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© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
FINANCIAL MANAGEMENT FOR
MANAGING HOSPITAL LOGISTICS EFFICIENTLY
Jirapan Liangrokapart, Ph.D.Department of Industrial Engineering
Mahidol University, Thailand
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Agenda
• Supply chain concept
• Hospital supply chain
• Inventory management
• KPI measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
SUPPLY CHAIN CONCEPT
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Supply Chain Concept
4
SuppliersEnd
Consumer(Customer)
Products/Services
Demand
1) Starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together
2) The material and informational interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are links in the supply chain (CSCMP, 2010)
Supply Point of Consumption
Point of Origin
Material Flow
Financial Flow
Information Flow
Needs/Requirement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Type of Supply Chain
5
Retail SC(Trading)
Manuf. Customer
Service SC
Hotel, Restaurant,
Hospital
Maintenance Service
Supplier
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Supply Chain Management
6
Suppliers Hospitals
Within OrganizationBetween Organization
Pharm. DeptPurchasing Dept
Between Department
OPD Dept
Within Department
Nurse
Doctor Patient
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Mission of Supply Chain Mgmt
7
Information Flow
Material/Service
FlowFinancial Flow
Customers
Responsiveness
Efficiency
Suppliers
Right Product Right CostRight Condition
Right Time Right Place
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Linkage the Supply Chain--Logistics Activity
8
Supplier Manuf. Distributor End Consumer
Products/Services
LogisticsLogistics Logistics Logistics
Logistics is defined as the integrated planning, realizing, usage and control of
– all kinds of transportation processes,
– the storage of goods and;
– the corresponding information processes
within organizations and between organizations.
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Linkage the Supply Chain--Logistics Activity
9
Information Management
MovementStorage MovementStorage
Inventory (Healthcare Products)
Mgmt
Material Handling
Packaging
Location Selection
Reverse Logistics (Returns, Disposal)
Customer Service
Demand Forecasting
Order Processing (Prescription)
Part & Service Support (MSUs, Sterilize)
Core of Logistics
Supplementary of Logistics
Procurement
From: James A. Tompkins Facilities Planning 3rd ed. 2003
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Bullwhip Effect
การแบงปนขอมูลสามารถกําจัด Bullwhip Effect ได
Supplier Manuf. Distributor End Consumer
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Supply Chain’s Uncertainty
Stores/Shops
$
$
End Consumers
Manufacturers/Suppliers
Retail DCs
การสนับสนุนการไหลของขอมลูและการ
เกิดขึ้นของกิจกรรมตางๆวัตถุดิบอยูท่ีใด?
เมื่อไรสินคาจะ
มีอยูในราน?
เมื่อไรฉันจะ
ไดรับสินคา?
เมื่อไรจะมาสงถึง?
เรากระจายสินคาพรอมๆกับ
การสงผานขอมูลไดหรือไม
เพ่ือประหยัดเวลา?
Henry Bruce (1999)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Challenges in Managing Supply Chain
Storage Movement (Flow)
Information Exchange/Data Synchronization(Supply Chain)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
HOSPITAL SUPPLY CHAIN
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Challenges in Hospital Supply Chain
14
Healthcare Challenges
Counterfeits/Pedigree (Sub-Standards)
Product’s Traceability/Recalls
‘Cost Containment’ versus Delivering quality of ‘Clinical Care’
Government Regulations
Standards Compliance
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Hospital
Supply Chain in Healthcare
15
Drugs
Medical Devices Patients
Medical Consumable
Foods
DistributorManuf.
Suppliers Products Customers
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Service on Top of Manufacturing SC
16
Hospital
Drugs
Medical DevicesPatients
Medical Consumable
Foods
DistributorManuf. Clinical Care
Professionals
Professional Service
Service Supply ChainManufacturing Supply Chain
Payers
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Service Supply Chain
Nature of Clinical care service• Intangibility -- บริการไมมีตัวตน ไมมีใครเปนเจาของถาวร
• Fluctuating Demand-- ความตองการท่ีไมแนนอน ลูกคาเปลีย่น เวลาเปลี่ยน ความตองการเปลี่ยน
• Variability-- ความแตกตางในการบริการแตละครั้ง
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Manufacturing Supply Chain
18
PatientInbound
PatientOutbound
SuppliersProcurement of ClinicalConsumables•Medical/Surgical Items
•Pharmaceutical Drugs & Medications•Blood/Intravenous Products
Doctors & Nurses
• Hospital Stock• Consignment Stock
CentralWarehouse
IPD
Hospital
OPD
OperatingRoom
Health Plans/Insurers
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Vendor Managed Inventory (VMI)
19
Refill Dispense
To optimize supply chain performance
The supplier responsible for maintaining inventory levels at Central DC.The supplier has access to the supplier’s inventory data and is generated purchased orders based on the movement of saline sol. and reaching inventory reorder levels
Supplier CustomerHospital
KPI Monitoring(% Stock out)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Replenishment Process
20
Various amounts (Qi) are ordered at regular time intervals (p) based on the quantity necessary to bring inventory up to target maximum
p p p
Q1 Q2
Q3
Q4
Target Maximum
Time
On-
Han
d In
vent
ory
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Multi-Echelon Inventory Management
WardsHospitalSupplier Nurses
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Logistics Improvement in Hospital
22
ExternalInternal
Reengineering
Supplier
Hospital
OrderingImprovement
Tracking and Traceability System
Purchasing Improvement VMI System
Replenishing Improvement
Advance Shipment Notice
System (ASN)
Web iPortal
BP RedesignBP Analysis
Data Synchronization Reconciliation System
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Hospital Supply Chain
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Product and Information flow
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Types of Distribution
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution system
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution system
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Product and Information flow
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
INVENTORY MANAGEMENT
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory Mgmt Risks
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution elements
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution elements
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution elements
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Distribution elements
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory Mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Which are the important products?
