{"id":7788,"date":"2019-04-26T06:37:43","date_gmt":"2019-04-26T11:37:43","guid":{"rendered":"https:\/\/www.billingparadise.com\/blog\/?p=7788"},"modified":"2026-06-15T05:11:20","modified_gmt":"2026-06-15T10:11:20","slug":"7-financial-kpis-every-hospital-cfo-must-track-billingparadise","status":"publish","type":"post","link":"https:\/\/www.billingparadise.com\/blog\/7-financial-kpis-every-hospital-cfo-must-track-billingparadise\/","title":{"rendered":"7 Financial KPIs every hospital CFO must track"},"content":{"rendered":"<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_empty_space][vc_custom_heading text=&#8221;7 Financial KPIs every hospital CFO must track&#8221; font_container=&#8221;tag:h2|font_size:32px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:700%20bold%20regular%3A700%3Anormal&#8221;]<div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Recent changes in the healthcare industry have made CFOs and practice managers of healthcare organizations review their practice\u2019s revenue cycle efficiency. In order to help CFOs evaluate their organization\u2019s performance, financial KPIs are used. Key Performance Indicators or KPIs help CFOs compare their healthcare organization\u2019s performance to other organizations like theirs. So instead of just trying to fix something internally, looking at fellow organizations can help remove major flaws (if any) in the system.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u2018To effectively track healthcare revenue cycle performance, provider organizations should develop <\/span><a href=\"https:\/\/www.techtarget.com\/healthtechanalytics\/news\/366591829\/Using-Business-Intelligence-KPIs-for-Revenue-Cycle-Management\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400\">key performance indicators<\/span><\/a><span style=\"font-weight: 400\"> (KPIs)\u2019, advises Sandra Wolfskill, Director of Healthcare Finance Policy and Revenue Cycle MAP at the Healthcare Financial Management Association (HFMA).<\/span><\/p>\n<p><span style=\"font-weight: 400\">KPIs are usually used to measure an organization\u2019s performance across different areas like operations, finance, etc. But financial KPIs are used to evaluate an organization\u2019s efficiency from a financial standpoint.<\/span><\/p>\n<\/div><\/div><div class=\"text-block \" ><div class=\"simple-text \"><p style=\"text-align: left\"><strong><a href=\"#one\">1. Days Cash on Hand<\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#two\">2. Operating margin<\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#three\">3. Projections<\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#four\">4. Days in Accounts Receivable <\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#five\">5. Gross Collections Ratio <\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#six\">6. Claim denial rate<\/a><\/strong><\/p>\n<p style=\"text-align: left\"><strong><a href=\"#seven\">7. Bad Debts<\/a><\/strong><\/p>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><section  id=\"one\" class=\"section no\"><div class=\"row\"><div id=\"ONE\" class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;1. Days Cash On Hand&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_empty_space][vc_single_image image=&#8221;441420&#8243; img_size=&#8221;500*250&#8243;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Days Cash on Hand is an indication of a <a href=\"https:\/\/billingparadise.com\/hospital\/\">hospital\u2019s<\/a> liquidity.<\/span><\/p>\n<p><span style=\"font-weight: 400\">How is it important in financial terms?<\/span><\/p>\n<p><span style=\"font-weight: 400\">According to Richard L. Gundling, vice president of healthcare financial management practices at the\u00a0<\/span><a href=\"https:\/\/www.healthcarefinancenews.com\/search\/content?keys=hfma\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400\">Healthcare Financial Management Association<\/span><\/a><span style=\"font-weight: 400\">, &#8220;DCOH is just one of the things lenders and others look at&#8221;.<\/span><\/p>\n<p><span style=\"font-weight: 400\">It\u2019s good to have cash on hand when something goes wrong, but having too much is also an indication of improper use of resources. \u00a0Good DCOH makes financial analysts feel positive about an organization\u2019s health for the time being but in order to have good DCOH in the future, it is important that we distribute our current resources to areas that can generate more revenue. Here\u2019s how you calculate Days Cash On Hand.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/section>[vc_empty_space]<div class=\"text-block \" style=\"color:#0a0000;\"><div class=\"simple-text \"><blockquote><p>\n<strong> (Cash and cash equivalents + Long term investments) *365 \/ Total expenses<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><section  id=\"two\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;2. Operating margin or operating profit margin percentage&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_empty_space][vc_single_image image=&#8221;441426&#8243; img_size=&#8221;500*250&#8243;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Operating margin is one of the first key metrics an investor would look at to determine the profitability of a company. Every organization finds new ways or imitates other successful organizations to achieve a good operating profit margin.