The income statement, or statement of revenue and expenses, show the dollar value of all transactions the institution has engaged in over a definable period, usually one year. Typically, the statements will show the current year and at least the previous year for comparison. The result of these statements is to show net income/margin, or bottom line, which is a look at how profitable the institution is.
REVENUES
Gross patient revenues is revenue earned from;
- Inpatient services
- Outpatient services
- Ancillary services (eg: lab, radiology, therapy, pharmacy, etc.)
Subtracted from gross patient revenues are contractual allowances and charity care to arrive at net patient revenues. “Other” revenue is from normal, day-to-day operation unrelated to patient care, such as cafeteria revenue.
EXPENSES
Operating expenses include;
- Salaries and wages
- Depreciation
- Administration
- Interest
- Provisions for bad debt (also known as bad debt expense)
Non-operating income includes;
- Income not related to patient care or other day-to-day activities (such as interest income earned on invested assets)
- Unrestricted income from donations (gifts)
- Gains or losses on the sale of assets
| Review a typical hospital income statement |
CAPITAL ANALYSIS IMPACT
Three financial indicators that can be ascertained from looking at an income statement are cash flow, risk, and profitability. How will a “good for business”capital project affect the income statement of an institution? Again, through capital analysis that supports your institution’s financial goals, your project will impact the income statement in four ways;
- By improving the cash flow, or patient revenue side of the statement.
- Keeping fixed costs (non-clinical salaries and depreciation), which are a risk to the expense side, to a minimum.
- Positively impacting patient volumes, which drive the revenue side.
- Enhancing bottom line profitability, or margins, making it easier for your institution to find and fund capital lending dollars to support new projects.
|