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Pareto Principle
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Pareto Principle
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Pareto Principle
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Pareto Principle
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
How to manage each group?
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
How to manage each group?
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
When to order? How many?
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
When to order? How many?
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt model
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt model
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt model
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt model
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt model
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Cost
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Cost
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt: goals
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Inventory mgmt
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
KPI MEASUREMENT
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
KPI Measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
KPI Measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
KPI Measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
KPI Measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Financial issues in Hospital Logistics
PAPER “BENCHMARKING FINANCIAL PERFORMANCE INDICATORS OF PRIVATE HOSPITALS IN THAILAND: COST SAVINGS IN HEALTH CARE SUPPY CHAIN”
By Jirapan Liangrokapart, Ph.D.
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Common Management questions?
• What is being done well?
• Where improvement is needed?
• How to improve it?
72
Introduction
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Answer:
They need a well-designed set of performance indicators (KPIs). The continuous use of KPIs will help the organizations know their performance and find the ways for improvement with an ultimate aim for sustainable development.
(Liangrokapart and Leonard, 2002).
73
Introduction: Hospitals
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• One of the player in the HC Supply chain.
• Distribute Pharmaceutical products, medical supplies, medical equipment, consumables, and others from the upstream players (the manufacturers) through vendors or distributors to its downstream players (the customers who are patients and their relatives)
• The ultimate aim for the service is for patient safety and satisfaction.
74
The role of Private hospitals
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• Performance of hospitals will reflect on the overall efficiency in the supply chain.
• Cost savings in the hospitals will result in a decrease in the amount of the patient bills.
• Finally, the cost savings will be evidence for the overall health care figures of the country.
75
The role of Private hospitals
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
76
SET: Sale in 2009Total 6,024,643 M Baht
Resources45%
Finance8%
Property11%
Technology9%
Services11%
Agricultures and Food8%
Consumer products
1%
Raw materials7%
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
77
SET: Service Industry in 2009Total 719,718 M Baht
Commerce50%Logistics and
Transportation33%
Printing7%
Medical service7%
Tourism and Entertainment
3%
Sale of Medical service is 0.82% of overall listed companies in the SET.
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Year Loss#companies
Net Profit
Sales Cost of Goods Sold
Operating profit margin
(%)
2005 0 3158 28949 18380 36.5
2006 1 3938 38394 23493 38.8
2007 0 4471 43792 26823 38.8
2008 2 4884 50206 30573 39.1
2009 1 5261 51723 32038 38.1
EGIE 513 78
Current situation in private hospital industry in Thailand
Financial Status of Private Hospital Industry (13 Listed companies)(M Baht)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
Year Sale Growth (%)
EBITDA D/E
2005 35.4 6612 0.96
2006 31.46 9156 1.11
2007 13.47 10785 0.98
2008 12.79 11819 0.89
2009 3.03 12411 0.77
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Current situation in private hospital industry in Thailand
Financial Status of Private Hospital Industry (13 Listed companies)(M Baht)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• THIP (Thailand Hospital Indicator Project): 75 KPIs on hospital quality1. Products and services
2. Patient-focus
3. Financial and Marketing
4. HR and learning
5. Efficiency
6. Leading and CSR
7. Health promotion 80
Current performance measurement
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• Current Ratio
• Quick Ratio
• Fixed Asset Turnover
• Days in Account Receivable
• Operating Margin
• Return on Asset (ROA)
(Kunaviktikul 2006, Hennel 2001, Cuthbertson and Poptrowixz 2008, Jana et.al 2007)
81
THIP: Financial and Marketing (6KPIs)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• Profitability
• Liquidity
• Capital structure
• Revenue
• Cost
• Utilization
82
Financial Performance Dimensions of CAH(Critical Access Hospitals)
(20 KPIs)
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
