Monitoring the Health Care Safety Net

Slide Presentation by Tim Clouse, Gil Silva, and Rob Gilliam

On September 24, 2003, Tim Clouse, Gil Silva, and Rob Gilliam made a presentation in the Web-Assisted Audioconference entitled Measuring Community-Based Healthcare Organization Financial Health.

This is the text version of Mr. Clouse, Mr. Silva, and Mr. Gilliam's slide presentation. Select to access the PowerPoint® slides (121 KB).

Measuring Community-Based Healthcare Organization Financial Health

Tim Clouse
U.S. Department of Agriculture

Gil Silva
Rob Gilliam
Health Resources and Services Administration

Slide 1

I Know "It" When I See It

• What is good financial health for a community-based healthcare organization?
• Is there an easy way to determine it?
• Is there an understandable way to explain it?

Slide 2

Half of Them Are Above Average

Rates community-based healthcare organizations

• Relative to a sample of similar organizations
• Simple, objective, and flexible
• Currently in use

Slide 3

Death and Taxes: The Only Two Certainties

• Uses available financial data
• Simple (?) calculations
• Identifies problem areas
  • General type of problem
  • Suggests remedies

Slide 4

Financial Risk Assessment Worksheet and Required Data

This slide shows an example of the financial risk assessment worksheet.

Instructions: An outpatient safety net provider can use this worksheet to evaluate its financial risk relative to our sample of outpatient safety net providers. Fill in each box with the information requested and do the calculations. If information is missing, either use an informed judgment as to the actual value or assume that the benchmark is met (i.e., the provider gets full points for that measure). If the resulting calculation yields more points than maximum in that category, only the maximum points are given.

To complete your financial risk assessment you will need your Audited Financial Statement to include the Balance Sheet, the Income Statement and the Statement of Cash Flow.

The slide shows a table asking for the Name of provider, provider address, audit period ending year, and month/day. The "score" requires you to add all sub scores and record them in the box (liquidity, equity/profitability, coverage, activity, and other).

Slide 5

Risk Level Descriptions

This slide shows a range of risk level descriptors: from 0 to 50 is high risk; from 50 to 60 is elevated risk; from 60 to 70 is medium risk; and from 70 to 100 is low risk. High risk indicates a financially stable provider with few or no financial imbalances. Medium risk indicates that some financial imbalances exist and there may be a need for targeted corrective action in the areas of weakness. Elevated medium risk indicates excessive financial imbalances that may interfere with provider's ability to operate effectively. High risk indicates that severe financial imbalances exists and a high risk of failure.

Slide 6

The slide depicts a table that shows how to measure liquidity. Liquidity measures if a provider can meet obligations over the short run. The current ratio (A) is calculated by dividing current assets by current liabilities. The working capital (B) is calculated by subtracting current liabilities from current assets. "Benchmarks and points" is written underneath the table.

Slide 7

What's the Bottom Line?

• Low scores are a Bad Thing
  • Not risk of bankruptcy
• More Research Is Needed
  • What areas are low?
• Possible fixes
  • Fee structure, billing, and collecting

Slide 8

All Politics Is Local

Every situation is unique

• Changing the benchmarks for each score
• Changing the weights/emphasis for each score
• Changing the risk categories

Slide 9

The Chicken and The Egg

The Financial Risk Assessment Model also works backwards

• Using it for a performance benchmark
• Knowing what to watch for
• Planning for a new organization
• Planning to sustain

Current as of February 2004

Internet Citation:

Measuring Community-Based Healthcare Organization Financial Health. Text Version of a Slide Presentation at a Web-assisted Audioconference. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/safetynetaud/sess2/clousetxt.htm

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