1. No category

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
Financial Flow
Demand
Point of Origin
End
Consumer
(Customer)
Products/
Services
Suppliers
Needs/
Requirement
Information Flow
Supply
Point of Consumption
Material Flow
1) Starting with unprocessed raw materials and ending with the final customer using the
4
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)
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Type of Supply Chain
Retail SC
(Trading)
Supplier
Customer
Manuf.
Service SC
5
Hotel,
Restaurant,
Hospital
Maintenance
Service
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Supply Chain Management
Suppliers
Hospitals
Purchasing
Dept
Pharm. Dept
OPD Dept
Doctor
Between Department
Between Organization 6
Nurse
Within Organization
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Within
Department
Patient
Mission of Supply Chain Mgmt
Right Product
Right Time
Right Place
Right
Condition
Right Cost
Customers
Responsiveness
Material/Service
Information
Flow
Flow
7
Financial Flow
Efficiency
Suppliers
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Linkage the Supply Chain--Logistics Activity
Supplier
Logistics
Manuf.
Distributor
Logistics
Products/
Services
Logistics
End
Consumer
Logistics
 Logistics is defined as the integrated planning, realizing, usage and control
of
– all kinds of transportation
processes,
8
– 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
Supplementary of Logistics
Information Management
Demand Forecasting
Customer
Service
Order Processing
(Prescription)
Core of Logistics
Procurement
Storage
Inventory
(Healthcare
Products)
Mgmt9
Material
Handling
Packaging
Movement
Storage
Movement
Reverse Logistics
(Returns, Disposal)
Location
Selection
Part & Service
Support (MSUs,
Sterilize)
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
Supplier
Manuf.
Distributor
End
Consumer
การแบงปนขอมูลสามารถกําจัด Bullwhip Effect ได
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Supply Chain’s Uncertainty
การสนับสนุนการไหลของขอมูลและการ
เกิดขึ้นของกิจกรรมตางๆ
วัตถุดิบอยูที่ใด?
เมื่อไรจะมาสงถึง?
$
Manufacturers/Suppliers
เรากระจายสินคาพรอมๆกับ
การสงผานขอมูลไดหรือไม
เพื่อประหยัดเวลา?
Retail DCs
เมื่อไรสินคาจะ
มีอยูในราน?
Stores/Shops
Henry Bruce (1999)
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
เมื่อไรฉันจะ
ได$รับสินคา?
End Consumers
Challenges in Managing Supply Chain
Information Exchange/Data Synchronization
(Supply Chain)
Storage
Movement (Flow)
© 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
Product’s
Traceability/Recalls
Standards Compliance
Healthcare
Challenges
Counterfeits/Pedigree
(Sub-Standards)
‘Cost Containment’
versus Delivering quality
of ‘Clinical Care’
14
Government Regulations
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Supply Chain in Healthcare
Suppliers
Products
Customers
Hospital
Drugs
Manuf.
Distributor
Medical
Devices
Medical
Consumable
Foods
15
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Patients
Service on Top of Manufacturing SC
Professionals
Hospital
Drugs
Manuf.
Distributor
Medical Devices
Medical
Consumable
Clinical Care
Professional Service
Foods
16
Payers
Manufacturing Supply Chain
Patients
Service Supply Chain
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Service Supply Chain
Nature of Clinical care service
•
Intangibility -- บริการไมมีตัวตน ไมมีใครเปนเจาของถาวร
•
Fluctuating Demand-- ความตองการที่ไมแนนอน
•
ลูกคาเปลีย่ น เวลาเปลี่ยน ความตองการเปลี่ยน
Variability-- ความแตกตางในการบริการแตละครั้ง
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Manufacturing Supply Chain
Patient
Inbound
Doctors & Nurses
Suppliers
Hospital
Procurement of Clinical
Consumables
•Medical/Surgical Items
•Pharmaceutical Drugs & Medications
•Blood/Intravenous Products
Central
Warehouse
• Hospital Stock
• Consignment Stock
Operating
Room
IPD
OPD
18
Health Plans/Insurers
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Patient
Outbound
Vendor Managed Inventory (VMI)
KPI Monitoring
(% Stock out)
To optimize supply chain performance
Supplier
Refill
Hospital
Dispense
Customer
The supplier responsible for maintaining inventory levels at Central
DC.
