Financial benchmarking has become common in different organizations due to its role in guiding leaders in financial decisions. There are different concepts relating to financial analysis, such as the benchmarks utilized in financial analysis and the advantages of financial benchmarking. Additionally, in healthcare finance, there are different aspects, including the effect of balancing benefits to reduce harms and cost through screening and prevention services, benefits of patient screening, screening, and preventive care impact cost, the GRADE system and its purpose, and how the GRADE system is applied to reduce harm to patients.
The benchmarks used in financial analysis
The main benchmarks used in financial analysis are return on assets, profit margin, inventory composition, and inventory turnover (Abrantes-Metz, 2013). Profit margin is defined as an estimation of how much of every income in sales ends up as profit. Large companies usually have economies of scale where they can manage buying goods and services at a lower price, hence increasing profit margin. On the other hand, publicly traded companies have additional expenses associated with financial reporting, thus a reduced profit margin. Return on assets is an estimation of how productive the assets in a company are in generating profit. It can be calculated as the net income divided by the sum of assets annually. The effectiveness of return on assets depends on finding a company to compare with the same capital framework. Assets composition or structure is the mixture of the company’s assets listed on its balance sheet (Abrantes-Metz, 2013). Comparable firms must have the same percentage of every asset on the balance sheet. Manufacturing companies use inventory composition by reviewing inventory balance. Inventory can be broken down into finished goods, work in process, and raw materials. A company with less finished goods inventory than raw materials inventory may have problems maintaining demand, affecting sales and financial performance. Inventory turnover ratios measure how quickly a company clears its inventory balance. The inventory turnover is calculated by dividing the cost of goods sold and the net income.
The benefits of financial benchmarking
According to Myšková & Hájek (2017), organizations use financial indicators such as liquidity, profitability, and solvency when reviewing financial strength. In conducting financial analysis, financial ratios are considered due to their additional information value and simplicity. The ratios enable the organizations to analyze the changes in a firm’s financial situation and conduct a comparative and cross-sectional analysis. Financial ratios include indicators of cost, productivity, profitability, solvency, liquidity, capital market indicators, and capital structure. Financial ratios can also enable an organization to set realistic financial goals, contributing to financial growth. Organizations can also access their competitors and strategies by comparing financial data. They can measure their performance using various metrics and apply them when setting goals.
The impact of balancing benefits to reduce harms and costs through screening and prevention services
Hospitals are put under a lot of pressure to reduce healthcare costs while maintaining high-quality care. Initiatives to increase the financial incentive of quality, such as value-based payment and public reporting, are only successful in improving the population’s health only if they are designed to consider the complicated relationship between the financial stability of a healthcare facility and healthcare quality (Akinleye et al., 2019). Value-based payment strategies are structured to offer a direct return on investment for better outcomes. Usually, they assume that all facilities have comparable baseline financial resources to invest in improving quality. The goal of screening is to improve essential healthcare outcomes and not only discover the state of a disease. Understanding a screening technique’s potential harms and benefits is central to patients’ and physicians’ informed decision-making. This requires understanding the main factors influencing the balance between harms and benefits, the standard measures of degree used to show the size of the harms and benefits, and the quality of evidence supporting the screening process. High-quality guidelines should offer information on the harms and benefits of preventive health screening techniques and tools to translate knowledge to support shared decision-making between patients and healthcare providers (Akinleye et al., 2019). A screening test’s harmful effects and benefits can only be outweighed if researchers make the controlled trials random, where participants are observed throughout the entire screening process. One group undergoes the screening while the other does not, and the two groups are compared at the end of the screening process.
The benefits of patient screening
Health screening effectively detects a specific disease or condition early, even when there have been zero signs or symptoms of the disease (McBride et al., 2010). Early detection ensures that patients receive the proper treatment at the right time, allowing them to control their health better. Screening also plays a vital role in reducing mortality caused by diseases that can be treated if they are detected early. Another benefit of patient screening is the decreased cost of treatment (McBride et al., 2010). Although preventive care costs the consumer, in the long run, the cost is less. Preventable conditions such as diabetes and heart disease pose a high annual cost for healthcare facilities and patients. Screening may enable patients to regularly visit a doctor before their condition worsens, reducing the need for expensive procedures in the future. Preventive care is also one of the healthcare aspects contributing to a healthy and long lifespan. For instance, some diseases, such as cancer, may be cured if they are detected early, but if the disease progresses, effective treatment may not be possible. The patient may have to undergo uncomfortable medical procedures and endure pain during the last stages of the disease.
