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Hospitals
costs:
Some of
the hospitals
costs are
hospital
stay cost,cost
hospital
standard,Average
hospitalscosts.
1)
Salaries,
Wages and
Employees’
Benefits:
Wages and
Salaries
Paid to
employees
cover nearly
50-60% of
the total
expenses
of the Hospital.
2)
Supplies
and Others:
Supplies,
contract
labor and
lease expenses
make up
the second
largest
category
of hospital
expenses
covering
nearly 30%
of Hospital
costs.
3)
Depreciation
and Amortization:
The fixed
assets bought
by the Hospital
are expensed
for their
expected
for their
expected
lengthy
of use this
process
is called
Depreciation.
The Hospital
also purchases
non-physical
assets such
as goodwill,
copyright
and patents
etc., these
assets.
The process
of expensing
the costs
over the
expected
length of
its life
is called
amortization.
4)
Interest:
Hospitals
often take
loans for
mortgages
and other
large purchases.
Interest
expense
is the amount
a hospital
must pay
in the current
accounting
period for
borrowing
funds.
5)
Bad Debt
Expenses:
Bad Debt
is the service
charge for
which a
hospital
is expected
to collect
but does
not receive
payment.
For instance
if the patient
can afford
to pay only
a half of
his total
bill, the
hospital
costs is
expected
to write
off the
remaining
amount as
bad debt
or record
it as an
expense.
Financial
performance
of the
hospital:
Hospitals
also need
a regular
Financial
Health Check-up.
Their Financial
performance
and financial
health is
checked
and evaluated
using the
following
indicators.
1)
Ratio Analysis:
Ratios evaluate
3 aspects
of financial
performance
of the Hospital:
a)
Profitability:
It
raises questions
as to –
How much
surplus
money is
left with
the Hospital
at the end
of the year?
Is the Hospital
working
smoothly
or is it
having problems
in covering
its costs?
b)
Liquidity:
Liquidity
is the Hospital’s
ability
to fulfill
its short-term
commitments.
For instance
the Hospital
should have
enough funds
to pay its
bills.
c)
Solvency:
Solvency
is the Hospitals
ability
to fulfill
its long-term
commitment.
Such as
having enough
funds to
pay back
its mortgage.
2)
Multi– Year
Cash Flow
Analysis:
A
cash flow
analysis
is the illustration
of a pattern
of cash
sources
and uses
over a period
of time.
Hospitals
usually
indulge
in Operating
Activity,
Financing
Activity
and Investing
Activity.
Cash Flow
analysis
helps up
to compare
the revenues
generated
by all 3
modes of
activity
and confirm
the state
of its financial
health.
Since a
financially
healthy
hospital
is the one
who generates
funds from
its operating
activities,
while an
unhealthy
hospital
uses debt
financing
or depreciation
as a large
source of
cash and
uses the
amount for
unprofitable
operations.
3)
Affiliate
charts:
Affiliate
Charts help
to evaluate
the organizational
structure
of the system
to which
the hospitals
belong.
It illustrates
of the Hospital
is self-sufficient
or not i.e
if the hospital
supports
other entities
or if the
hospital
itself is
supported
by other
entities.
These charts
also help
to analyze
trends in
ratios and
explain
impacts
on cash
flows.
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