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Hospital 1

Year 1 Year 2 Difference

Current liabilities $100,000 20% $150,000 25% $50,000 50%

Long-term debt 400,000 80% 450,000 75% 50,000 12.5%

Total liabilities $500,000 100% $600,000 100% $100,000 –

14.2 TREND ANALYSIS The process of trend analysis compares figures over several time periods. Once again, dollar amounts are converted to percentages to obtain a relative basis for purposes of comparison, but now the comparison is across time. If, for example, radiology revenue was $20,000 this period but was only $15,000 for the previous period, the difference between the two is $5,000. The difference of $5,000 equates to a 33.3% difference because trend analysis is computed on the earlier of the two years: that is, the base year (thus, 5,000 divided by 15,000 equals 33.3%). Trend analysis is sometimes called “horizontal analysis” (because the computation of the percentage of difference is horizontal).

An example of horizontal analysis is contained in Table 14–3 (http://content.thuzelearning.com/books/Baker.6866.18.1/sections/ch14_sect1_2#ch14_tbl3) . In this case, the liabilities of hospital 1 for year 1 are compared with the liabilities of hospital 1’s year 2. Current liabilities, for example, were $100,000 in year 1 and are $150,000 in year 2, a difference of $50,000. To arrive at a percentage of difference for comparative purposes, the $50,000 difference is divided by the year 1 base figure of $100,000 to compute the relative differential (thus, 50,000 divided by 100,000 is 50%).

Table 14–3 Trend Analysis for Liabilities

Another example of comparative analysis is contained in Table 14–4 (http://content.thuzelearning.com/books/Baker.6866.18.1/sections/ch14_sect1_2#ch14_tbl4) . In this case, general services expenses for two years in hospital 1 are compared. The difference

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Hospital 1

Year 1 Year 2 Difference

General services expense

Dietary $320,000 40% $405,000 45% $85,000 26.5%

Maintenance 280,000 35% 270,000 30% (10,000) (3.5)%

Laundry 80,000 10% 45,000 5% (35,000) (43.5)%

Housekeeping 120,000 15% 180,000 20% 60,000 50.0%

Total GS expense $800,000 100% $900,000 100% $100,000 –

between year 1 and year 2 for each line item is computed in dollars; then the dollar difference figure is divided by the year 1 base figure to obtain a percentage difference for purposes of comparison. Thus, housekeeping expense in year 1 was $120,000, and in year 2 was $180,000, resulting in a difference of $60,000. The difference amounts to 50% ($60,000 difference divided by $120,000 year 1 equals 50%). In Table 14–4 (http://content.thuzelearning.com/books/Baker.6866.18.1/sections/ch14_sect1_2#ch14_tbl4) , two of the four line items have negative differences: that is, year 2 was less than year 1, resulting in a negative figure. Also, the dollar figure difference is $100,000 when added down (subtract the negative figures from the positive figures; thus, $85,000 plus $60,000 minus $10,000 minus $35,000 equals $100,000). The dollar figure difference is also $100,000 when added across ($900,000 minus $800,000 equals $100,000).

Table 14–4 Trend Analysis for Expenses

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