Guide to Health Care KPIs
Hospitals and Other Facilities
Inpatient Admissions
Inpatient admissions represents the number of patients admitted to the hospital for a period of at least 24 hours, to ensure pre-and post-operative care.
Guide to Health Care KPIs for Hospitals and Other Facilities
This guide highlights the key performance indicators for the health care facilities industry and where investors should look to find an investment edge. While this guide is not a full health care facilities industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key health care facilities metrics that will aid market participants in identifying health care facilities trends and future performance of health care facilities – including Southwest Airlines, Air Canada, Cathay Pacific and more – by region and sub-industry.
Health Care Facilities Business Model
Hospitals generate revenue primarily from two types of services: inpatient care and outpatient care. Revenue generated from inpatient care and outpatient care is known as inpatient revenue and outpatient revenue, respectively. Together, total inpatient revenue and total outpatient revenue constitute the total hospital revenue.
Inpatient Care: Inpatient care covers any general acute care medical need that requires the patient to be admitted to the hospital for at least 24 hours. This includes:
- The diagnosis and treatment of illnesses and injuries;
- Surgical procedures that require at least 24 hours of supervised care; and
- Housing requirement during treatment.
Outpatient Care: Outpatient care covers medical treatments or procedures that do not require the patient to be admitted to the hospital for supervised care. This includes:
- Surgical and emergency room facilities and services;
- Diagnostic services and laboratory services; and
- Consultation services.
Equivalent admissions represents the combined inpatient and outpatient volume. It is computed by multiplying inpatient admissions with gross patient revenues (inpatient and outpatient revenues) and then dividing that number by inpatient revenues.
Demographics and market share play a crucial role in ensuring the long-term viability of hospitals. Hospitals that are levered to local markets with high population growth and a relatively high market share have a competitive advantage, which can help leverage volume growth across existing cost structures. Inpatient admissions, outpatient admissions, equivalent admissions, number of hospitals, patient days, occupancy rate, average licensed beds and the average length of stay are all important volume metrics in gauging the scalability of the hospital business and are readily provided by companies in the U.S.
The financial performance of a hospital can be evaluated based on a wide range of factors, such as the hospital’s overall debt leverage and liquidity, in conjunction with its operating performance and margin. Pricing metrics such as revenue per inpatient admission, revenue per equivalent admissions, revenue per patient days and revenue per hospital are also analyzed to compare the hospital’s pricing power and performance. Volume metrics, such as inpatient admissions and outpatient admissions, and capacity metrics, such as the number of beds and number of hospitals, are evaluated to understand the scale and reach of the business. In terms of profitability, operating margin and earnings before interest, taxes, depreciation, and amortization (EBITDA) margin are often analyzed, along with cost metrics like operating expense (OPEX) per hospital.
From a liquidity perspective, debt/EBITDA, interest coverage ratio and debt/capitalization are important ratios to determine the ability of a hospital to meet its financial obligations given its high leverage.
Hospitals often have to wait for a substantial amount of time to obtain financial reimbursement from insurance companies or government agencies. As a result, cash management and sufficient cash flow is essential to financial stability. Liquidity metrics like cash flow from operations (CFO), cash flow coverage ratio (CFO/total debt), cash and cash equivalent and capital expenditures (CAPEX) requirements are key metrics for investors analyzing hospitals’ liquidity needs.
Analysts use different methodologies to model hospital revenues. Here are some common approaches:
- The most common approach involves total inpatient revenue and total outpatient revenue, which together constitute the total hospital revenue. The total inpatient revenue is the product of inpatient admissions and revenue per inpatient admission, and the total outpatient revenue is the product of outpatient admissions and revenue per outpatient admission.
- Total hospital revenue is also computed by directly taking the product of equivalent admissions and revenue per equivalent admissions.
Although the previously listed methodologies are the most commonly used approaches in modeling hospital revenue, there are a few other approaches:
- Total hospital revenue is sometimes computed using the number of hospitals and the revenue per hospital.
- Total hospital revenue can also be derived using the number of beds, occupancy rate and revenue per bed.
- Another approach to compute total hospital revenue is by taking the product of equivalent admissions, the average length of stay and revenue per patient day.
Finally, regulatory factors such as government health care policy changes, drug pricing regulations and other factors, such as reimbursement methodology and the proportion of insured versus uninsured patients, also have an impact on the health care facilities industry
In the U.S., health care coverage is availed through a combination of private health insurance and public health insurance programs, such as Medicare and Medicaid. The U.S. does not have a universal health care program like Brazil, Thailand and most countries in Europe. In the U.K. for instance, the National Health Service (NHS) is a state-funded health care system, covering all U.K. citizens based on their need for medical care rather than their ability to pay for it. Hospitals in the U.K. are primarily reimbursed by the NHS.
