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Financial Benchmarking Analysis

Perkins

Financial Benchmarking Analysis

Below are 19 financial benchmarks for health systems from Fitch Ratings, outlined in its “2021 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems” report (Paavola, 2021).

  1. Cash on hand: 255 days
  2. Accounts receivable: 44.6 days
  3. Cushion ratio: 29x
  4. Current liabilities: 95 days
  5. Cash to debt: 169.9 percent
  6. Cash to adjusted debt: 161.1 percent
  7. Operating margin: 1.3 percent
  8. Operating EBITDA margin: 6.7 percent
  9. Excess margin: 3.1 percent
  10. EBITDA margin: 8.5 percent
  11. Net adjusted debt to adjusted EBITDA: -2.6 percent
  12. Personnel costs as a percent of total operating revenue: 55 percent
  13. EBITDA debt service coverage: 9x
  14. Operating EBITDA debt service coverage: 2x
  15. Maximum annual debt service as a percent of revenues: 2.2 percent
  16. Debt to EBITDA ratio: 4x
  17. Debt to capitalization: 35.2 percent
  18. The average age of plant: 11.4 years
  19. Capital expenditures as a percent of depreciation expense: 1 percent

There are several advantages of benchmarking. Most of the expected benefits of benchmarking help improve the company’s productivity. Moreover, these advantages can provide a clear picture of the critical factors of benchmarking in the company. And increased productivity elements display the successful features of the company (Reddy, n.d.).

The trade-off between benefits and harms can be unclear for most conditions. In these circumstances, practitioners and patients need to consider the balance between the intervention’s advantages and disadvantages and the individual patient’s preferences and values. In the GRADE system, these recommendations are given weak suggestions (Kavanagh, 2009). It is important to note that weak proposals do not indicate that physicians should or should not perform the action or intervention; instead, physicians and patients should engage in shared decision-making to determine the most appropriate screening decision for each patient. In this situation, patients with similar health states for which the recommendation is intended might make different choices on whether to undertake or decline preventive screening maneuvers based on their values and preferences. Such weak offers include screening for breast, prostate, or lung cancer (Bell et al., 2017).

The World Health Organization (WHO) has defined criteria for evaluating population-broad screening tests, which may help you decide whether or not to have such a test. The WHO criteria include the following:

The WHO points out that detecting a disease early does not automatically have a benefit. If early diagnosis and treatment do not lead to an improved health outcome, detecting disease earlier only worries people and have therapy for more prolonged – unnecessarily, because they do not benefit from earlier treatment (InformedHealth.org, 2013).

Studies have shown that extending the time of wellness visit lengths to 60–90 minutes removes one of the significant barriers cited by physicians as hampering their ability to counsel on lifestyle modification. This contrasts with the median visit length of 15.7 minutes in a typical PCP office covering six topics. MDVIP recruits physicians who are interested in wellness and prevention coaching in addition to their medical credentials. Ongoing physician education, accessible tools, and national conferences augment those skills. These opportunities address a second commonly acknowledged barrier of lack of self-efficacy in motivating patients to change lifestyle behaviors (especially for weight management). Evidence of the success of the MDVIP wellness visit model is documented in that most members take advantage of this membership benefit and schedule their annual wellness reviews (Musich et al., 2016).

Spending more time with patients and physician counseling on behaviors has been associated with patients’ higher trust. In turn, confidence in one’s physician has been linked to improvements in many factors, including patient-physician communications, satisfaction with health care, compliance with medical protocols, and continuity of care. Strengthening patient-physician relationships may be essential to enhance patient engagement and motivation to adopt healthy lifestyle behaviors. Managing lifestyle health risks remains especially important to patients in midlife and as they age to delay the onset of disease and disability and to facilitate the management of existing chronic conditions.

References

Bell, N. R., Grad, R., Dickinson, J. A., Singh, H., Moore, A. E., Kasperavicius, D., & Kretschmer, K. L. (2017). Better decision making in preventive health screening: Balancing benefits and harms. Canadian family physician Medecin de famille canadien, 63(7), 521–524.

InformedHealth.org [Internet]. Cologne, Germany: Institute for Quality and Efficiency in Health Care (IQWiG); 2006-. Benefits and risks of screening tests. 2013 Nov 7 [Updated 2019 Dec 17]. Available from: https://www.ncbi.nlm.nih.gov/books/NBK279418/

Kavanagh B. P. (2009). The GRADE system for rating clinical guidelines. PLoS medicine, 6(9), e1000094. https://doi.org/10.1371/journal.pmed.1000094

Musich, S., Wang, S., Hawkins, K., & Klemes, A. (2016). The Impact of Personalized Preventive Care on Health Care Quality, Utilization, and Expenditures. Population health management, 19(6), 389–397. https://doi.org/10.1089/pop.2015.0171

Paavola, A. (2021). Nineteen key financial bookmarks for health systems. https://www.beckershospitalreview.com/finance/19-key-financial-benchmarks-for-health-systems.html

Reddy, C. (n.d.). Benchmarking: Types, Process, Advantages & Disadvantages. https://content.wisestep.com/benchmarking-types-process-advantages-disadvantages/

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Question 

Hospital leaders nationwide use benchmarking to determine the areas of their business that need improvement. The continuous benchmarking process allows hospital executives to see how their organizations stack up against local and regional competitors and national leaders. (Ellison, 2019)

Financial Benchmarking Analysis

Prepare a 5-page benchmark analysis for your staff by responding to the following:

  1. Discuss the benchmarks used in financial analysis
  2. Explain the benefits of financial benchmarking.
  3. Evaluate the impact of balancing benefits to reduce harms and cost through screening and prevention services.
  4. Identify the benefits of patient screening
  5. Describe how screening and preventive care impact the cost
  6. Discuss the GRADE system and its purpose
  7. Explain how the GRADE system is applied to reduce harm to patients

Cite at least five sources in APA format.

Submitting your assignment in APA format means, at a minimum, you will need the following:

Title page: Remember the running head. The title should be in all capitals.

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