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Operating margin is the amount of revenue a company makes after paying for all of its operational and overhead costs. Operating margin excludes taxes and interest paid on debts.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Currently, healthcare CEOs are looking for new ways to generate revenue as operating margins have declined across the healthcare industry. A survey by <\/span><span style=\"font-weight: 400\">Deloitte<\/span><span style=\"font-weight: 400\"> reveals that increased headcount costs, investments in clinical innovation and population health initiatives are three factors that are responsible for declining hospital costs, other than decreasing revenues and rising costs. Mergers, funding, acquisitions, shifting patients to outpatient services and new staffing models are seen as new ways to improve revenue streams.<\/span><\/p>\n<\/div><\/div><div class=\"text-block \" ><div class=\"simple-text \"><blockquote><p>\n<strong> (Total operating revenues \u2013 Total operating expenses) *100 \/ (Total operating revenues)<br \/>\n<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div><\/div><\/div><\/section>[vc_empty_space]<\/div><\/div><\/section><section  id=\"three\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;3. Projections&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_empty_space][vc_single_image image=&#8221;441427&#8243; img_size=&#8221;500*250&#8243;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Every CFO today would like to see how his business would perform over a period of time. \u00a0Projections play a crucial role in planning for both short &amp; long term.<\/span><\/p>\n<p><span style=\"font-weight: 400\">There are many forecasting models available in the market such as Moving Averages, exponential smoothing, trending models etc. <\/span><\/p>\n<p><span style=\"font-weight: 400\">The best method is by tracing historical numbers and extrapolating it with projecting business days and removing anomalies.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/section>[vc_empty_space]<\/div><\/div><\/section><section  id=\"four\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;4. Days in Accounts Receivable&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_empty_space][vc_single_image image=&#8221;441428&#8243; img_size=&#8221;500*250&#8243;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Days in Accounts Receivable is the average number of days a practice takes to get paid for services provided to its customers. Faster the returns the better an organization is doing at generating revenue.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Outstanding A\/R divided by Average daily net patient service charges gives Days in A\/R. Days in AR can range from 30 days to 120 days or even more but having a number less than 36 is the ultimate goal for all specialties.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Days in A\/R are reflective of an organization\u2019s revenue cycle efficiency. Accounts Receivable in the healthcare industry is one of the key factors affecting an organization\u2019s cash flow. It is not uncommon for practices to get help from third-party or <a href=\"https:\/\/www.billingparadise.com\/medical-billing\/\">offshore medical billing service providers<\/a> to recover their lost revenue.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/section>[vc_empty_space]<div class=\"text-block \" ><div class=\"simple-text \"><blockquote><p>\n<strong>Outstanding A\/R \/ (Average daily patient service charges)<br \/>\n<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><section  id=\"five\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;5. Gross Collections Ratio&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_single_image image=&#8221;441429&#8243; img_size=&#8221;500*250&#8243;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">Whether a hospital can collect patient services cash successfully can be determined by its gross collections ratio. If you are running a hospital, you definitely want to know whether your patient services are being paid properly by payers; the gross collection ratio helps us understand a hospital\u2019s rate of success in converting patient services into cash. \u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Total collected patient service cash divided by average monthly (3 or 6 months) patient service charges gives <\/span><b>Cash Collection as a percentage of Gross Collections Ratio<\/b><span style=\"font-weight: 400\">. The total patient service cash is the amount posted to a patient\u2019s accounts.