1. Profitability Definition
1. Total margin Net income/total revenue
2.Cash Flow margin ((Net income − (contributions, investments, and appropriations)) + depreciation expense + interest expense)/(net patient revenue + other income – (contributions, investments, and appropriations)
3. Return on equity Net income / Fund balance
83
KPIs of CAH and its Definitions
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
2. Liquidity Definition
4. Current Ratio Current assets / Current liabilities
5.Days cash on hand (Cash + marketable securities + unrestricted investments)/[(total expenses-depreciation)/days in period]
6. Net days revenue in account receivable
(Net patient accounts receivable)/(net patient servicerevenue/days in period)
84
KPIs of CAH and its Definitions
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
3. Capital Structure Definition
7. Equity Financing Fund balance/total assets
8. Debt service coverage (Net income + depreciation expense+ interest expense)/((current portion of long-term debt * Days in period/365) + interest expense))
9. Long Term debt to capitalization
Long-term debt/(Long-term debt + fund balance)
85
KPIs of CAH and its Definitions
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
4. Revenue Definition
10. Outpatient revenue to total revenue
Total out patient revenue/total patient revenue
11. Patient deductions (Contractual allowances + discounts)/gross total patient revenue
12. Medicare Inpatient payer mix
Medicare inpatient days/(total inpatient days − nurserybed days − NF swing bed days)
13. Medicare outpatient payer mix
Outpatient Medicare charges / Total outpatient charges
14. Medicare outpatient cost to charge
Outpatient Medicare costs/outpatient Medicare charges
15. Medicare revenue per day
Medicare revenue/(Medicare days − SNF swing bed days)
86
KPIs of CAH and its Definitions
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
5.Cost Definition
16. Salaries to total expenses
Salary expense/total expenses
17. Average age of plant Accumulated depreciation/(annual depreciation expense•365/Days in period)
18. FTEs per adjusted occupied bed
(Number of FTEs / [((Inpatient days − NF swing days − nursery days) * (total patient revenue/(total inpatient revenue − inpatient NF revenue − other LTC revenue)))/days in period]
87
KPIs of CAH and its Definitions
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
6. Utilization Definition
19. Average daily census swing SNF beds
Inpatient swing bed SNF days/days in period
20. Average daily census acute beds
Inpatient acute care bed days/days in period
88
KPIs of CAH and its Definitions
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
89
In Thailand: SET Annual Report
• 1. Detailed operations of the listed companies
• 2. Certified accuracy of the information
• Accounting statements and Financial Ratios are included in the report of each company.
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
90
SET Annual Report: Financial ratios and definitions
1. Profitability Ratio Unit DefinitionGross Profit Margin % Gross Profit / Net sales
Operating Profit Margin % Operating Profit / Net sales
Net Profit Margin % Net Profit / Net sales
Return on Equity % Net Income / Avg. Equity
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
91
SET Annual Report: Financial ratios and definitions
2. Liquidity Ratio Unit DefinitionCurrent Ratio Times Current Assets / Current Liabilities
Acid Test Ratio (Quick Ratio) Times(Cash+Investment+Recievable) / Current Liabilities
Receivable Turnover Times Net credit sales / Avg. Acc. receivbles
Collection Periods Days Accts receivable / Avg. day sales
Inventory Turnover Times Total purchase / Avg. Inventory
Average Day Sales Days 360 / Inventory turnover
Account Payable Turnover Times Total purchase / Avg. Acc Payables
Average Payment Periods (APP) Days 360 / Acc. Payable Turnover
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
92
SET Annual Report: Financial ratios and definitions
3. Efficiency Ratio Unit DefinitionReturn on Asset % Net income after taxes / Total assets
Return on Fixed Asset %(Net income after taxes+Depreciations) / Fixed assets
Asset Turnover Ratio Times Net sales / Total Assets
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
93
SET Annual Report: Financial ratios and definitions
4. Financial Policy Ratio Unit DefinitionDebt to Equity Ratio Times Long Term Debt / Total Equity
Interest Coverage Ratio TimesEarnings before interest and taxes (EBIT) / Interest
Dividend Payout Ratio % Dividend / Net Income
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
94
Performance ComparisonThailand and USA
Financial ratios USA Thailand
1. Profitability Ratio
Net Profit Margin 2.33 10.05
Return on Equity 5.72 11.87
2. Liquidity Ratio
Current Ratio 1.9 1.11
Collection Period 59.31 23.83
3. Financial Policy Ratio
Debt to Equity Ratio 20.65 0.77
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
95
Methodology and its application
Step 1• From Literature, KPIs used by CAH and Financial ratio
of SET has been reviewed and integrated.
Step 2• Develop a set of Financial Performance Indicators (FPIs)
Step 3• Collect performance figures of each private hospital
based on each FPI.