Payer mix refers to the percentage of U.S. hospital revenue generated from private insurance companies versus government insurance programs (Medicare and Medicaid) versus self-paying patients. Payer mix is an important metric to track for U.S. hospitals because self-paying patients and private insurance companies compensate hospitals at a higher rate compared to government programs. Government programs often pay hospitals less than the actual cost of patient treatment, causing hospitals to lose revenue. Therefore, revenue breakup based on payer mix – Medicare, Medicaid, managed/private, and self-pay/uninsured – can help in understanding the reimbursement risk associated with the hospital industry.
Health Care Facilities Business Model
CLICK DIAGRAMS TO EXPAND
Key performance indicators (KPIs) are the most important business metrics for a particular industry. When understanding market expectations for health care facilities, whether at a company or industry level, here are some of the health care facilities KPIs to consider.
Visible Alpha’s Standardized Industry Metrics
To understand market expectations for the health care facilities industry, a key information source is sell-side analyst estimate and consensus forecast data. The buy side, sell side and public companies leverage this type of data to conduct peer analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.
Visible Alpha Insights includes analyst data, company data and industry data at level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.
Data as of January 2023
40
Global Tickers
401
Current Analyst Excel Models
176
Proprietary line items in our standardized operating metrics data
73
Contributing Brokers
397
Total standardized line items
221
Proprietary line items in our standardized financials data
Visible Alpha offers 14 health care facilities comp tables, comparing key financial and operating metrics, to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for HCA Healthcare competitors or revenue per admission. Every pre-built comp table is based on region, sub-industry or key operating metrics. All comp tables are fully customizable.
North America
- HCA Healthcare, Inc. (HCA)
- Tenet Healthcare Corporation (THC)
- Community Health Systems, Inc. (CYH)
- Surgery Partners, Inc. (SGRY)
- U.S. Physical Therapy Inc (USPH_US)
LATAM
- Fleury S.A. (FLRY3_BR)
- Notre Dame Intermedica Participacoes SA (GNDI3_BR)
EMEA
- Mediclinic International (MDC_UK)
- Spire Healthcare Group Plc (SPI_UK)
- Orpea (ORP_FR)
- Life Healthcare (LHC_ZA)
- Netcare (NTCI_SA)
APAC
- Ramsay Health Care Ltd (RHC_AU)
- Aier Eye Hospital Group (300015_CN)
- Apollo Hospitals Enterprise Ltd (ALPH_IN)
- IHH Healthcare Berhad (IHHH_MY)
- Ryman Healthcare (RYM_NZ)
Industry KPI Terms & Definitions
Inpatient Admissions
Inpatient admissions represents the number of patients admitted to the hospital for a period of at least 24 hours, to ensure pre-and post-operative care.
Outpatient Admissions
Outpatient admissions represents the number of patients that receive diagnostic and other medical care without getting admitted to the hospital.
Equivalent Admissions
Equivalent admissions represents the combined inpatient and outpatient volume. It is computed by multiplying inpatient admissions with gross patient revenues (inpatient and outpatient revenues) and then dividing that number by inpatient revenues.
Licensed Beds
Licensed beds represent the number of beds approved by the applicable state licensing agency for the hospital.
Average of Licensed Beds
Average licensed beds represents the average number of licensed beds, weighted based on periods owned.
Beds in Service
Beds in services represent the number of beds that are readily available for patient use.
Daily Census Average
Average daily census represents the average number of patients in hospital beds each day.
Occupancy Rate
Occupancy rate represents the percentage of a hospital’s licensed beds occupied by patients. Both average daily census and occupancy rate provide measures of the utilization of inpatient rooms.
Emergency Room Visits
Emergency room visits represent the number of patients treated in emergency rooms.
Outpatient Surgeries
Outpatient surgeries represents the number of surgeries performed on patients who were not admitted to the hospital. Pain management and endoscopy procedures are not included in outpatient surgeries.
Inpatient Surgeries
Inpatient surgeries represents the number of surgeries performed on patients who were admitted to the hospital. Pain management and endoscopy procedures are not included in inpatient surgeries.
Payer Mix
Payer mix refers to the percentage of hospital revenue generated from private insurance companies versus government insurance programs (Medicare and Medicaid) versus self-paying patients.
Medicare (Payer Mix)
Medicare is a U.S. federal-funded government program that covers the elderly (65 and above) and individuals with permanent disabilities.
Medicaid (Payer Mix)
Medicaid is a U.S. government program, funded by both the federal and state governments but administered by individual states. The program provides health care coverage to the marginalized section of the population.
Managed or Private Payer (Payer Mix)
Managed or private payer represents private insurance providers with which hospitals have predefined contracts.
National Health Care Service (NHS)
The National Health Care Service is a state-funded health care system in the U.K., covering all U.K. citizens based on their need for medical care rather than their ability to pay for it.
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Guide to Health Care Facilities KPIs for Investment Professionals
This guide highlights the key performance indicators for the health care facilities industry and where investors should look to find an investment edge, including:
- Health Care Facilities Industry Business Model & Diagram
- Key Health Care Facilities Metrics PLUS Visible Alpha’s Standardized Industry Metrics
- Available Comp Tables
- Industry KPI Terms & Definitions
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