Financial dashboard reporting for the hospital industry.

Most senior executives and board members experience information overload in their decision making roles. They simply receive an excessive amount of unrelated data that is not benchmarked to standards that enable them to make effective decisions. This is an unfortunate situation given the information technology and the availability of public data that exists today. Many firms in a variety of industry sectors have combined the concept of "balanced scorecards" with "dashboard" reporting to revamp their senior level executive reporting systems. A sample dashboard reporting system for a hospital is outlined in this paper.

The health care industry: in evolution or revolution?

The health care industry has experienced dramatic changes during the last 25 years and will likely undergo even more dramatic changes in the next 25 years. Many firms in the health care industry will thrive just as many firms have thrived during the last 25 years. The ultimate key to success will be management and their attention to the basics of good business management. Management has always been the key ingredient and will continue to be the most critical success factor.

Factors affecting the valuation of physician practices.

Valuation of physician practices provides physicians with a benchmark of their business success and helps purchasers negotiate a purchase price. The Center for Healthcare Industry Performance Studies (CHIPS) recently conducted a survey of physician practice acquisitions. The survey collected data on salaries and benefits paid to physicians after practice acquisition, historical profitability of the acquired practice, and specific values assigned to both tangible and intangible assets in the practice. Some of the survey's critical conclusions include: hospitals tend to acquire unprofitable practices, value is based on historical revenues rather than historical profits, the importance of valuation methodology and payer mix is underestimated, tangible assets represent a large part of the purchase price, and hospitals tend to pay higher physician compensation than do other purchasers.

A new perspective on hospital financial ratio analysis.

Using audit financial data in a study of 2,189 not-for-profit hospitals for the period 1989-1992, six financial characteristics of performance were defined. These characteristics are profitability factor, fixed-asset efficiency, capital structure, fixed-asset age, working capital efficiency, and liquidity. The statistical output also shows the specific sets of financial ratios that can be used to measure the six characteristics of hospital performance. The results of this study can be beneficial to healthcare financial managers, hospital boards, policy groups, and other relevant entities because it affords them a clear understanding of an institution's financial performance.

CFO compensation increasingly linked to performance.

Organization size and individual seniority are key factors affecting compensation of hospital senior executives. However, a recent survey suggests that an organization's financial performance also influences executive compensation, especially of chief financial officers (CFOs). CFOs can benefit from being at the forefront of this trend in compensation practices.

Hospital bankruptcies: an exploration of potential causes and consequences.

Although small in number, hospitals are increasingly seeking bankruptcy protection. This article explores the potential forces that might motivate hospitals to seek bankruptcy protection and the potential consequences for hospitals that obtain it. Case reviews of 11 hospital bankruptcies that occurred in 1990 and 1991 are presented. The findings should assist hospital executives, trustees, financial analysts, and legal counsel as they assess bankruptcy as an option for distressed hospitals.

Trends in the hospital financial picture.

In 1992 (the most recent year for which complete financial data are available), the overall financial condition of U.S. hospitals was better than it had been in a decade. However, low-performing hospitals were falling further behind their high-performing counterparts. Moreover, the continuing drop in prices for services, which requires hospitals to achieve greater productivity and cost control, may pose a threat to the ability of some to maintain high-quality care in the future.

Economic value added--a framework for health care executive compensation.

Health care executive compensation has come under recent scrutiny, partly because of efforts to contain health care costs in general and partly because of negative press given to executive compensation in the corporate world. This article extends beyond speculating what the basis of health care executive compensation should be and beyond presenting comparative compensation data often used to support compensation levels. It presents a sound economic framework on which executive compensation may be determined and evaluated--a framework to be used to supplement traditional bases of executive compensation in voluntary and investor-owned hospitals. The economic value added (EVA) framework is built on the premise that levels of health care executive compensation should at least in part be based on the economic value that the executives themselves create for the organization. EVA is both a measure of value and measure of performance and offers a base for annual executive incentive compensation in addition to those traditionally used by hospital boards.

Is there a link between hospital profit and quality?

In industrial firms, high perceived quality in products or services leads to high return on investment. The link between high quality and high profit is more difficult to document for healthcare products and services. An even more important question for healthcare managers is whether there is a link between poor-quality services and low profitability. A study of a small sample of HCFA high-mortality hospitals shows that poor quality hospitals are less profitable. Although the demand for the products and services of poor-quality hospitals is relatively strong, such hospitals are underinvested in assets and understaffed, the study shows.

Does hospital financial performance measure up?

Comparisons are continuously being made between the financial performance, products and services, of the healthcare industry and those of non-healthcare industries. Several useful measures of financial performance--profitability, liquidity, financial risk, asset management and replacement, and debt capacity, are used by the authors to compare the financial performance of the hospital industry with that of the industrial, transportation and utility sectors. Hospitals exhibit weaknesses in several areas. Goals are suggested for each measure to bring hospitals closer to competitive levels.

Competitive strategy for successful hospital management.

This study examined financial and operating data for approximately 1,000 U.S. hospitals categorized by Medicare as "large urban" to determine critical relationships between business strategy and financial performance. Cost control was found to be the most important factor influencing financial performance. Other factors of importance included market share, diversification, and financing policy.

Critical strategies for successful rural hospitals.

Not all rural hospitals are in a depressed financial situation. Many can and have achieved financial performance levels which match their urban counterparts. Cost control is the single most important management strategy which differentiates the successful from the unsuccessful rural hospital. Labor productivity is much higher in the financially successful rural hospital than in the unsuccessful hospitals. Reduced length of stay is also especially critical in the overall cost containment program.

1991 outlook: progress will require partnerships, improved productivity--roundtable discussion.

To address the myriad problems and challenges in the next year, the operative word will be partnership. That's according to members of Modern Healthcare's editorial advisory board in their discussion of the healthcare industry in 1991. The experts see the need for hospitals, physicians and the business community to team up to control costs, solve staffing woes and take initial steps toward healthcare reform.

Hospital closings: fact and fiction.

The majority of hospitals that closed in 1988 appear to have closed because they could not compete with other alternatives. In short, there was not sufficient value to justify their continuation.

Improving financial performance: a study of 50 hospitals.

This article provides an analysis of key differences between a small sample of high-performing and low-performing hospitals where performance was defined as return on equity. Some of the more significant findings were: (1) high-performing hospitals achieve their superior performance through cost control rather than higher prices; (2) high-performing hospitals minimize their investment in plant assets and accounts receivable. They are also likely to have a newer plant than low-performing hospitals; (3) high-performing hospitals are not afraid to use debt in their capital structure, but they use significantly less debt than low-performing hospitals; (4) high-performing hospitals have set aside greater reserves for future plant replacement, which helps them to keep their level of debt reasonable and generates significant amounts of investment income; and (5) high-performing hospitals have greater market share than low-performing hospitals.