Financial Data
Helpm31990
9781284118308_SLID_CH14.pptChapter 14:
Trend Analysis, Common Sizing, and Forecasted Data
Common Sizing
- Common sizing puts data on the same relative basis.
Common Sizing: Example
- Common sizing converts numbers to percentages so that comparative analysis can be performed. The worksheet below shows the assets of two hospitals.
| Same Year for All Three Hospitals | ||||||
| Hospital 1 | Hospital 2 | Hospital 3 | ||||
| Current Liabilities Long-term debt Total liabilities | $100,000 400,000 $500,000 | 20% 80% 100% | $500,000 1,500,000 $2,000,000 | 25% 75% 100% | $400,000 100,000 $500,000 | 80% 20% 100% |
Common Sizing:
Practice Exercise 14-1
Trend Analysis
- Trend analysis compares figures over several time periods.
Trend Analysis: Example
| Trend analysis allows comparison of figures over time. | ||||||
| Hospital 1 | ||||||
| Year 1 | Year 2 | Difference | ||||
| Current Liabilities Long-term debt Total liabilities | $100,000 400,000 $500,000 | 20% 80% 100% | $500,000 1,500,000 $2,000,000 | 25% 75% 100% | $50,000 50,000 $100,000 | 50.0% 12.5% |
Trend Analysis:
Practice Exercise 14-2
Comparative Analysis of Operating Data: Horizontal Analysis
- Usually involves converted $ to %
- Called “horizontal analysis” because computation of the % is across, or horizontal
(Refer to examples in this chapter.)
Comparative Analysis of Operating Data: Vertical Analysis
- Usually involves converted $ to %
- Called “vertical analysis” because computation of the % is up and down, or vertical
(Refer to examples in the chapter.)
Forecast Definition
- Webster defines the verb “forecast” as “to calculate or predict some future event or condition, usually as a result of study and analysis of available pertinent data” (Merriam Webster’s Collegiate Dictionary, 10th ed., s.v. “Forecast”).
Forecasting Results
Managers can use three levels of forecasts:
- Short Range: Next year
- Intermediate Range: 5 years from today
- Long Range: The next decade and beyond
Forecasting Approaches
The manager’s forecasting approach usually involves three source levels:
- Level 1: Directly involved personnel
- Level 2: Electronic and statistical information
- Level 3: Executive-level judgment
Forecasting Types
The three most common types of healthcare forecasts include:
- Revenue forecasts
- Staffing forecasts
- Operating expense forecasts
Forecasting Results (1 of 2)
Assumptions affect forecasted results and are the basis of the numbers in your forecast. For example:
- Computing a staff requirement of 3 lab technicians requires an assumption.
- Computing the salary and fringe benefits for each of the technicians requires another assumption.
- When the salary and fringe benefit dollars are computed for the 3 lab technicians, the resulting figure becomes part of your forecast.
Forecasting Results (2 of 2)
Five important assumptions, (especially when forecasting for revenues) include:
- Utilization Changes
- Patient Mix Changes
- Contractual Allowance Changes
- Trend Analysis
- Payer Changes
Contractual Allowance:
Practice Exercise 14-3
A: The unit has recorded 2,000 procedures.
A: 500 procedures are attributed to each payer.
A: Net revenue and contractual allowance as follows:
| Payer # | Gross Charges | % Paid by Each Payer | Net Revenue per Procedure | Contractual Allowance per Procedure |
| 1 | $100.00 | 90% | $90.00 | $10.00 |
| 2 | $100.00 | 80% | $80.00 | $20.00 |
| 3 | $100.00 | 70% | $70.00 | $30.00 |
| 4 | $100.00 | 50% | $50.00 | $50.00 |
Contractual Allowance:
Assignment Exercise 14-3
A: The unit has performed 2,000 procedures. Of these,
Payer 1 = 30% × 2,000 = 600 procedures
Payer 2 = 40% × 2,000 = 800 procedures
Payer 3 = 20% × 2,000 = 400 procedures
Payer 4 = 10% × 2,000 = 200 procedures
Proof Total = 2,000
Contractual Allowance:
Assignment Exercise 14-3 (1 of 3)
A: The net revenue per procedure and the contractual allowance per procedure for each payer is as follows:
| Payer # | Gross Charges | % Paid by Each Payer | Net Revenue per Procedure | Contractual Allowance per Procedure |
| 1 | $100.00 | 80% | $80.00 | $20.00 |
| 2 | $100.00 | 70% | $70.00 | $30.00 |
| 3 | $100.00 | 50% | $50.00 | $50.00 |
| 4 | $100.00 | 90% | $90.00 | $10.00 |
Contractual Allowance:
Assignment Exercise 14-3 (2 of 3)
A: The total net revenue computation for each payer is as follows:
| Payer # | Number of Procedures | Times Net Revenue per Procedure per Payer | Equals Total Net Revenue per Payer |
| 1 | 600 | $80.00 | $48,000 |
| 2 | 800 | $70.00 | $56,000 |
| 3 | 400 | $50.00 | $20,000 |
| 4 | 200 | $90.00 | $18,000 |
| Total | 2,000 | $142,000 |
Contractual Allowance:
Assignment Exercise 14-3 (3 of 3)
A: The total contractual allowance computation for each payer is as follows:
| Payer # | Number of Procedures | Times Contractual Allowance per Procedure per Payer | Equals Total Contractual Allowance per Payer |
| 1 | 600 | $20.00 | $12,000 |
| 2 | 800 | $30.00 | $24,000 |
| 3 | 400 | $50.00 | $20,000 |
| 4 | 200 | $10.00 | $ 2,000 |
| Total | 2,000 | $58,000 |
Forecasting Results
- Managers often have to prepare staffing forecasts
- Watch for
- Non-Controllable Expense Problems
- Required Minimum Staff Levels
- Labor Market Problems
(More details are in the chapter.)
Staffing Forecasts
- A staffing forecast has many parts. A master staffing plan should include all units and all hours and days required to cover all positions with the units.
- Refer to Figure 14-4, “Components of the Staffing Forecast,” in the text.
(Computation of an annual staffing factor is also illustrated in Figure 14-4.)
Figure 14-4 Components of the Staffing Forecast.
Capacity Level Issues in Forecasting (1 of 2)
- In the healthcare industry, “capacity” refers to levels of services; that is, the ability to produce or provide a certain amount of specific healthcare services.
- In the manufacturing industry, on the other hand, “capacity levels” refer to production levels, such as the ability to produce a certain number of widgets.
Capacity Level Issues in Forecasting (2 of 2)
Limitations on healthcare capacity levels generally involve:
- Space and equipment availability
- Staffing availability
(Refer to details in the chapter.)
Final Words About Forecasts
In summary:
- The ultimate accuracy of a forecast rests on the strength of its assumptions
- Always remember: forecasting is an important part of the budget process.
