You are an administrative assistant at a hospital.

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Assessing Hospital Performance

Hospital Performance Assessment Case Study				© 2007 South University
Eastside Memorial Hospital
INPUT DATA:
Consolidated Statements of Revenues and Expenses:
(Millions of Dollars)
REVENUES	2002	2003	2004	2005	2006
Net patient service revenue	$ 25.661	$ 27.236	$ 28.796	$ 30.576	$ 34.582
Other revenue	1.305	1.261	1.237	1.853	1.834
Total revenues	$ 26.966	$ 28.497	$ 30.033	$ 32.429	$ 36.416
EXPENSES
Salaries and wages	$ 10.829	$ 11.135	$ 12.245	$ 12.468	$ 13.994
Fringe benefits	1.496	1.731	1.830	2.408	2.568
Interest expense	1.341	1.305	1.181	1.598	1.776
Depreciation	1.708	1.977	2.350	2.658	2.778
Provision for bad debts	0.546	0.589	0.622	0.655	0.776
Professional liability	0.102	0.157	0.140	0.201	0.218
Other	7.874	8.389	9.036	10.339	11.848
Total expenses	$ 23.896	$ 25.283	$ 27.404	$ 30.327	$ 33.958
Excess of revenues over expenses	$ 3.070	$ 3.214	$ 2.629	$ 2.102	$ 2.458
Consolidated Balance Sheets:
(Millions of Dollars)
ASSETS	2002	2003	2004	2005	2006
Cash and investments	$ 3.513	$ 5.799	$ 4.673	$ 5.069	$ 2.795
Patient accts rec (net)	5.915	4.832	4.359	5.674	7.413
Inventories	0.338	0.403	0.432	0.523	0.601
Other current assets	0.693	0.294	0.308	0.703	0.923
Total current assets	$ 10.459	$ 11.328	$ 9.772	$ 11.969	$ 11.732
Gross plant and equipment	$ 37.999	$ 42.005	$ 47.786	$ 55.333	$ 59.552
Accumulated depreciation	8.831	10.092	11.820	14.338	17.009
Net plant and equipment	$ 29.168	$ 31.913	$ 35.966	$ 40.995	$ 42.543
Total assets	$ 39.627	$ 43.241	$ 45.738	$ 52.964	$ 54.275
LIABILITIES AND FUND BALANCE
Accounts payable	$ 1.068	$ 1.273	$ 0.928	$ 1.253	$ 1.760
Accruals	0.692	0.942	1.460	1.503	1.176
Current portion of LT debt	0.136	0.290	0.110	1.341	1.465
Total current liabilities	$ 1.896	$ 2.505	$ 2.498	$ 4.097	$ 4.401
Long-term debt	$ 15.959	$ 15.775	$ 15.673	$ 19.222	$ 17.795
Net assets (Equity)	$ 21.772	$ 24.961	$ 27.567	$ 29.645	$ 32.079
Total liabilities and equity	$ 39.627	$ 43.241	$ 45.738	$ 52.964	$ 54.275
Revenue and Cost Breakdown:
	2002	2003	2004	2005	2006
Gross patient revenue
Inpatient	$ 25.161	$ 25.275	$ 26.117	$ 29.148	$ 33.216
Outpatient	4.748	5.969	6.535	9.130	11.912
Total gross patient revenue	$ 29.909	$ 31.244	$ 32.652	$ 38.278	$ 45.128
Revenue deductions
Contractual allowances	$ 2.489	$ 2.053	$ 1.729	$ 5.196	$ 7.516
Charity care	1.759	1.955	2.127	2.506	3.030
Total deductions	$ 4.248	$ 4.008	$ 3.856	$ 7.702	$ 10.546
Net patient service revenue	$ 25.661	$ 27.236	$ 28.796	$ 30.576	$ 34.582
Inpatient operating costs	$ 18.635	$ 19.221	$ 20.573	$ 22.229	$ 24.771
Outpatient operating costs	5.261	6.062	6.831	8.098	9.187
Total patient costs	$ 23.896	$ 25.283	$ 27.404	$ 30.327	$ 33.958
Selected Operating Data:
(Millions of Dollars)
	2002	2003	2004	2005	2006
Medicare discharges	3,008	2,960	2,721	2,860	2,741
