Question

The CFO at Marshall Regional Hospital was exploring an option to convert his hospital to a critical access hospital (CAH) status under the Medicare program. The hospital has been losing money for the last four years, and cash positions have been eroding to the point of possible default on a small debt issue.

Let's find out if this is a possible option to save this hospital.

From the scenario, interpret the operating indicators used to analyze the financial performance of the organization. Indicate specific ways in which this information will help management improve the performance of the organization. Provide support for your rationale. 

Assume that you are a hospital administrator, and one of your responsibilities is selecting financial ratios to be included on your management dashboard. Determine the two (2) most critical financial ratios for you to monitor at your facility, and indicate how each of these ratios would help you assess the current performance of your facility. Provide support for your rationale.

Answer 1

Interpret the operating indicators used to analyze the financial performance of the organization

Operating indicators which can be used are the number of patients coming to the hospital for the first time as well as for re-examination. Operating indicators to analyze financial performance would be revenue per bed per day and the cost to operate per bed per day. These ratios can further be analyzed with the ratios of the similar hospital and measures been taken to improve the cost structure of fees charged.

Determine the two (2) most critical financial ratios for you to monitor at your facility, and indicate how each of these ratios would help you assess the current performance of your facility

Financial performance can also be assessed by assessing the cash ratios and profit margins of the hospital. Cash ratios shall help hospital to assess the liquidity position of the hospital to pay out its operating expenses like salaries and utilities while profit margins will help in estimating the costs of the services to be charged.

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