Student Name

Capella University

DHA8007 Strategic Financial Management in Health Care

Professor Name

Submission Date

Ratio Analysis

Ratio analysis is used to evaluate the financial performance of a health care organization. Ratio analysis can assist healthcare organizations in assessing cost and income. The various ratios, including liquidity, capital structure, and turnover ratios, are helpful in revealing detailed information on the financial stability of the healthcare organization (Jakóbczyk et al., 2021). The ratios are homogeneous measures that aid healthcare financial leaders in an evaluation of the financial scenario. In the assessment, the Westside Clinic’s financial performance will be evaluated by reviewing the ratio analysis data.

Strategic Assessment Based on Healthcare Data

Healthcare information helps a great deal in determining the financial health of the organization. One of the planning tools used to assist a healthcare organization in creating a strategic plan is strengths, weaknesses, opportunities, and threats (SWOT) (Teoli et al., 2023). Healthcare data are useful in strategic analysis to utilize the resources best. Within the atmosphere of the Westside Clinic, the analysis of the profitability ratio showed that the operation and total margin performance was better in 2022, as it reflects better quality of care (Ross, 2022). The growth in profitability was an indicator of the strength of the Westside clinic that extended care services to the community. The capital structure ratios showed that lending has been growing in 2022 owing to the high demand for health services. A drawback is the growth in lending because the tendency to increase debt has an impact on the general performance of the clinic.

The process of strategic assessment assisted in using the resources more favourably in order to satisfy the healthcare demands of the community. An analysis of the turnover ratios was able to assess the generation of revenues from the assets. When it comes to maximizing the utilization of assets, this is one of the chances to extend healthcare services and increase the revenues of Westside Clinic. The information concerning the billing process indicates that payment collection was quicker in 2021 than in 2022, which requires a considerable enhancement (Ross, 2022). Delays in payment are a threat to the Westside clinic and affect the clinical operations and overall productivity. SWOT analysis offers in-depth information to the heads of health care organizations that can help them make informed decisions to attain the objectives of the organization.

Financial Ratios

The 2021-2022 written-down analysis of the financial ratios of the Westside Clinics gave a detailed overview of the financial performance. The total margin under the profitability ratio in 2022 reflected that Westside Clinic earned $3.59 for every 100 dollars revenue, as compared to the 2.81 of 2021 (Ross, 2022). The growth in the total margin meant that Westside Clinic had made an initiative to enhance the quality of service provided overall, to increase the net income. In addition, the liquidity ratio assisted in evaluating the current assets that the organization utilized. It was shown that there is enough data to cover the current obligations with $1.46.

Other ratios, like the capital structure ratio and turnover ratios, also shed some light on the financial performance of Westside Clinic. The debt service coverage ratio of the capital structure reflected that the value increased to $1.81 compared to 1.61 in 2022, and that reflected that the Clinic borrowed more to sustain the financial operation. Turnover data of current assets has shown that the Clinic decreased the investment in current assets by downgrading it by $ 3.95 to $ 3.68, which reflected that the organization has too small current assets (Ross, 2022). Some ratios, however, like the profitability ratio and capital structure ratio, are more concerned with the establishment of the financial position. The overall margin would give information on the net income earned by the organization, and the profitability can be identified. In addition, the capital structure ratio assists in determining the coverage of debt services in order to reduce lending and maximize the turnover of healthcare organizations.

Perspectives on Long-Term Financial Trends

The approaches towards future financial trends comprise digital payments and reimbursement. The initial financial trend is the aspect of reimbursement owing to the escalated medical costs (Wagenschieber and Blunck, 2024). Reimbursement trends reflect that medical cost increases make it difficult for patients to access medical care by patients, which impacts the health outcomes of patients and may lead to higher patient readmission. The rise in cost of admission subjects patients and health facilities to financial strain. The trends in reimbursement assist the Westside Clinic in reducing the risk of liquidity and stabilising financial activities. The insights of the second trend of digital payments also provide perspectives that can be used to reduce the risk of debt. The 2021-2022-year healthcare data of the Westside Clinic revealed that the care services of the Clinic took 58 days to clear billing (Ross, 2022). Bad debt is considered to be unpaid bills after three months, which impacts the financial stability of the organization. Thus, online payment is an appropriate solution to reduce the time for billing to be cleared in the Westside Clinic.

• Implication of Each Trend

The Westside Clinic has positive implications of the trends. The reimbursement trend assists in refining the optimum utilization of resources in new admissions of patients to improve the clinical performance of the organization. The cost-reimbursement of the additional admissions helps the organization to stay out of debt, thereby increasing its performance (Wagenschieber & Blunck, 2024). Digital payment similarly has good implications as it decreases the debt risk Westside has. Furthermore, real-time payment using technologies will prevent the protracted time to achieve the transparency of bills, which improves the debt ratio at Westside.

Financial Impact on Organization Strategy

The economic evaluation of the healthcare information proved that it could affect the strategy at the Westside organization. The analysis of Westside healthcare data via ratios showed that its profitability margin has improved marginally in 2022, confirming the validity of the care quality standards (Ross, 2022). Nevertheless, the cost of money and the debt ratio were signs of a need to improve. The Westside Clinic’s strategy is to provide cost-effective care services to the community. The analysis of the data revealed that financial cost and income influence the strategies adopted in the organization because of augmenting healthcare demands (Ross, 2022). The reduction of days in accounts receivable and current asset turnover suggested that the Westside Clinic had to come up with remedies to control the operation. The unpaid bills work against the organization by obstructing the smooth running of the organization as well as impacting the efficiency with which the Westside Clinic operates.

• Implications of Patient Care Based on Benchmark Data

The analysis of the healthcare data suggested that the care could be enhanced by means of paying attention to cost-effective care. The data on benchmarking the cost of an admission can assist healthcare managers of Westside in reducing the cost by utilizing resources in the most efficient way (Ross, 2022). Determining the cost of each admission assists Westside in giving equitable care to each of its patients, enhancing the quality of care and patient satisfaction. The other benchmark is the patient referral rate that is to be used to deliver effective services. The referral forms are used to provide in-depth information about the patient, streamlining the operations and healthcare costs (Harbi et al., 2024). The benchmark data have positive implications for patient care as effective care and referral help in improving the quality of life and patient safety.

• Critical Needs and Opportunities

The financial information brought out the critical needs and opportunities for the Westside Clinic. The number of days in accounts receivable shows that the data are not good enough and need to be improved further since it is the number of days that unpaid bills are written up to show debts, and as such, it is impacting the efficiency of Westside in its operations. On the contrary, the returns on assets (ROA) and returns on equity (ROE) reported the possibility to raise revenue; the earnings of Westside Clinic improved significantly. As at the end of 2022, the ROA and ROE improved substantially against the past years when ROA went up to $6.10 in comparison to the four years before that acquisition, which was $4.81, and ROE went up to 16.75 as compared to 14.94 on 100 of equity (Ross, 2022). Financial ratios of the Westside Clinic indicated that financial positions were viable.

Conclusion

Ratio analysis in the Westside Clinic assists in determining the financial stability of the organization. An evaluation of the healthcare data, covering the years 2021-2022, was used to evaluate the financial health of the organization. SWOT planning tool assists in enabling a healthcare organization to make a plan. Financial ratios provided by the healthcare organization showed an improvement in operating and total margins. Opinions on the prospects of the future financial direction, such as reimbursement and digital payments, were valuable insights. Also, the ratio data showed that the strategy of the Westside organization was influenced by financial stability.