<\/span><\/p>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><div class=\"text-block \" ><div class=\"simple-text \"><blockquote><p>\n<strong>\u00a0Gross collections ratio = Total patient service cash collected\/ Avg monthly patient service charges<br \/>\n<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><section  id=\"six\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;6. Claims denial rate&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;][vc_single_image image=&#8221;441430&#8243; img_size=&#8221;500*250&#8243;][vc_empty_space]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\"><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">If you are a provider treating patients in hundreds you really know how much money you could be losing by not getting reimbursed. Claim denial rate is purely meant to evaluate whether the payer you are working with makes reimbursements accurately, apart from adhering to contractual agreement.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Claim denial rate is the percentage of claims denied. Total number of claims denied divided by the aggregate number of claims remitted gives <\/span><b>Claim Denial rate<\/b><span style=\"font-weight: 400\">. A low denial rate means good cash flow.<\/span><\/p>\n<p><span style=\"font-weight: 400\">This KPI is used to determine the efficiency of your RCM process. While claim denials cannot be avoided a mismanagement of denied claims could mean lost revenue.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/section>[vc_empty_space]<div class=\"text-block \" ><div class=\"simple-text \"><blockquote><p>\n<strong>Total number of claims denied \/ Total number of claims remitted<br \/>\n<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div>[vc_empty_space]<\/div><\/div><\/section><section  id=\"seven\" class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_custom_heading text=&#8221;7. Bad Debts&#8221; font_container=&#8221;tag:h3|font_size:25px|text_align:left|color:%23ff6600&#8243; google_fonts=&#8221;font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal&#8221;]<section  class=\"section no\"><div class=\"row\"><div class=\"wpb_column col-md-12 have-padding\">[vc_single_image image=&#8221;441431&#8243; img_size=&#8221;500*250&#8243;]<\/div><\/div><\/section><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">As a healthcare organization\u2019s CFO you would want to set a benchmark for the percentage of bad debts you want your hospital to have. An ideal practice should be seeing this at 2% or less. <\/span><\/p>\n<p><span style=\"font-weight: 400\">Bad debt is calculated by dividing write off by total patient service charges.<\/span><\/p>\n<\/div><\/div>[vc_empty_space]<div class=\"text-block \" ><div class=\"simple-text \"><blockquote><p>\n<strong> \u00a0Bad debts = Write off amount \/ Total patient service charges<br \/>\n<\/strong>\n<\/p><\/blockquote>\n<\/div><\/div><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\">No one wants multiple accounts to be placed in the \u2018bad debt\u2019 file. The ideal solution is for all accounts receivable to be paid by the patient. However, this is less of a possibility.<\/span><\/p>\n<p><span style=\"font-weight: 400\"><strong>Note:<\/strong> Financial KPIs for healthcare CFOs is a series of blog posts that have been carefully researched, written and curated by our revenue cycle management experts. <\/span><\/p>\n<\/div><\/div><div class=\"text-block \" ><div class=\"simple-text \"><p><span style=\"font-weight: 400\"><strong>To subscribe to the series click here<\/strong> + <em><a href=\"https:\/\/www.billingparadise.com\/resources\/templates\/urgent-care-clinics.html\"><strong>Get a free eBook on RCM strategies and best practices. 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text=\"7 Financial KPIs every hospital CFO must track\" font_container=\"tag:h2|font_size:32px|text_align:left|color:%23ff6600\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:700%20bold%20regular%3A700%3Anormal\"]Recent changes in the healthcare industry have made CFOs and practice managers of healthcare organizations review their practice\u2019s revenue cycle efficiency. In order to help CFOs evaluate their organization\u2019s performance, financial KPIs are used. Key Performance Indicators or KPIs help CFOs compare their healthcare organization\u2019s [...]","protected":false},"author":2,"featured_media":445224,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[7],"tags":[],"class_list":["post-7788","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cfos-corner"],"modified_by":"Erika Regulsky","_links":{"self":[{"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/posts\/7788","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/comments?post=7788"}],"version-history":[{"count":21,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/posts\/7788\/revisions"}],"predecessor-version":[{"id":451362,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/posts\/7788\/revisions\/451362"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/media\/445224"}],"wp:attachment":[{"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/media?parent=7788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/categories?post=7788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.billingparadise.com\/blog\/wp-json\/wp\/v2\/tags?post=7788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}