DHA 8007 Week 3 Assignment Ratio Analysis

Ratio Analysis

Student Name

Capella University

DHA 8007

Professor Name

Submission Date

Ratio analysis is used to evaluate the financial performance of a healthcare organisation. Ratio analysis allows healthcare organisations to assess their revenues and expenditures. The various ratios, including liquidity, capital structure, and turnover ratios, give detailed information about the financial stability of the healthcare organisation (Jakóbczyk et al., 2021). The ratios are homogeneous indicators that assist the healthcare financial leaders in evaluating the financial state. During the analysis, the financial performance of the Westside clinic will be evaluated by examining the data provided in the ratio analysis.

Strategic Assessment Based on Healthcare Data

The healthcare data is important in determining the financial stability of the organisation. Strengths, Weaknesses, Opportunities, and Threats (SWOT) is a strategic planning tool with the assistance of which a healthcare organisation can develop a strategy plan (Teoli et al., 2023). Healthcare data-based strategic assessment assists in the optimal utilisation of the resources. According to the analysis of profitability ratios in the situation of Westside Clinic, the performance of operating and total margin showed improvement in 2022, which shows better quality of care (Ross, 2022).

The profitability increase demonstrated the power of the Westside clinic, which has extended the services of care to the population. The capital structure ratios showed that lending grew in 2022 as a result of the growth in the number of people who needed the services of healthcare. High lending is a kind of weakness since the tendencies of high debt influence the overall performance of the clinic.

The strategic analysis was used to make better use of the resources in order to address the health requirements of the population. The review of the ratio of the turnover was helpful in assessing the revenue generated from the assets. There is also an opportunity to increase the amount of revenue of Westside Clinic by optimising the use of assets to expand healthcare services.

The information connected with the billing process was that in 2021, the collection of payments occurred more quickly than in 2022, and this aspect requires serious enhancement (Ross, 2022). The issue of payment delays is a risk to the Westside clinic and has implications for the clinical procedures and general productivity. The SWOT analysis offers detailed knowledge to the healthcare leaders that can be used to make sound decisions in an effort to attain the goals of the organisation.

Financial Ratios

The financial performance of the Westside Clinics in the years 2021 to 2022 was fully analysed through the analysis of the financial ratios. The overall margin on the profitability ratio in 2022 shows that Westside Clinic earned $3.59 on every $100 as compared to the prior year of 2.81 (Ross, 2022). The rise in the total margin meant that Westside Clinic made the move towards enhancing the overall quality of care, which increased the net income. Furthermore, the liquidity ratio assisted in the evaluation of the current assets utilised by the organisation. The statistics suggested that the current obligations can be satisfied with the amount of 1.46.

The other ratios, including capital structure ratios and turnover ratios, also helped in giving an insight into the financial performance of Westside Clinic. The debt service coverage ratio of the capital structure showed that the value has grown to become 1.81 when compared to 1.61 in 2022, and it was an indication that the Clinic has borrowed more to sustain the financial performance. The data on current assets turnover showed that the Clinic decreased the investment in the current assets between the values of 3.95 and 3.68, which demonstrated that the organisation did not have enough in current assets (Ross, 2022).

But some ratios, including the profitability ratio and capital structure ratio, are more applied to the determination of the financial position. The total margin gives an insight into the net income which the organisation generates, which helps in determining the profitability. In addition, capital structure ratio assists in evaluating the debt service coverage to reduce lending and increase the income of the healthcare organisation.

Perspectives on Long-Term Financial Trends

These are the views on the long-term financial trends, reimbursement, and digital payments. The initial finance trend is concerned with reimbursement as a result of rising costs of health care (Wagenschieber and Blunck, 2024). Attitudes toward the trends of reimbursements were that the cost increase in healthcare was inhibiting the ability of the patients to seek medical care, which impacted patient health outcomes and raised patient readmission. The rise in the cost per admission causes financial pressure to patients and healthcare organisations. The trends in reimbursement will assist the Westside Clinic in reducing the risk of liquidity and stabilising financial processes.

The insights on mitigating debt risk could also be found in the perspectives of the second trend of digital payments. The Westside Clinic data on healthcare-related data of the 2021-2022 year indicated that the care services had a billing clearance of 58 days (Ross, 2022). Any unpaid bills after three months are regarded as bad debt, which disturbs the financial stability of the organisation. As such, digital payment will be an appropriate alternative to enhance the time it takes for billing to be cleared in the Westside Clinic.

Implication of Each Trend

The trends have definite positive implications for the West Side Clinic. Reimbursement trends facilitate the optimal utilisation of resources during the new admission of patients, which increases the effectiveness of the organisation in clinical terms. The payment of the price of the additional admissions helps the organisation to escape the debt and improves the total performance (Wagenschieber and Blunck, 2024). Digital payment is also a good implication as it minimises the debt risk of Westside. Moreover, the payment in real time with the help of technologies prevents the protracted period of clearing the bills, decreasing the debt ratio on Westside.

Financial Impact on Organisation Strategy

The financial analysis of the healthcare data has shown that it may have an effect on the strategy of the Westside organisation. The healthcare data of the Westside ratio analysis showed that the profitability margin improved slightly in 2022, which proves the effectiveness of the care quality standards (Ross, 2022). The cost of finance and debt ratio, however, showed that there was a need to improve. The strategy of the Westside Clinic is to offer affordable care services to the community.

The analysis of the data revealed that the financial expense and revenue influence the strategies of the organisation because of the growth of demand for healthcare (Ross, 2022). The reduction in the days in accounts receivable and current asset turnover indicated that Westside Climic must have implemented the right strategies to control its operations. Debts that are not paid prevent the organisation from streamlining its operations and will influence the performance of the Westside Clinic.

Implications of Patient Care Based on Benchmark Data

The health data analysis suggested that patient care can be enhanced through offering cost-efficient care. The cost per admission benchmark data assists the healthcare manager of Westside in restricting costs by utilising resources optimally (Ross, 2022). Determining the cost per admission will enable Westside to offer quality care to all patients, enhancing the quality of care and patient satisfaction.

The other standard is patient referral rate, which is applied in order to offer effective services. The in-depth information about the patient is provided with the help of the referral forms, which simplifies the operations and the patient costs of healthcare (Harbi et al., 2024). The benchmark data have affirmative implications on patient care because effective care and referral aid to enhance the quality of life and patient safety.

Critical Needs and Opportunities

The financial information uncovered the critical needs and opportunities of Westside Clinic. The information about accounts receivable days shows that it is necessary to improve the situation because the number of unpaid receivables results in debt, which influences the effectiveness of Westside. On the contrary, return on assets (ROA) and return on equity (ROE) suggested the possibility of increasing revenue because the earnings of Westside Clinic improved considerably.

The ROA and ROE have risen significantly compared to the past years, as the ROA has risen by the year’s end to 6.10 as compared to 4.81, and ROE has risen to 16.75 as compared to 14.94 on an equity of 100 dollars (Ross, 2022). The financial positions were stable as indicated by the financial ratios of the Westside Clinic.

Conclusion

Ratio analysis would be used to determine the financial stability of the organisation in the Westside Clinic. An analysis of the healthcare data of the period 2021-2022 assisted in determining the financial stability of the organisation. Owing to the SWOT planning tool, a healthcare organisation can make a strategic plan. Healthcare data on financial ratios showed that the operating and total margins were rising. The ideas of the long-term financial trends, such as reimbursement and digital payments, were very insightful. Also, the ratio data showed that the strategy of the Westside organisation was influenced by financial stability.

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