Step 4
Step 5
Identify industry average and best value
For each FPI, private hospitals can benchmark their performance with the best and find a way to make improvement.
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
96
FPIs
1.Profitability
• % Cost of goods sold
• % Net Profit
2.Utilization
• % Utilization OPD
• % Utilization IPD
3.Other financial dimensions
• Liquidity ratio• Efficiency ratio• Financial Policy
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
97
13 Hospitals in the SET
AHC Aikchol Hospital Center
BGH Bangkok General Hospital
BH Bumrungrad Hospital
CMR Chiengmai Ram Medical Center
KDH Kungdhon Hospital
KH Kasemraj Hospital
M-Chai Mahachai Hospital
NEW North-Eastern Wattana Hospital
NTV Nontavej Hospital
RAM Ramkamhaeng Hospital
SKR Sikarin Hospital
SVH Samitivej Hospital
VIBHA Vibhavadi Hospital
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
98
1. Hypothesis Testing
Large private hospitals Smaller-sized private hospitals
Total income>2000 M Baht
Total income< 2000 M Baht
(190-1200)
BGH VIBHA
BH SKR
SVH NTV
KDH M-chai
KH AHC
RAM CMR
KDH
NEW
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
99
1. Hypothesis testing
Financial PerformanceFPIs
Large private hospitals
Smaller-sized private hospitals
1. Profitability
% Cost of goods sold 62.04(57-70)
72.23*(65-82)
% Net Profit 11.71(8-14.3)
8.43*(0-13.4)
2. Utilization
% Utilization OPD 64.16(59.49-69.00)
71.40**(52.92-78.94)
% Utilization IPD 49.36(30.00-67.79)
64.16**(41.13-82.78)
* Significant at 95% Confidence
**Not significant
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
100
1. Hypothesis testing
Financial PerformanceFPIs
Large private hospitals
Smaller-sized private hospitals
3. Other financial dimensions: Liquidity Ratio
Current Ratio 0.84 1.24
Acid Test Ratio 0.40 1.14
Receivable Turnover 15.50 16.46
Collection periods 24.04 23.71
Inventory turnover 30.57 23.88
Average days sales 15.83 17.17
Account payable turnover 11.97 12.70
Payment periods 30.19 47.57
* Significant at 95% Confidence**Not significant
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
101
1. Hypothesis testing
Financial PerformanceFPIs
Large private hospitals
Smaller-sized private hospitals
Efficiency Ratio
Return on Asset 12.56 5.28
Return on Fixed Asset 31.37 9.49
Asset Turnover Ratio 0.95 0.84
Financial Policy
Debt to Equity Ratio 0.63 0.41
Interest Coverage Ratio 19.39 417.03
Dividend Payout Ratio 46.61 39.99
* Significant at 95% Confidence
**Not significant
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
102
2. Best Value for Benchmarking
FPIs AHC BGH BH CMR KDH KH M-Chai
…
1. Profitability
2. Utilization
3. Other financial dimensions
Financial performance of each hospital
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
103
Analysis
Low performance
value
Average value (Industry average)
Best performance value (benchmark)
For each FPI
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
104
Best value for each FPI
Financial Performance Best Value BenchmarkingHospital
1. Profitability
% Cost of goods sold 57 BGH
% Net profit 14.27 KH
2. Utilization
% Utilization OPD 78.94 VIBHA
% Utilization IPD 82.78 CMR
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
105
Financial Performance Best Value BenchmarkingHospital
3. Other financial dimensions: Liquidity Ratio
Current Ratio 4.46 KDH
Acid Test Ratio 4.22 KDH
Receivable Turnover 22.4 AHC
Collection periods 17.16 RAM
Inventory turnover 53.28 SVH
Average days sales 6.76 SVH
Account payable turnover 19.71 NTV
Payment periods 18.27 NTV
Best value for each FPI
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
106
Financial Performance Best Value BenchmarkingHospital
Efficiency Ratio
Return on Asset 24.8 KH
Return on Fixed Asset 32.3 BH
Asset Turnover Ratio 1.24 NTV
Financial Policy
Debt to Equity Ratio 0.15 NTV
Interest Coverage Ratio 2760.1 KDH
Dividend Payout Ratio 86.54 VIBHA
Best value for each FPI
© 2011 Cluster of Enhancing Competitive Advantage of Health Care Service in Thailand, Mahidol University
• Other private hospitals can use the benchmark values as targets for improving their performance.
• The overall performance improvement in the private hospitals will result in quantifiable savings in the Health care supply chain.
• For Example, SVH’s Inventory turnover of 53.28 times means that SVH can turn their inventory into sale 53.28 times a year or it means that SVH keeps very low inventory level (1 week). Hence, the inventory cost must be very low.
107
Findings
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