How screening and preventive care impact cost
Preventive care helps reduce healthcare expenses by treating or preventing diseases before they require emergency care. A study by Amadeo (2021) indicated that when patients regularly access affordable, preventive care, their chronic conditions are more likely to be identified and managed, lowering the probability of expensive treatments and emergency room visits. The study found that the cost of emergency room services for uninsured patients is prohibitive, and hospitals must recover the costs incurred by the patient in the emergency room even when the patient cannot afford to pay for the required services. The Affordable Care Act requires insurance companies like Medicaid and Medicare to offer preventive care services without charging anything. Essential benefits promoting preventive care include all the procedures the United States Preventive Services Task Force recommends.
The GRADE system and its purpose
The Grading of Recommendations, Assessment, Development, and Evaluation is a transparent structure for developing and providing evidence summaries while systematically making recommendations in clinical practice. It is mainly used in grading the quality of evidence in clinical care and making recommendations for improvement. It includes deciding the clinical question, including the population affected by the question, alternatives, and meaningful outcomes, particularly those of significance to those making the decision. A systematic review is conducted to give the best estimate of the impact of every outcome. The review is followed by rating evidence-based quality on its application to every outcome since the quality of evidence varies between outcomes. The framer has four levels, also known as quality of evidence or certainty in the evidence. They are mainly moderate, very low, low, and high levels. Evidence from controlled and randomized trials starts at high quality, and evidence, including observational data, begins at low quality due to residual confounding. The certainty in the evidence is decreased or increased for various reasons such as imprecision, publication bias, risk of bias, indirectness, and inconsistency. Evidence is considered more certain when studies directly compare the interventions of interest in the study population.
The certainty of the evidence is also guaranteed when several studies demonstrate consistent impacts. The framework also focuses on the outcome level instead of the study level, requiring clinicians to decide whether bias is a considerable risk. Clinicians must also detect publication bias, mainly with observational data, and when a specific industry funds most of the data published on different databases. Recommendations made in GRADE may either be solid or weak and may favor a particular intervention. A recommendation is considered vital if it suggests that everyone would choose it. Certainty in evidence increases the strength of a recommendation. A strong recommendation is also characterized by a close balance between undesirable and desirable outcomes and when there is substantial uncertainty or variation in patients’ preferences and values.
How the GRADE system is applied to reduce harm to patients?
The GRADE system is applied to reduce patient harm through practice recommendations based on collective evidence. The practice recommendations are graded to give clinicians practical confidence in the quality and strength of the cumulative evidence considered in the recommendation. Implicit judgments on important outcomes are essential in balancing harm and benefit.
Abrantes-Metz, R. M. (2013). Principles for financial benchmarks: Comments on the OICU-IOSCO consultation report on financial benchmarks. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2266447
Akinleye, D. D., McNutt, L., Lazarus, V., & McLaughlin, C. C. (2019). Correlation between hospital finances and quality and safety of patient care. PLOS ONE, 14(8), e0219124. https://doi.org/10.1371/journal.pone.0219124
Amadeo, K. (2021). Preventive care: How it lowers healthcare costs in America. The Balance. https://www.thebalance.com/preventive-care-how-it-lowers-aca-costs-3306074
McBride, K. R., Goldsworthy, R. C., & Fortenberry, J. D. (2010). Patient and partner perspectives on patient-delivered partner screening: Acceptability, benefits, and barriers. AIDS Patient Care and STDs, 24(10), 631-637. https://doi.org/10.1089/apc.2010.0109
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. Journal of International Studies, 10(4), 96-108. https://doi.org/10.14254/2071-8330.2017/10-4/7
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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)
Ellison, A. (2019). 45 financial benchmarking for hospital executives. https://www.beckershospitalreview.com/finance/45-financial-benchmarks-for-hospital-executives-062619.html
Prepare a 5-page benchmark analysis for your staff by responding to the following:
Discuss the benchmarks used in financial analysis
Explain the benefits of financial benchmarking.
Evaluate the impact of balancing benefits to reduce harms and costs through screening and prevention services.
Identify the benefits of patient screening
Describe how screening and preventive care impact the cost
Discuss the GRADE system and its purpose
Explain how the GRADE system is applied to reduce harm to patients
Cite at least five sources in APA format.
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