Assessment #4: Ratio Analysis
Assessment #4: Ratio Analysis (15%)
- Write a 4-6 page paper in which you discuss the value of ratio analysis in decision making for health care organizations. Complete the following in your paper:
- Discuss the meaning of ratio analysis in healthcare.
- Pick only one (1) ratio from EACH major group from the financial statements. (e.g. Current ratio, ROE, Debt to equity, ALOS)
- Major Groups:
- Liquidity ratios (Current ratio, Days Cash-on-Hand, Quick Ratio)
- Profitability ratios (ROE, ROA, Total Margin, Operating Margin)
- Leverage/Capital Structure Ratios (Debt ratio, Equity ratio, Debt to Equity Ratio)
- Nonfinancial Ratios (Occupancy rate, payer mix, ALOS, Expense per discharge, FTE per bed, HMO penetration)
- Discuss one (1) ratio (from EACH major group) using the following criteria:
- What is the meaning of each ratio?
- Evaluate the meaning of the ratio related to the financial health of the health care organization. Show the calculations.
- Explain the factors that affect the results related to the financial health of the organization.
You can also utilize the sample Help4UHMO Organization financial statements (located under week 6) or a real-life health care organization to evaluate by researching their financial statements. Show relevant calculations.
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- Format your paper consistent with APA guidelines.
- Provide a minimum of two (2) cited sources in your paper. Properly cite in APA format.
You will be graded base on the following rubric:
Income Statement
| Help4U HMO | |||||
| Income Statement and Change in Net Assets | |||||
| Year Ended June 30, 2015 | |||||
| (in thousands) | |||||
| Revenue: | |||||
| Premiums Earned | $26,682 | ||||
| Co-Insurance | 1,689 | ||||
| Interest and Other Income | 242 | ||||
| Total Revenue | $28,613 | ||||
| Expenses: | |||||
| Salaries and Benefits | $15,154 | ||||
| Medical Supplies and Drugs | 7,507 | ||||
| Insurance | 3,963 | ||||
| Provision for Bad Debt | 19 | ||||
| Depreciation | 367 | ||||
| Interest | 385 | ||||
| Total Expenses | $27,395 | ||||
| Net Income | $1,218 | ||||
| Net Assets, Beginning of Year | $900 | ||||
| Net Assets, End of Year | $2,118 |
Non-Financial Indicator Data
| Help4U HMO Non-Financial Indicators | ||
| Number of Occupied Beds | 26350 | |
| Total Beds | 32000 | |
| Total Length of Stay per Discharge | 1000 | |
| Total Discharged Patients | 250 | |
| Total FTE's | 700 | |
| Total Patient Days | 2500 | |
| Payer | UOS | |
| Medicare | 328 | |
| Medicaid | 125 | |
| HMO | 450 | |
| Commerical | 800 | |
| Uninsured | 225 |
Balance Sheet
| Help4U HMO | ||||
| Balance Sheet | ||||
| June 30, 2015 | ||||
| (in thousands) | ||||
| Assets | ||||
| Cash and Cash Equivalents | $2,737 | |||
| Net Premiums Receivable | 821 | |||
| Supplies | 387 | |||
| Total Current Assets | $3,945 | |||
| Net Property and Equipment | $5,924 | |||
| Total Assets | $9,869 | |||
| Liabilities and Net Assets | ||||
| Accounts Payable Medical Services | $2,145 | |||
| Accrued Expenses | $929 | |||
| Notes Payable | $141 | |||
| Current Portion of Long-Term Debt | $241 | |||
| Total Current Liabilities | $3,456 | |||
| Long-Term Debt | $4,295 | |||
| Total Liabilities | $7,751 | |||
| Net Assets (Equity) | $2,118 | |||
| Total Liabilities and Net Assets | $9,869 |
Industry Benchmarks
| Industry Benchmarks | |||
| Total Margin | 3.80% | ||
| Return on Equity | 25.50% | ||
| Return on Assets | 8.00% |
