Capacity Utilization of Council Designated Hospitals Before and After Conversion: The Use of Ratios Analysis

Abstract

It is argued that financial and non-financial ratios share very important information as far as hospital performance is concerned. Non-financial ratios carry vital information such as hospitals’ capacity utilization or capacity information (may include number of admissions, number of full time employees, number of beds in services, etc.) this study employs hospitals nonfinancial ratios to analyze capacity utilization of eight (8) Council Designated Hospitals (CDHs) before and after conversion. Findings revealed that before conversion hospitals were efficiently utilizing their capacity, conversion brought inefficiency in terms of increase in average length of stay (ALOS) and full time equivalent (FTEs), it is possible that increase in ALOS was the result of inefficient FTEs. It is obvious that if there was an increase in ALOS and FTEs inefficiency is high, then it could possibly result into the occupancy rate which does not reflect the hospitals efficiency. However, hospitals’ bed turnover was high over the study period while FTEs productivity was low particularly after conversion. In the totality of analysis of capacity utilization, the findings contend that after conversion number of inputs particularly FTEs were higher in relation to outputs. The study recommends that hospitals administrators should control and make efficient allocation of the resources so as to reduce excessive capacity in Council Designated Hospitals (CDHs).