Assessing Critical Business Indicators

In order to be a sound financial manager, you need to know the fiscal intricacies of your organization or department. Decisions about future expenditures should be based on careful calculations of organizational or departmental needs. By using critical business indicators, you can more effectively balance the fiscal realities of your budget with the functional demands of your department.

In this Discussion, you examine the use of critical business indicators to assist in financial decision making for a health care department or organization.

The Instructor has assigned a problem from the Zelman, McCue, and Glick online text.

To prepare:

Review this week’s Learning Resources, focusing on how critical business indicators can be used in financial decision making.

For the problem you were assigned, complete the calculations and then answer the questions included.

Select a different business indicator than you used in your problem. Reflect on how this critical indicator could assist a nurse manager to more effectively balance the demands placed on a department while still meeting budgetary constraints. Find an example.

Assess the ramifications of making a decision without having the types of information these business indicators provide.

If it was imperative for you to make a certain purchase or launch a new initiative, but your break-even point was calculated as higher than the expected revenues, what are your options?

Post your response to the question you were assigned and explain your reasoning. Suggest how nurse managers could use the critical business indicator you selected to both meet the needs of a department or organization and remain within budget. Provide a specific example. Describe potential ramifications of making a financial decision without using business indicators. Specify strategies for addressing a situation where a break-even point is higher than expected revenues.

Respond to at least two of your colleagues on two different days using one or more of the following approaches:

Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives.

Offer and support an alternative perspective using readings from the classroom or from your own research in the Walden Library.

Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings.

(I will send the Responses soon)

For the Assigned Question:

You may choose any of the four  problems (#9, #10, #11 or #12) on pages 414–415 of the text (eBook) Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts, and Applications (3rd  ed.). 

Required Readings

Baker, J., & Baker, R. W. (2014). Health care finance: Basic tools for nonfinancial managers. Burlington, MA: Jones and Bartlett Learning.

Chapter 11, “Financial and Operating Ratios as Performance Measures” (pp. 121–128)

Review: This chapter introduces a number of different tools that can be used to measure the performance of an organization. These include liquidity ratios, solvency ratios, and profitability ratios.

Chapter 14, “Using Comparative Data” (pp. 157–169)

Review: In this chapter, you are introduced to the criteria for identifying other health care organizations that are comparable to your own. Data from these organizations can then be used to evaluate your own organizational performance.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

Retrieved from the Walden Library databases.

Chapter 7, “The Investment Decision” (pp. 271–328)

This chapter explores three methods by which large, multiyear investment decisions can be evaluated. This chapter also explores various capital investment alternatives.

Chapter 9, “Using Cost Information to Make Special Decisions” (pp. 374–422)

In this chapter, the authors delve into fixed and variable costs, which largely help determine decisions about services and how much to charge for them. The chapter also explores break-even analysis, which studies the relationship among revenues, costs, and volume.

Kaufman, K., & Grube, M. (2009). Making the right decisions in a consolidating market. Healthcare Financial Management, 63(7), 44–52.

Retrieved from the Walden Library databases.

This article discusses how a difficult economy can impact consolidation in the U.S. health care industry. The authors describe both opportunities and challenges with consolidation.

Required Media

 Laureate Education (Producer). (2012). Opportunity analysis. Baltimore, MD: Author.

In this video, Dr. William Ward demonstrates how to conduct a benefit/cost analysis, calculate a break-even point, perform a return on investment analysis, and create a profit and loss statement. He highlights the uses of each.

 Document: Finance and Economics in Healthcare Delivery Transcript (PDF)