Running Head: HEALTHCARE e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 1
1-2 Reflective Journal: Financial Management Measures
IHP 450
SNHU
May 8,2022
HEALTHCARE e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e
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In the healthcare setting, proper financial measurement is of paramount importance. It can
help to have a better degree of control over the financial elements that are involved while
delivering care to individuals. Zargar has argued that it is essential to identify and study diverse
financial indicators in the healthcare context so that the performance of the healthcare system can
be evaluated in an in-depth manner (Meritorious et al., 2020).
Some of the key financial ratios that healthcare facilities need to keep track of to get a
clear picture of their financial performance include operating margin, capital spending, debt to
capitalization ratio, days cash on hand and operating EBIDA (Earnings before interest,
depreciation and amortization) margin (Key financial ratios healthcare providers should track.
Becker's Hospital Review, 2021). Each of these measures can provide insightful and rich insight
into the financial health of healthcare organizations. For example, by measuring the operational
margin, it is possible to capture the profitability of a healthcare entity from its day-to-day
operations, including investment-related decisions and depreciation and interest expenses. An
important decision that might be informed by the measure is the need to purchase new equipment
that can aid in better diagnosis of specific health conditions. The debt to capitalization ratio helps
in measuring the financial leverage of an entity, and thus, it can showcase the debt level of the
entity as compared to its cumulative earnings or funds balance. A vital decision that might be
informed by the financial measure is the decision to take additional loans or borrowings while
expanding the operations of the healthcare facility. By measuring each of these financial ratios, it
is possible to get a clear comprehension of the financial health of a healthcare concern (Key
financial ratios healthcare providers should track. Becker's Hospital Review, 2021).
Some of the financial measures that of extremely important for the very survival of a
healthcare organization are day cash on hand and capital spending. Day cash on hand is also an
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important liquidity measure that can reflect the number of days a healthcare entity can support its
operating expenses without collecting extra cash. It can influence the normal functioning of a
healthcare facility with the available cash. Maslach has argued that the financial liquidity of
healthcare entities such as hospitals and clinics is highly critical since it can ensure that there is
continuity in the provision of healthcare services (Maślach et al., 2019). Similarly, capital
spending is also a useful measure that can shed light on the capital expenditure of a healthcare
facility as a percentage of the annual deprecation expenses. By having accurate insight into this
specific financial measure, it is possible to strategically spend the organizational capital so that it
can be optimally used to deliver better care to individuals and contribute to the profitability of the
organization. Choi has argued that organizations operating in the healthcare landscape need to
strategically make decisions relating to capital spending and capital investment so that the
available funds can b productively used to acquire and maintain new technologies that can aid in
improving the quality of healthcare services (Choi, 2017). Thus, financial measurement in the
healthcare context can have a direct influence on the quality of delivered healthcare services. e
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References
Choi, S. (2017). Hospital capital investment during the great recession. INQUIRY: The Journal of
Health Care Organization, Provision, and Financing, 54, 0046958017708399.
Key financial ratios healthcare providers should track. Becker's Hospital Review. (2021).
Retrieved May 5, 2022, from https://www.beckershospitalreview.com/finance/5-key-
financial-ratios-healthcare-providers-should-track.html
Meritorious meghanloo, markazi moghadam, zargar top collector, sanaz, & tehrani. (2020).
financial indicators of health system assessment in iran and the world: a review study. nurse
and physician in combat, 8(26), 50-62.
Maślach, D., Markiewicz, J., Warelis, A., & Krzyżak, M. (2019). Importance of financial liquidity
in hospital management. Epidemiol. Rev, 73(3), 369-381.