Total discharges	9,680	9,311	8,784	8,318	8,576
Outpatient visits	30,754	31,960	32,285	32,878	36,796
Licensed beds	210	210	210	210	210
Staffed beds	192	196	193	197	178
Patient days	45,296	45,983	44,085	42,434	40,062
Case mix index	1.2531	1.2674	1.2869	1.2993	1.3161
Employee FTEs	604.5	618.1	610.8	625.8	619.3
OUTPUT DATA:
Consolidated Statements of Cash Flows:
(Millions of Dollars)
CASH FLOWS FROM OPERATIONS		2003	2004	2005	2006
Income from operations		$ 3.214	$ 2.629	$ 2.102	$ 2.458
Noncash expenses		1.952	2.326	2.633	2.756
Change in NWC (ex cash)		2.026	0.423	(0.202)	(1.733)
Net cash flow from operations		$ 7.192	$ 5.378	$ 4.533	$ 3.481
CASH FLOWS FROM INVESTING
Fixed asset acquisitions		$ (4.722)	$ (6.402)	$ (7.686)	$ (4.328)
CASH FLOWS FROM FINANCING
Long-term debt		$ (0.184)	$ (0.102)	$ 3.549	$ (1.427)
NET INCREASE (DECREASE) IN CASH		$ 2.286	$ (1.126)	$ 0.396	$ (2.274)
BEGINNING CASH/INVESTMENTS		3.513	5.799	4.673	5.069
ENDING CASH/INVESTMENTS		$ 5.799	$ 4.673	$ 5.069	$ 2.795
Note: The noncash expenses and fixed asset acquisitions data in the statements of cash flows are somewhat different than
they would be if calculated directly from the other financial statements because of asset revaluations.
Financial Statement Analysis: Du Pont Analysis
						2006 Ind Data (200-299 Beds)
	2002	2003	2004	2005	2006	+Quartile	Median	-Quartile
Total margin	11.38%	11.28%	8.75%	6.48%	6.75%	5.58%	3.48%	0.53%
Total asset turnover	0.68	0.66	0.66	0.61	0.67	1.04	0.89	0.75
ROA = TM x TATO	7.75%	7.43%	5.75%	3.97%	4.53%	5.80%	3.10%	0.40%
Equity multiplier	1.82	1.73	1.66	1.79	1.69	2.70	1.94	1.54
ROE = ROA x Equity multiplier	14.10%	12.88%	9.54%	7.09%	7.66%	15.66%	6.01%	0.62%
Check ROE (Excess/Funds)	14.10%	12.88%	9.54%	7.09%	7.66%
Financial Statement Analysis: Ratios
						2006 Ind Data (200-299 Beds)
	2002	2003	2004	2005	2006	+Quartile	Median	-Quartile
Profitability Ratios:
Deductible ratio	0.14	0.13	0.12	0.20	0.23	0.34	0.26	0.18
Total margin	11.38%	11.28%	8.75%	6.48%	6.75%	5.58%	3.48%	0.53%
Return on assets	7.75%	7.43%	5.75%	3.97%	4.53%	5.80%	3.10%	0.40%
Return on equity	14.10%	12.88%	9.54%	7.09%	7.66%	15.66%	6.01%	0.62%
Liquidity Ratios:
Current ratio	5.52	4.52	3.91	2.92	2.67	2.53	1.99	1.48
Days cash on hand	57.79	90.82	68.08	66.87	32.72	32.35	15.89	6.24
Debt Management Ratios:
Debt ratio	45.06%	42.27%	39.73%	44.03%	40.90%	62.90%	48.40%	35.20%
LT debt to equity	73.30%	63.20%	56.85%	64.84%	55.47%	127.00%	64.70%	26.90%
Times interest earned	3.29	3.46	3.23	2.32	2.38	4.29	2.23	1.14
Fixed charge coverage	2.99	2.83	2.95	1.26	1.31	2.18	1.35	1.02
Cash flow coverage	4.56	4.98	5.22	3.98	3.95	5.32	3.22	1.76
Asset Management Ratios:
Inventory turnover	79.78	70.71	69.52	62.01	60.59	98.68	63.95	43.99
Current asset turnover	2.58	2.52	3.07	2.71	3.10	3.94	3.38	2.88
Fixed asset turnover	0.92	0.89	0.84	0.79	0.86	2.20	1.76	1.49
Total asset turnover	0.68	0.66	0.66	0.61	0.67	1.04	0.89	0.75
