Strategic Performance Measurement in a Healthcare Organization

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Balance sheets document the state of affairs within organizations and summarize the assets (items that have value), liabilities (current and non-current obligations), and net assets (the difference between assets and liabilities) (Codman, 2013).

Current Assets
Cash $9 000 000
Net accounts receivable $16 500 000
Supplies $4 000 000
Total current assets $29 500 000
Gross plant, property, and equipment $80 000 000
(minus accumulated depreciation) -$6 000 000
Net plant, property, and equipment $74 000 000
Total assets $103 500 000
Current Liabilities
Accounts payable $8 000 000
Accrued expenditures $7 000 000
Total current liabilities $13 000 000
Long-term debts $55 000 000
Total liabilities $68 000 000
Net Assets $35 500 000
Total liabilities and net assets $103 500 000

Total assets equal the total current assets and the net plant, property, and equipment. Total liabilities equal the total current liabilities and long-term debts. Finally, the difference between the total assets and total liabilities is the net assets.

Balance sheets document the state of affairs within organizations and summarize the assets (items that have value), liabilities (current and non-current obligations), and net assets (the difference between assets and liabilities) (Codman, 2013).

Clinical site example: Balance Sheet
Clinical site example: Balance Sheet (2015).

Income statement reports the financial performance of the organization for a designated period of time (Casabona & Coville, 2014).

Unrestricted revenues
Net patient revenue $620 000
Provision for bad debts -$8 000
Net patient service revenue less provision for bad debts $612 000
Net assets released from restriction $200 000
Total revenues $812 000
Operating expenses
Labor expense $434 000
Supply expense $134 000
Depreciation expense $55 000
Interest expense $12 000
Total operating expenses $635 000
Excess of revenues over expenses $177 000
Increase in unrestricted net assets $177 000

To get the total operating expenses, it is necessary to add all of them together. The difference between them and the total revenues calculated above is the excess of revenues over expenses.

Income statement reports the financial performance of the organization for a designated period of time (Casabona & Coville, 2014).

Clinical site example: The Income Statement
Clinical site example: The Income Statement.

The Cash Flow Statement

Cash Flow Statement: a financial statement that demonstrates how changes in balance sheet accounts and income influence cash or its equivalents (Barua & Saha, 2015).

Cash Flows from Operating Activities:

Change in net assets 7 500

Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation 7 500

(Increase) decrease in current assets:

Increase (decrease) in current liabilities

Increase in net account receivables -52 000

Increase in inventory -3 500

Decrease in prepaid expenses 2 000

Increase in accounts payable 42 000

Decrease in accrued expenses -3 500

Increase in other current liabilities 2 500

Net cash flows from operating activities 2 500

Cash flows from investing activities

Purchases of equipment -157 000

Sale of long-term investments 33 000

Net cash used in investing activities 124 000

Cash Flows from Operating Activities:

Change in net assets 7 500

Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation 7 500

Increase) decrease in current assets:

Increase (decrease) in current liabilities

Increase in net account receivables -52 000

Increase in inventory -3 500

Decrease in prepaid expenses 2 000

Increase in accounts payable 42 000

Decrease in accrued expenses -3 500

Increase in other current liabilities 2 500

Net cash flows from operating activities 2 500

Cash flows from investing activities

Purchases of equipment -157 000

Sale of long-term investments 33 000

Net cash used in investing activities 124 000

Net cash flows from operating activities = all increases/decreases in current assets.

The payment components are, apparently, expenditures; consequently, they should be subtracted.

Net cash flow from operating activities + net cash flow from investing activities + net cash flow from financing activities = the net increase or decrease in cash flow.

The Cash Flow Statement

The Cash Flow Statement

The Cash Flow Statement

Benchmarks in financial management in hospitals: a clinical standard utilized to evaluate performance or the level of quality (Grigoroudis, Orfanoudaki, & Zopounidis, 2012).

Some indexes (Elison, 2015):

Days in accounts receivable Days cash on hand Operating margin Cash to debt percentage Bad debt as percentage of patient revenue
Average benchmarks 48.2 203.4 3% 141.8 5.3
Clinical site 47.7 199.5 3% 100.2 5.2

Benchmarks in financial management in hospitals: a clinical standard utilized to evaluate performance or the level of quality (Grigoroudis, Orfanoudaki, & Zopounidis, 2012).

One of the advantageous strategies is to involve RNs (Allen, Himmelfarb, Szanton, & Frick, 2014). They may reimburse doctors; because nurses are paid about a half of physicians’ salary, approximately $88,000, the hospital may reduce costs (Jennings, Clifford, Fox, O’Connell, & Gardner, 2015).

One of the advantageous strategies is to involve RNs (Allen, Himmelfarb, Szanton, & Frick, 2014). They may reimburse doctors; because nurses are paid about a half of physicians’ salary, approximately $88,000, the hospital may reduce costs (Jennings, Clifford, Fox, O’Connell, & Gardner, 2015).

References

Allen, J. K., Himmelfarb, C. R. D., Szanton, S. L., & Frick, K. D. (2014). Cost-effectiveness of nurse practitioner/community health worker care to reduce cardiovascular health disparities. The Journal of Cardiovascular Nursing, 29(4), 308-314.

Barua, S., & Saha, A. K. (2015). Traditional ratios vs. cash flow based ratios: Which one is better performance indicator?. Advances in Economics and Business, 3(6), 232-251.

Casabona, P. A., & Coville, T. (2014). Statement of comprehensive income: New reporting and disclosure requirements. Review of Business, 35(1), 23-34.

Codman, E. A. (2013). The classic: A study in hospital efficiency as demonstrated by the case report of first five years of private hospital. Clinical Orthopaedics and Related Research, 471(6), 1778-1783.

Elison, A. (2015). 40 financial benchmarks for hospital executives. Web.

Grigoroudis, E., Orfanoudaki, E., & Zopounidis, C. (2012). Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced scorecard. Omega, 40(1), 104-119.

Jennings, N., Clifford, S., Fox, A. R., O’Connell, J., & Gardner, G. (2015). The impact of nurse practitioner services on cost, quality of care, satisfaction and waiting times in the emergency department: A systematic review. International Journal of Nursing Studies, 52(1), 421-435.

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