The supplier has access
to the supplier’s inventory data and is
19
generated purchased orders based on the movement of saline sol.
and reaching inventory reorder levels
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Replenishment Process
Various amounts (Qi) are ordered at regular time
intervals (p) based on the quantity necessary to
bring inventory up to target maximum
On-Hand Inventory
Target Maximum
Q1
Q4
Q2
Q3
p
20
p
p
Time
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Multi-Echelon Inventory Management
Supplier
Hospital
Wards
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
Nurses
Logistics Improvement in Hospital
Hospital
BP Analysis
BP Redesign
Reengineering
Internal
External
Purchasing
Improvement
Ordering
Improvement
Tracking and
Traceability System
Replenishing
Improvement
Data Synchronization
22
Reconciliation System
Advance
Shipment Notice
System (ASN)
VMI System
Web iPortal
Supplier
© 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
Introduction
Common Management questions?
• What is being done well?
• Where improvement is needed?
• How to improve it?
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
72
Introduction: Hospitals
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).
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
73
The role of Private hospitals
• 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.
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
74
The role of Private hospitals
• 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.
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
75
SET: Sale in 2009
Total 6,024,643 M Baht
Consumer
products
1%
Services
11%
Raw materials
7%
Agricultures and
Food
8%
Resources
45%
Technology
9%
Property
11%
Finance
8%
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
76
SET: Service Industry in 2009
Total 719,718 M Baht
Medical service
7%
Printing
7%
Logistics and
Transportation
33%
Tourism and
Entertainment
3%
Commerce
50%
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
77
Current situation in private
hospital industry in Thailand
Financial Status of Private Hospital Industry (13 Listed companies)
(M Baht)
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
© 2011 513
Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
78
Current situation in private
hospital industry in Thailand
Financial Status of Private Hospital Industry (13 Listed companies)
(M Baht)
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
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
79
Current performance
measurement
• THIP (Thailand Hospital Indicator Project): 75
KPIs on hospital quality
1.
2.
3.
4.
5.
6.
7.
Products and services
Patient-focus
Financial and Marketing
HR and learning
Efficiency
Leading and CSR
Health promotion
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
80
THIP: Financial and Marketing
(6KPIs)
•
•
•
•
•
•
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)
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
81
Financial Performance Dimensions
of CAH(Critical Access Hospitals)
(20 KPIs)
•
•
•
•
•
•
Profitability
Liquidity
Capital structure
Revenue
Cost
Utilization
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
82
KPIs of CAH and its Definitions
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
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
83
KPIs of CAH and its Definitions
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 service
revenue/days in period)
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
84
KPIs of CAH and its Definitions
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)
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
85
KPIs of CAH and its Definitions
4. Revenue
Definition
10. Outpatient revenue to
total revenue
11. Patient deductions
Total out patient revenue/total patient
revenue
(Contractual allowances + discounts)/gross
total patient revenue
Medicare inpatient days/(total inpatient
days − nursery
bed days − NF swing bed days)
Outpatient Medicare charges / Total
outpatient charges
Outpatient Medicare costs/outpatient
Medicare charges
Medicare revenue/(Medicare days − SNF
swing bed days)
12. Medicare Inpatient
payer mix
13. Medicare outpatient
payer mix
14. Medicare outpatient
cost to charge
15. Medicare revenue per
day
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
86
KPIs of CAH and its Definitions
5.Cost
Definition
16. Salaries to total
expenses
17. Average age of plant
Salary expense/total expenses
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]
Accumulated depreciation/(annual
depreciation expense
•365/Days in period)