Avgerage collection period	84.13	64.76	55.25	67.73	78.24	87.53	75.67	63.33
Average payment period	31.19	39.23	36.39	54.05	51.52	71.24	56.52	45.84
Other Ratios:
Average age of plant	5.17	5.10	5.03	5.39	6.12	8.86	7.39	6.14
Operating Analysis: Indicators
						2006 Ind Data (200-299 Beds)
	2002	2003	2004	2005	2006	+Quartile	Median	-Quartile
Profit Indicators:
Profit per discharge	$305.00	$301.98	$280.03	$126.72	$79.61	$89.04	($21.30)	($120.08)
Profit per visit	($38.61)	($26.87)	($33.07)	($24.49)	($1.60)	$6.22	$0.66	($7.01)
Net Price Indicators:
Net price per discharge	$2,230	$2,366	$2,622	$2,799	$2,968	$4,091	$3,411	$2,815
Net price per visit	$132	$163	$179	$222	$248	$201	$139	$98
Medicare payment %	31.07%	31.79%	30.98%	34.38%	31.96%	43.47%	36.60%	31.25%
Bad debt/charity %	5.88%	6.26%	6.51%	6.55%	6.71%	7.89%	4.76%	2.97%
Contractual allowance %	8.32%	6.57%	5.30%	13.57%	16.65%	25.27%	20.02%	12.12%
Outpatient revenue %	15.87%	19.10%	20.01%	23.85%	26.40%	25.26%	21.03%	17.44%
Volume Indicators:
Occupancy rate	64.63%	64.28%	62.58%	59.01%	61.66%	67.12%	58.10%	47.84%
Average daily census	124.10	125.98	120.78	116.26	109.76	173.23	144.73	114.39
Length of Stay Indicators:
Length of stay (days)	4.68	4.94	5.02	5.10	4.67	6.80	6.07	5.41
Adj length of stay	3.73	3.90	3.90	3.93	3.55	6.48	5.36	4.52
Intensity of Service Indicators:
Cost per discharge	$1,925	$2,064	$2,342	$2,672	$2,888	$3,937	$3,392	$2,972
Cost per visit	$171	$190	$212	$246	$250	$202.23	$141.97	$111.53
Case mix index	1.2531	1.2674	1.2869	1.2993	1.3161	1.2795	1.1756	1.0259
Efficiency Indicators:
FTEs per occupied bed	4.10	3.97	4.04	4.10	4.15	4.59	4.15	3.77
Outpat manhours/visit	6.49	7.69	7.88	9.44	9.24	8.66	5.84	4.68
Unit Cost Indicators:
Salary per FTE	$17,914	$18,015	$20,047	$19,923	$22,596	$24,447	$22,517	$20,347
Employee benefits %	13.81%	15.55%	14.94%	19.31%	18.35%	19.58%	17.04%	15.18%
Liability costs/disc	$10.54	$16.86	$15.94	$24.16	$25.42	$80.94	$42.05	$18.31
Critical Financial Indicators:
						Comparative Data
	2002	2003	2004	2005	2006	Very Poor	Poor	Good	Excellent
Cash flow to net patient service rev.	18.6%	19.1%	17.3%	15.6%	15.1%	Less than 9.6%	9.6% to 12.3%	12.3% to 15.6%	Over 15.6%
Cash flow to total liabilities	26.8%	28.4%	27.4%	20.4%	23.6%	Less than 15.8%	15.8% to 23.3%	23.3% to 32.4%	Over 32.4%
Return to total revenue	11.4%	11.3%	8.8%	6.5%	6.7%	Less than 3.5%	3.5% to 6.0%	6.0% to 9.0%	Over 9.0%
Return to patient service revenue	12.0%	11.8%	9.1%	6.9%	7.1%	Less than 3.8%	3.8% to 6.3%	6.3% to 9.2%	Over 9.2%
Case mix index	1.25	1.27	1.29	1.30	1.32	Less than 1.27	1.27 to 1.42	1.42 to 1.65	Over 1.65
Age of plant and equipment	5.17	5.10	5.03	5.39	6.12	Over 9.5	8.1 to 9.5	7.1 to 8.1	Less than 7.1
EVA Analysis:
Cost of capital input	10.0%
	2002	2003	2004	2005	2006
Economic value added (EVA)	$ 0.4	$ 0.2	$ (0.8)	$ (1.6)	$ (1.2)

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