Recognizing the considerable controversy over ways to measure hospitals' financial viability, this issue brief reviews various ways to assess their fiscal strength. The paper looks first at operating margins, traditional measures that some experts say are inadequate when considered alone. It then explores several recommendations: (a) net income, liquidity and cash flow, and debt burden, suggested by the National Advisory Panel; (b) factors that determine year-to-year changes in hospitals costs, such as hospital input price inflation, changes in care patterns, and the complexity of patients treated, put forth by the Medicare Payment Advisory Commission; and (c) 35 financial indicators and 43 operating indicators, drawn from audited hospital financial statements by the Center for Healthcare Industry Performance Studies.
Matherlee, Karen, "Margins As Measures: Gauging Hospitals' Financial Health" (1999). National Health Policy Forum. Paper 31.