Key Hospital Financial Statistics and Ratio Medians: Glossary of Formulas

Overview

• This document provides key financial statistics and ratio medians used in hospital financial management.
• It includes explanations and formulas for critical financial metrics used to assess a hospital's performance and financial health.

Key Financial Metrics

Average Length of Stay (days)

• Definition: Measures the average number of days inpatients are hospitalized.
• Formula:
  • (patient days) / (total discharges)
• Use: Indicator of efficiency in managing inpatient service costs.

Maintained Bed Occupancy (%)

• Definition: Evaluates the utilization and volume of inpatient services.
• Formula:
  • (patient days x 100) / (maintained beds x 365)

Operating Margin (%)

• Definition: Shows profitability from patient care operations.
• Formula:
  • (total operating revenue - total operating expenses) / total operating revenue

Excess Margin (%)

• Definition: Includes all income sources, not just patient care operations.
• Formula:
  • (total operating revenue - total operating expenses + non-operating revenue) / (total operating revenue + non-operating revenue)

Debt Service Coverage Ratio (x)

• Definition: Measures the ability to meet debt repayments.
• Formula:
  • net revenue available for debt service / (principal payment + interest expense)

Current Ratio (x)

• Definition: Indicates ability to meet short-term obligations.
• Formula:
  • total current assets / total current liabilities
• Importance: High ratio suggests a better margin of safety for creditors.

Cushion Ratio (x)

• Definition: Assesses the capital structure and financial risk.
• Formula:
  • (cash and cash equivalents + board designated funds for capital) / estimated future peak debt service

Accounts Receivable (days)

• Definition: Efficiency measure of the collections function.
• Formula:
  • (net patient accounts receivable x 365) / net patient revenue

Average Payment Period (days)

• Definition: Measures efficiency in bill payments.
• Formula:
  • (total current liabilities x 365) / (total operating expenses - depreciation and amortization expenses)

Average Age of Plant (years)

• Definition: Indicates the age of fixed assets.
• Formula:
  • accumulated depreciation / depreciation expense
• Use: Older age suggests a need for capital resources.

Debt-to-Capitalization (%)

• Definition: Evaluates long-term debt financing sources.
• Formula:
  • long-term debt / (long-term debt + unrestricted fund balance)

Capital Expense (%)

• Definition: Reflects capital structure and flexibility in raising capital.
• Formula:
  • (interest expense + depreciation & amortization expenses) / total operating expenses

Patient Recommendation

• Surveys if patients would recommend the hospital, based on the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS).
• Relevant information available through the Hospital Compare website.

This glossary serves as a reference for healthcare financial professionals to understand and apply these financial metrics within their organizations.