HMO Ratio Analysis

The market structure of the U.S health insurance industry not only reflects the nature of health care, but also its origins in 1930’s. According to Investopedia, “The HMO Act of 1973 helped to cement the HMO into the U.S. health system by providing grants to start or expand HMO’s. This plan helped, “Remove many restrictions imposed by the individual states, and required employers with more than 25 employees to offer a federally-certified HMO to employees”(Investopedia). Policies focused only on health insurance sectors reform may yell some results, but are unlikely to solve large cost growth and limited access problems. The health maintenance organizations were successful in bringing medical costs down and have made health insurance more …show more content…
The basic ratio includes several different categories to calculate an organization, gross profit and loss. In this paper you will learn about 2 different ratios analysis that are substantial in the implementation of HMO’s daily operation. Ratio analysis is an important technique, which is widely used for interpreting financial statements. In today’s health care environment, liquidity and activities are significant in the performance of HMO’s. Liquidity ratio is a measure of the company assets that pay into their short-term commitment. This measurement involves planning and controlling the current assets and …show more content…
In order to correctly identify a problem that aligns the company they must find ways to evaluate the problem and reduce and cut overhead expense. Financial ratios are important to an organization because, it determines the credit worthiness. These ratios break down the payment made on debt and short-term obligation of the company. Basically the more efficient liquidity management is the organizations profitability will have a significant effective. The cash profit must be large than the ratio debt or the HMO’s will have a problem due to the existence of cash lost. The principal of HMO’s