Using financial ratio analysis to compare hospitals' performance

Financial ratio analysis allows a hospital to evaluate its own performance over time and to compare itself with other hospitals. Through reclassification procedures, potential distortions are reduced, and administrative decisions can be based on more reliable rations. Step 1 reclassifies financial statements for analysis, step 2 computes and explains ratios, and step 3 combines ratios into patterns for interpretations. Step 4 describes the 209-hospital sample, step 5 compares three individual hospitals' ratios to industry ratios, and step 6 discusses behavior of two hospitals' ratios and industry ratios over time.