Following the Right Turnaround Indicators
"An indicator we talk a lot about is days in accounts receivable," says Rick Langosch, senior vice president and CFO at the Coker Group, a healthcare management consulting services firm in Alpharetta, GA. One hospital he is currently working with is at 38 days. "That is about as good you can get," says Langosch. Just a few days less can mean millions of dollars in cash. Also, he adds, "When they pay me quicker, it means I have a better chance of collecting it. When it is out there 90 or 120 days people kind of forget to pay me."
Hospitals should also be paying close attention to days cash on hand, he says. A few years ago, he says, "It wasn't unusual for hospitals to have 100 to 120 days cash on hand." However, "in these hard times," he adds, many have 60 to 75 and some have as little as 30 days cash on hand. Langosch also says margin per patient is important to follow as is employees per occupied bed. "It is not unusual for an acute care or a medical surgical hospital to have 3.0 employees per occupied bed. Hospitals that are in trouble might have 4.0 or 5.0 employees per occupied bed."
Nelson, with HFMA, like many others, seems optimistic that healthcare will come back. But he's not committing just yet. "It's like the stock market," he says. "We saw it dive way down and we have seen it have a little bit of a rally and come back. Things are turning around and changing but it is not going to happen overnight," he says.
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