Distress detectors measures for predicting financial trouble in hospitals: early-warning systems that anticipate financial distress can provide management with powerful tools to help identify and rectify problems before they reach a crisis

Healthcare Financial Management, August, 2005 by Corbett A. Price, Andrew E. Cameron, Devin L. Price

AT A GLANCE

Seven measures are indispensable to healthcare financial executives for assessing their organizations' financial well-being. Two are accrual based:

* Cleverley's Financial Strength Index

* Altman's modified Z score

The rest are cash-flow based:

* Operating cash flow ratio

* Funds flow coverage ratio

* Cash interest coverage ratio

* Cash flow to total debt ratio

* Total free cash flow ratio

SOME MORE MEASURES

Key Hospital Financial Statistics and Ratio Medians 2004 is an HFMA resource you can use to compare your organization's performance on key financial measures with various benchmarks. Go to www.hfma.org/resource, click on "Business of Healthcare" from among the menu options on the right, and scroll to the resource under the heading "Financial Performance."

Corbett A. Price is chairman, Kurron Shares of America, Inc., New York.

Andrew E. Cameron, PhD, is a principal, Kurron Shares of America, Inc., Dublin, Ohio, and a member of HFMA's Central Ohio Chapter. Questions or comments about this article may be sent to him at acameron@kurron.com.

Devin L. Price is a senior associate, Kurron Shares of America, Inc., New York.