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A balanced perspective: using nonfinancial measures to assess financial performance.
1Department of Accounting, Bryan School of Business, University of North Carolina at Greensboro, N.C., USA. alwatki2@uncg.edu
Summary
Hospital financial analysis can be improved by including nonfinancial measures alongside traditional financial ratios. Key metrics like case-mix adjusted admissions offer a more comprehensive view of financial health.
Area of Science:
- Healthcare Management
- Financial Analysis
- Hospital Operations
Background:
- Traditional hospital financial performance assessments rely heavily on financial ratios.
- There is a need for more comprehensive methods to evaluate hospital financial health.
Purpose of the Study:
- To investigate the impact of nonfinancial measures on hospital financial performance analysis.
- To determine if incorporating nonfinancial metrics enhances the understanding of a hospital's financial condition.
Main Methods:
- Analysis of hospital financial data.
- Inclusion of nonfinancial performance indicators such as case-mix adjusted admissions.
- Calculation of metrics per full-time equivalent and per beds in service.
Main Results:
- Financial ratio analysis alone provides an incomplete picture of hospital financial performance.
- Nonfinancial measures, including case-mix adjusted admissions, significantly enhance financial condition assessments.
- Metrics like case-mix adjusted admissions per full-time equivalent and per beds in service offer valuable insights.
Conclusions:
- Integrating nonfinancial measures alongside financial ratios provides a more robust evaluation of hospital financial performance.
- Healthcare organizations should consider a broader set of metrics for a complete financial assessment.
- Nonfinancial indicators are crucial for understanding the true financial condition of hospitals.