Operating and Financial Performance Indicators

Operating and Financial Performance Indicators

Health care leaders depend on sound operating and financial performance indicators to make decisions regarding working capital management, capital budgeting, and resource allocation. These indicators help organizations maximize performance and strategically plan for new initiatives. For this Discussion, you select a health care organization and examine how its leaders and managers use operating and financial performance indicators in their decision making.

To prepare:

• Select a health care organization and locate its operating (i.e., utilization rate) and financial data. You may want to use a not-for-profit health care system, as they usually post their annual reports online.
• Identify one operating indicator (e.g., length of stay, admission, etc.) and two financial performance indicators (e.g., cash and cash equivalents, accounts receivable, accounts payable, short-term loans, etc.).

Note: For this Discussion, you are required to complete your initial post before you will be able to view and respond to your colleagues’ postings. Begin by clicking on the “Post to Discussion Question” link and then select “Create Thread” to complete your initial post. Remember, once you click submit, you cannot delete or edit your own posts and cannot post anonymously. Please check your post carefully before clicking Submit!

By Day 3

Post a cohesive response to the following:

Identify the health care organization you selected, and describe one operating indicator and two financial performance indicators of the organization. Analyze how leaders and managers use these indicators when making decisions about working capital management, capital budgeting, and resource allocation. Support your response by identifying and explaining key points and/or examples presented in the Learning Resources.

Read a selection of your colleagues’ postings. Consider how your colleagues’ postings relate to the information presented in the Learning Resources and to your own posting.

SAMPLE ANSWER

Operating and Financial Performance Indicators: Barnes-Jewish Hospital

The healthcare organization selected is Barnes-Jewish Hospital. It is one of the biggest not for profit hospitals in the United States. It has a total annual revenue of 5.9 billion dollars annually and a total of 1241 beds (Barnes-Jewish Hospital, n.d.). The operating indicator selected from the company is the average length of stay and the two financial performance indicators selected are the annual revenue and the expenses going towards the employees. According to the financial reports and as stated earlier, the hospital had a total annual revenue realized of 5.9 billion dollars (Barnes-Jewish Hospital, n.d.). The expenses that goes towards the salaries and benefits paid to the employees is 3.2 billion dollars.  Therefore, the hospital spends more than half of its annual revenue paying the salaries and benefits of its employees.

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The indicators are important when making decisions on areas of working capital management, capital budgeting and resource allocation. For example, if the average rate of discharge is high because of hospital falls then it would be important to analyze the hospital staff members and whether there are enough nurses providing services to hospitals. The indicators are also important in capital budgeting because for example, revenue raised can show if past projects have been effective or not. The knowledge can be used in determine which project in the appraisal level will be invested in and help in making the capital budgeting process more accurate and beneficial to the hospital. The same indicators are also useful in resource allocation (Wayland & Mcdonald, 2016). For example, the hospital reported that helping patients to be active other than remain in bed resulted in reduction of days average discharge days by one. Therefore, the data average length of stay helped allocate more resources to reduce it.

References

Barnes-Jewish Hospital. (n.d.). Annual Reports – Report to Board of Directors St Louis. Retrieved from https://www.barnesjewish.org/About-Us/Annual-Reports

Wayland, M. S., & McDonald, W. G. (2016). Strategic analysis for healthcare: Concepts and practical applications. Chicago, IL: Health Administration Press.

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