2009). In addition, there was a variety of financial conditions for the health care industry in 2007 and 2012. Overall, the health care costs tend to consume a significant amount of society 's resources and the ability to control health care costs is a significant issue for health care executives (Coss, 2009). As a result, there has been a variety of changes to the health care industry 's financial management sector. The purpose of this paper is to synthesize the financial management changes.
There are many financial ratios used in evaluation of a healthcare organization’s performance but for purpose of this study, it will be limited to activity, leverage investment, liquidity and profitability.
There are three main benefits of proper health care revenue cycle management. First, it improves access management through centralized registration, scheduling and insurance processing. Second, it improves organizational management of health care consumerism. This means that consumers are empowered through technology to access their information, research costs, make payments and schedule appointments. Finally, it vastly accelerates the cash and credit collection process. This means that the revenue cycle capture process is streamlined and
Content Introduction Part 1 Analysis of Financial Statement Computation of Financial ratio 1. Common size statements 2. Internal liquidity (solvency) 3. Operating performance a. Operating efficiency
The relationship between two variables is defined by ratios. When dividing the dollar amount of one item on a financial statement by the amount of another item on the financial statement a financial ratio is computed. Expressing the relationship of two variables for ease of comparison and interpretation of other information is the purpose of ratio analysis. A ratio analysis computation allows a look at a particular time period in a financial statement. Ratios present a true picture of a company’s financial health, which serves as a control. In analyzing a business one would want to know if enough funds are being generated, if there is a
Firms and Companies include ‘Ratios’ in their external report to which it can be referred as ‘highlights’. Only with the help of ratios the financial statements are meaningful. It is therefore, not surprising that ratio analysis feature are prominently in the literature on financial management. According to Mcleary (1992) ratio means “an expression of a relationship between any two figures or groups of figures in the financial statements of an undertaking”.
Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.
Financial ratios are used in many companies because they can indicate economic and financial success or failure; and provide information and guidance to decision makers. These ratios are generally broken down into 4 types; profitability, liquidity, efficiency and leverage. (Silvia, 2011, pg. 237). One ratio of each type has been calculated in table 1 below, comparing annual reports of two companies within the same industry; the NSW Audit Office (a not-for-profit entity) and KPMG (UK) (a for-profit company).
The main part of the assignment is the financial ratio analysis. For the purpose of this assignment ratios we are going to analyze are: