MHA 612 week 3 Discussion: How to Improve Operating Margins

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MHA 612 week 3 Discussion: How to Improve Operating Margins

MHA 612 week 3 Discussion: How to Improve Operating Margins

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Prior to completing this discussion, read Assignment 1 in Chapter 11.

  • What does operating margin tell you about the organization, and how would you calculate this ratio?
  • Select a local medical service organization and describe how it has specifically improved its operating margins.

Your initial post must be 300 to 350 words.

MHA 612 week 3 Discussion: How to Improve Operating Margins Guided Response: Challenge your peers to think about the difference between operating margin and total margin. Look at ways in which small changes in operations can result in huge changes in the margin. Respond to at least two of your classmates’ posts.

Your initial discussion thread is due on Day 3 (Thursday) and you have until Day 7 (Monday) to respond to your classmates. Your grade will reflect both the quality of your initial post and the depth of your responses. Refer to the Discussion Forum Grading Rubric under the Settings icon above for guidance on how your discussion will be evaluated.

Required Resources

Required Text

  1. Cleverley, W. O., Song, P. H., & Cleverley, J. O. (2011).. Sudbury, MA: Jones & Bartlett Learning. Retrieved from https://www.vitalsource.com
    • Chapter 8: General Principles of Accounting
      • This chapter focuses on core principles of accounting and the differences between financial and managerial accounting.  Cash basis, accrual basis, and three categories of net assets are discussed.
    • Chapter 9: Financial Statements
      • This chapter discusses the main four types of financial statements and the importance to know the scope of business being reviewed when using financial statements.
    • Chapter 10: Accounting for Inflation
      • This chapter discusses the major types of asset valuation, alternatives units of measurement in financial reporting and the major financial reporting alternatives.  The uses of financial information and the difference between monetary and nonmonetary accounts are also examined.
    • Chapter 11: Analyzing Financial Position
      • This chapter focuses on balanced scorecard and dashboard reporting. The primary financial objective and the critical drivers of financial performance in healthcare firms are analyzed.
    • Chapter 12: Financial Analysis of Alternative Healthcare Firms
      • This chapter discusses the major nonhospital and non-physician sections of the healthcare industry and their financial analysis.

Navigate Simulation

  1. Jones & Bartlett Learning. [Access Code]. Sudbury, MA: Jones & Bartlett Learning.

 

Recommended Resources

Articles

  1. Olden, P. (2008).  Hospitals, community health, and balanced scorecards.  Academy of Health Care Management Journal, 4(1), 39.  Retrieved from the ProQuest database.
    • This article discusses the balanced scorecard tool.
    • Abstract:  Community health improvement has been part of many hospitals’ mission statements and strategic plans, although it has been less common in their actual work. Recently, hospital industry leaders and stakeholders have called on hospitals to do much more to improve health status in their local communities. For hospitals to satisfy external demands for improved community health, they must re-direct some of their goals, resources, activities, and work processes.
  2. Panayiotis, C. & Roupas, T. (2009).  Health care finance, the performance of public hospitals and financial statement analysis.  European Research Studies, 12(4), 199.  Retrieved from the ProQuest database.
    • Abstract: Regional form of Organization of the health care that are called today DyPE, have as a main goal to promote more rational resource allocation through decentralization in the decision making process. The concern for more effective and efficient use of resources devoted into the health care sector renders hospitals a critical vehicle of the quest for superior economic performance, especially if we take into our consideration their mounting over time deficits. Economic performance is primarily traced through a set of specific financial ratios, which embrace important elements that constitute the substance of the financial well-being of hospitals as economic units. An array of financial ratios is critically reviewed and a combination of them is proposed as a means of effective financial management.

Textbook PowerPoint Presentations

MHA 612 week 3 Discussion: How to Improve Operating Margins

Every organization or company has expenses that are required to be paid amidst operating the organization and receiving a profit. The operating margin is the figure that reveals how much profit a company makes on sales after all of the expenses are paid (Kenton, 2018). Expenses include wages for employees, materials if applicable, building expenses if applicable, production, and an array of other expenses (Kenton, 2018). Once these expenses have been paid, what’s left over is the profit. However, the profit is not the operating margin. Once applicable taxes and interest has been removed from the profit, the residual is the operating margin (Kenton, 2018). The operating margin is calculated by dividing the total income by net sales, then multiply by 100 (Adkins, 2018). The end result will be a percentage, this is the operating margin. Essentially, the operating margin is a percentage of net sales. The operating margin is what shows the true profit of an organization.

Guthrie Health Care is a Pennsylvania based health care system that offers its patient a wide variety of health care services. Services ranging from primary care, specialty care, behavioral health, surgical, impatient care, home health care, hospice care, palliative care, along with many other services. The ultimate goal of Guthrie Health Care is to provide a wide variety of services to its patient population while decreasing the cost of health care delivery to its patients.

Guthrie’s operating margin in FY2010 was $30.7m (5.7% operating margin) and $15.5m (3% operating margin) the year below. Clearly, the company is growing exponentially and the financial records prove it. According to Fitch (2011), the profitability for Guthrie Health Care has been very consistent. After it’s founding in 2001, the system has continued to grow. Guthrie invested heavily in information technology which contributed to their secure financial outlook (Fitch, 2011). The health system is also known for being a low-cost entity which also has contributed to the increase in their operating margin.

Reference:

Adkins, W. (2018). How to Calculate an Operating Margin for a Business. Retrieved from

Fitch rates guthrie health’s (PA) series 2011 bonds ‘A+’; outlook to positive. (2011). Health & Beauty Close – Up, Retrieved from

Kenton, W. (2018). Operating Margin. Retrieved from

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