Is Your Hospital at Risk of Insolvency?

Key Performance Indicators as a Diagnostic Tool

The financial situation of many hospitals is precarious. An increasing number are suffering from a skills shortage, underfunding, modernisation backlogs and a rising tide of red tape. More than a quarter are in the red at group level. 12% are at risk of insolvency according to the latest Hospital Rating Report.

From the data to the diagnosis

How are your hospital finances doing? The following KPIs will assist with your diagnosis:

  • Debt ratio = Liabilities / Total assets
  • Bank debt ratio = Bank liabilities / Total assets
  • Liquidity = Cash and equivalents / Liabilities up to 1 year
  • Financial power = Cash flow / (Liabilities – Advance payments received)
  • Short-term liabilities = Liabilities up to 1 year / Total assets
  • Asset turnover = Revenues / Total assets
  • Value creation = (Revenues – Cost of materials) / Personnel expenses
  • Return on assets = Earnings from ordinary operations / Total assets

Don’t let your hospital become an emergency

Only by keeping track of the hospital’s financial position can potential crises be identified and countermeasures taken in good time. An effective tool for this purpose is the integrated financial plan. The integration of all the relevant business data with well-thought-out key ratio systems produces a transparent set of figures in which all the influences on the financial plan can be seen. Thus, the integrated financial plan serves as a precision tool for identifying impending crises in the business and their causes. By enabling countermeasures to be introduced quickly, the integrated financial plan helps to safeguard solvency – so that the hospital remains in good financial health.