You have recently joined the River staff as a special assistant to the CEO. On your first day, the CEO states that the best way to get to know the financial and operating condition of the hospital is to conduct a thorough financial statement and operating indicator analysis. The CEO mentions that the board has been complaining that too much time is spent at quarterly meetings discussing River's financial and operating condition.

As a recent MBA/MHA graduate you know that many healthcare providers are now using dashboards to focus on key performance indicators (KPI's). A dashboard is nothing more than a way to summarize an organization's financial and operating performance. You decide you will use this strategy to conduct an extensive financial statement and operating indicator analysis on the hospital.

A key performance indicator (KPI) will measure a critical area of performance, while a dashboard is a means of presenting the measures that facilitates interpretation. Many dashboards contain KPIs related to patient satisfaction and other factors beyond financial and operating performance, but the intent of this assignment is to focus solely on financial and operating measures.

you will calculate and analyze, from the resources provided, the following five financial and five operating key performance indicators (KPIs). You will then prepare two dashboards, one for the financial KPI's and one for the operating KPI's. These dashboards will then be presented at future board meetings.

Financial KPIs: Operating KPIs:

Days cash on hand Profit per inpatient discharge

Operating margin Profit per outpatient visit

Days in patient accounts receivable Occupancy rate

Debt ratio FTEs per occupied bed

Total asset turnover Outpatient labor hours per visit

The key to your success for this assignment lies in the interpretation of the data presented rather than number crunching.

Required:

• five financial KPI calculations and results.
• five operationalKPI calculations and results.
• Comparison of each KPI with peers
• A narrative demonstrating your interpretation of the data presented. Your narrative should address the following (for each KPI).
  • Where you found the data (financial/operating statement) needed to complete each KPI.
  • An explanation of whether each KPI finding represents a strength or weakness to the hospital.
  • The potential problem areas in the system that can be detected through application of this ratio.
  • Actions and recommendations you would recommend to the board, for an unfavorable KPI, to bring this ratio back to a more favorable position.

To assist in your calculations and analysis, you are provided with the following resources.

Statements of Operations and Changes in Net Assets (thousands of dollars)
Revenues	2021
Net patient service revenue	$148,118
Premium revenue	$17,316
Other revenue	$3,079
Net operating revenue	$168,513
Expenses
Salaries and benefits	$126,223
Supplies	$20,568
Insurance	$4,518
Purchased services	$3,189
Depreciation	$3,965
Interest	$5,329
Total expenses	$163,792
Operating income	$4,721
Nonoperating income
Contributions	$243
Investment income	$3,870
Total nonoperating income	$4,113
Excess of revenues over expenses (net income)	$8,834
Changes in Net Assets
Changes in net assets without donor restrictions:
Excess of revenues over expenses	$8,834
Increase in net assets without donor restrictions	$8,834
Changes in net assets with donor restrictions:
Gifts and bequests	$1,466
Increase in net assets with donor restrictions	$1,466
Increase in net assets	$10,300
Net assets at beginning of year	$54,174
Net assets at end of year	$64,474

Balance Sheets (thousands of dollars)
Assets	2021
Current Assets:
Cash and cash equivalents	$16,468
Short-term investments	$10,000
Net patient accounts receivable	$28,509
Inventories	$3,695
Total current assets	$58,672
Long-term investments	$18,059
Net property and equipment	$88,490
Total assets	$165,221
Liabilities and Equity
Current Liabilities:
Notes payable	$4,334
Accounts payable	$5,022
Accrued expenses	$6,069
Total current liabilities	$15,425
Long-term debt	$85,322
Total liabilities	$100,747
Net assets (Equity):
Without donor restrictions	$56,168
With donor restrictions	$8,306
Total net assets	$64,474
Total liabilities and net assets	$165,221
Net Property and Equipment (thousands of dollars)
	2021
Land	$2,954
Buildings and equipment	$115,595
Gross property and equipment	$118,549
Less: Accumulated depreciation	$30,059
Net property and equipment	$88,490

Median Financial Ratios for Peer Group (200-299 beds)
	Median
Profitability Ratios
Total margin	4.30%
Operating margin	1.80%
Return on assets	3.60%
Return on equity	6.01%
Liquidity Ratios
Current ratio	1.90
Days cash on hand	200.90
Debt Management Ratios
Debt ratio	33.7%
Debt to equity	64.7%
Times interest earned	2.23
Asset Management Ratios
Fixed asset turnover	3.64
Total asset turnover	1.25
Days in patient accounts receivable	45.90
Average age of plant (years)	11.7
Operating Data for River Community Hospital
	2021
Medicare discharges	2,741
Total discharges	5,489
Outpatient visits	97,141
Licensed beds	210
Staffed beds	178
Patient days	32,050
All-payer Case Mix Index	1.3161
Full-time equivalents	619.3
Operating Revenue and Expense Allocation (thousands of dollars)
	2021
Operating revenue
Gross inpatient service	$161,265
Gross outpatient service	$221,718
Gross patient service revenue	$382,983
Contractual allowances	$214,470
Net operating revenue	$168,513
Operating expenses
Inpatient service	$72,996
Outpatient service	$90,796
Total operating expenses	$163,792

Median Operating Ratios for Peer Groups (200-299 beds)
	Median
Profit Indicators
Profit per inpatient discharge	($21)
Profit per outpatient visit	$78
Net Revenue Indicators
Net revenue per discharge	$12,411
Net revenue per visit	$523
Medicare revenue percentage	40.8%
Contractual allowance percentage	50.6%
Outpatient revenue percentage	45.6%
Volume Indicators
Occupancy rate	65.9%
Average daily census	144.7
Length of Stay Indicators
Average length of stay (days)	5.40
Adjusted length of stay	5.36
Expense Indicators
Expense per discharge	$15,126
Expense per adjusted discharge	$13,924
Expense per visit	$764
All-payer Case Mix Index	1.1756
Efficiency Indicators
FTEs per occupied bed	3.01
Outpatient Labor hours/visit	5.84

Note that the peer group data used in this case are for instructional use only, and do
not represent actual peer group data for the time period of the case. The material presented in this case is extracted from Gapenski's Cases in Healthcare Finance, Seventh Edition, Pink & Song, 2022, Health Administration Press.

Answer rating: 100% (QA)

To conduct an extensive financial statement and operating indicator analysis on the hospital we will calculate and analyze the following financial and operating key performance indicators KPIs using t... View the full answer