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Key Differences between Financial Statement Analysis and Operating Indicator Analysis (Gapenski & Reiter, 2016)
Healthcare managers utilize the financial statement analysis to be able to evaluate the financial health of the organization. While the operating indicators analysis is used to identify and guide financial strategies into the future. (Gapenski & Reiter, 2016)
Many organizations find it a challenge to utilize the financial statement analysis because the results are in and are history. Tough to change what has already happened. Whereas, the operating indicator analysis gives a manager a chance to change what is happening in the future. As a leader, we are always needing to look forward, paying respect to the past, but not living there; moving forward.
Gapenski, L.C., & Reiter, K.L. (2016). Healthcare Finance: An Introduction to Accounting & Financial Management (6th ed.). Chicago, IL: Health Administration Press.
Financial Statement analysis is similar to a time line that shows data on how finances are spent in the past and future. This helps managers make decisions for an organization. The financial statement does evaluate the past and future data; however, it does not give insight into the operating data which include things such as number of patients in the organization, length of stay and productivity measures. This type of evaluation is called an operating indicator analysis. In other words, financial statement analysis focuses more on the business perspective of an organization while operational indicators focus more on the patient care and risks involved in healthcare. (Gapenski & Reiter, 2016).
The financial statement analysis includes generally four types of statements, they include income statement, balance sheet, cash flows, and changes in stockholder’s equity. There are also a series of techniques that can be used in an analysis, such as vertical, horizontal, trend, and ratio analysis (Woodruff, 2018). This can help give a good idea of where finances are going in an organization.
However, an operational indicator analysis focuses more on the hours and time spent on treating patients. Also, for healthcare managers an operational analysis can help show how the profits in an organization are affected by patient care and discharge. This is why both analysis need to be looked at. In healthcare, managers can use the operational analysis to help find ways to improve efficiency and quality of care while still making a profit. Investors are more interested in the business side of the analysis and this can help them see where their money is going. Managers need to have a thorough understanding of both to see the financial health of an organization.
Gapenski, L.C., Rieter, K. L. (2016). Healthcare Finance An Introduction to Accounting &
Financial Management. Health Administration Press. Sixth Edition. Chicago, Illinois.
Woodruff, Jim. (2019). Financial Statement Analysis. Chron. Retrieved from
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