top of page

Healthcare/Hospitals Evaluation of Financial Conditions & Capital Raising  Financing Facilitation


Evaluating Hospitals’ Financial Condition


Three types of performance indicators are used to measure a hospital’s financial condition:

• Ratio analysis

• Multi-year cash flow analysis

• Affiliate charts


Ratio Analysis

The purpose of a ratio is to relate several pieces of information through one summary measure that is more meaningful. Ratios can be looked at across time, called a trend analysis, and can be compared to other hospitals or industry standards. Ratios should be used together to understand the full story of a hospital. Ratios address three aspects of financial performance: profitability, liquidity, and solvency. 


• Profitability—How much profit has a company made? Is the hospital rolling in dough or just breaking even and covering its costs?

• Liquidity—A company’s ability to meet its short-term obligations. Does the hospital have enough cash to pay its bills?

• Solvency—A company’s ability to meet its long-term obligations. For example, can the hospital pay back its mortgage?


Cash Flow Analysis:

A cash flow analysis aggregates cash inflows and outflows over time to illustrate a pattern of cash sources and uses. Hospitals can provide services (operating activity), borrow (financing activity), or buy and sell assets (investing activity).

A healthy hospital generates cash mainly from operating activities, especially operating income, non-operating income, and depreciation. An unhealthy hospital uses debt financing as a large source of cash and uses cash for unprofitable operations. Depreciation expense is the largest source of operating cash for many hospitals.



Affiliate Charts

Affiliate charts help to explain the organizational structure of the system to which the hospital belongs. The chart may illustrate if the hospital supports

other entities or is supported by the other entities. The charts may help interpret trends in ratios and explain impacts on cash flows. The tax status of

the affiliates is also important to assess. Below is an example of the type of information affiliate charts can provide.


To understand the hospital’s financial picture, it is also important to assess the hospital’s operating environment. Both internal and external factors

may affect the hospital’s fiscal health.



Regulatory Changes

Changes in Payment Methodologies

Investment Performance




Performance of Affiliated Entities

Management Control (Service Mix, Discharge Planning, Physician Profiling)

Case Mix/Level of Severity in Patients

Payer MixAnalyzing an Hospital Financial Picture

 How much money does the hospital have?

• How does the hospital get its money?

• By providing medical services?

• By providing nonmedical services?

• Through donations from individuals, foundations, or

the government?

• Through investments?

• What percentage of money comes from each of these


• What does the hospital use the money for?

• How much cash has the hospital generated after meeting

operating expenses?

• What is the hospital’s investment strategy?

• What was the value of charity care provided to the community?

• What is the estimated value of a hospital’s tax exemptions?

• What internal and external factors affect the hospital’s financial



Financing for Healthcare Centers and Hospitals


Hospitals as Non-Profits


In many instances charities, non-profits, schools, hospitals and other entities receive charitable donations made as deferred contributions by their supporters, including wealthy individuals and corporations. Monetization financing allows these beneficiaries to manage their cash flow by proactively utilizing this financing solution as a strong tool to receive multiyear future donor commitments with a lump sum payment today. This can facilitate an increase in total donations and benefits the organization by having cash available now for their financial needs.

Our Expertise: 


bottom of page