1-2 Journal 1
1-2 Reflective Journal: Financial Management measures
IHP- 450 Healthcare Mgmt and Finances
Southern New Hampshire University
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Healthcare organizations need financial measurement data to create decisions that lead to
better operational efficiency while enhancing patient care and financial sustainability.
Healthcare managers use financial measure monitoring to evaluate organizational performance
while discovering areas for improvement and resource distribution strategies.
Major Financial Measures in Healthcare:
Admissions:
The number of patients entering healthcare facilities through admission tracking is recorded.
Financial managers would start by implementing targeted marketing strategies to attract
patients or assess service quality when admissions show a decline in order to understand
community needs.
Discharges:
The facility tracks the total patient population who leave their facilities through discharges.
High discharge rates motivate managers to examine patient flow processes as well as discharge
planning to improve operational efficiency but low discharge rates require investigation of care
delivery bottlenecks.
Length of Stay (LOS) shows how long patients stay on average within hospital facilities.
Financial managers would investigate better care methods and discharge planning
improvements to lower costs and enhance patient satisfaction because the LOS exceeds
industry norms.
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Daily Census: Hospital patient numbers for a particular day are represented by this metric. The
assessment of this measure allows managers to decide staff requirements for adequate patient
care support without spending additional money on personnel.
Occupancy Rates: This measure indicates the percentage of available beds that are occupied.
Healthcare organizations need to analyze their occupancy levels because low rates require
service line adjustments and marketing while high rates necessitate either expansion plans or
better resource distribution.
The main function of financial measurement enables organizations to understand their
financial standing which then directs decisions about resource distribution and strategic
planning. Healthcare managers need financial measures to detect organizational strengths and
weaknesses because this information supports operational efficiency and quality patient care
delivery. Financial managers in healthcare organizations track the following essential financial
measures.
1. Operating Margin serves as a key performance indicator which reveals the financial success
of healthcare organizations. A declining operating margin prompts management to choose
between cost reduction and service fee increases to achieve better profitability.
2. Current Ratio helps organizations evaluate their short-term financial capability to fulfill their
obligations. Financial managers would investigate supplier payment term negotiations and debt
restructuring options when current ratio levels become low to maintain liquidity.
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3. Days Cash on Hand reveals the duration for which a company can sustain its operations
using its available cash reserves. A healthcare organization facing low days cash on hand would
choose between implementing cost reduction strategies or seeking additional funding sources.
4. Accounts Receivable Turnover demonstrates the speed at which a healthcare organization
retrieves payments from patients. The organization should concentrate on enhancing its billing
procedures and patient payment alternatives when payment collection takes too long.
5. Debt Service Coverage Ratio evaluates the organization’s capability to fulfill its debt
responsibilities. Management should investigate financing alternatives or reassess capital
projects when the debt service coverage ratio remains low.
The survival of a healthcare organization depends most on Operating Margin and Days Cash
on Hand according to my professional experience. The operating margin demonstrates both
operational efficiency and profitability which ensures long-term organizational sustainability.
The organization needs sufficient cash reserves to maintain uninterrupted service delivery for
its daily operations.
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References
5 Key Finacial ratios healthcare providers should track- becker's hospital review: healthcare
news & Analysis. (2012, 05 20). Retrieved from Becker's Hospital Review | Healthcare
News & Analysis: https://www.beckershospitalreview.com/finance/5-key-financial-
ratios-healthcare-providers-should-track/
Introduction to the Financial Management of Healthcare Organizations. (2021). In M. Nowicki,
Introduction to the Financial Management of Healthcare Organizations. ACHE Learn.