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
87
KPIs of CAH and its Definitions
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
Source: Pink, et.al 2006
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
88
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
89
SET Annual Report: Financial
ratios and definitions
1. Profitability Ratio
Gross Profit Margin
Unit
%
Definition
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
90
SET Annual Report: Financial
ratios and definitions
2. Liquidity Ratio
Current Ratio
Unit
Times
Acid Test Ratio (Quick Ratio)
Times
Receivable Turnover
Times
Definition
Current Assets / Current Liabilities
(Cash+Investment+Recievable) / Current
Liabilities
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
91
SET Annual Report: Financial
ratios and definitions
3. Efficiency Ratio
Return on Asset
Unit
%
Return on Fixed Asset
%
Asset Turnover Ratio
Times
Definition
Net income after taxes / Total assets
(Net income after taxes+Depreciations) /
Fixed assets
Net sales / Total Assets
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
92
SET Annual Report: Financial
ratios and definitions
4. Financial Policy Ratio
Debt to Equity Ratio
Unit
Times
Interest Coverage Ratio
Times
Dividend Payout Ratio
%
Definition
Long Term Debt / Total Equity
Earnings before interest and taxes (EBIT)
/ Interest
Dividend / Net Income
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
93
Performance Comparison
Thailand and USA
Financial ratios
USA
Thailand
Net Profit Margin
2.33
10.05
Return on Equity
5.72
11.87
1.9
1.11
59.31
23.83
20.65
0.77
1. Profitability Ratio
2. Liquidity Ratio
Current Ratio
Collection Period
3. Financial Policy Ratio
Debt to Equity Ratio
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
94
Methodology and its application
• From Literature, KPIs used by CAH and Financial ratio
of SET has been reviewed and integrated.
Step 1
Step 2
• Develop a set of Financial Performance Indicators (FPIs)
• Collect performance figures of each private hospital
based on each FPI.
Step 3
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
95
FPIs
1.Profitability
• % Cost of
goods sold
• % Net Profit
2.Utilization
3.Other financial
dimensions
• % Utilization
OPD
• % Utilization
IPD
• Liquidity ratio
• Efficiency ratio
• Financial Policy
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
96
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
97
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
98
1. Hypothesis testing
Financial Performance
FPIs
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)
% 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)
2. Utilization
* Significant at 95% Confidence
**Not significant
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
99
1. Hypothesis testing
Financial Performance
FPIs
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
100
1. Hypothesis testing
Financial Performance
FPIs
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
Debt to Equity Ratio
0.63
0.41
Interest Coverage Ratio
19.39
417.03
Dividend Payout Ratio
46.61
39.99
Financial Policy
* Significant at 95% Confidence
**Not significant
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
101
2. Best Value for Benchmarking
Financial performance of each hospital
FPIs
AHC
BGH
BH
CMR
KDH
KH
MChai
…
1. Profitability
2. Utilization
3. Other financial
dimensions
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
102
Analysis
For each FPI
Average value
(Industry average)
Best
performance
value
(benchmark)
Low
performance
value
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
103
Best value for each FPI
Financial Performance
Best Value
Benchmarking
Hospital
1. Profitability
% Cost of goods sold
57
BGH
% Net profit
14.27
KH
% Utilization OPD
78.94
VIBHA
% Utilization IPD
82.78
CMR
2. Utilization
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
104
Best value for each FPI
Financial Performance
Best Value
Benchmarking
Hospital
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
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
105
Best value for each FPI
Financial Performance
Best Value
Benchmarking
Hospital
Efficiency Ratio
Return on Asset
24.8
KH
Return on Fixed Asset
32.3
BH
Asset Turnover Ratio
1.24
NTV
Debt to Equity Ratio
0.15
NTV
Interest Coverage Ratio
2760.1
KDH
Dividend Payout Ratio
86.54
VIBHA
Financial Policy
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
106
Findings
• 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.
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University
107
© 2011 Cluster of Enhancing Competitive Advantage
of Health Care Service in Thailand, Mahidol University