Measuring and evaluating of financial risks in health care organizations

Nowadays the real financial management of hospitals which are mainstones of the health systems has gained more importance with the effect of health reforms. Financial risk management which is one of the important functions of financial management is vital to maintain the financial viability of hospitals. That hospitals are gradually exposed to the more financial risks because of the increase in health care costs and of the shifts in payment systems but due to the result of not giving importance to the risk management activities in the sectoral and organizational level, the research subject of this study is selected. The aim of the study is to determine financial risk profiles of public and private hospitals in Turkey and put forward some theoretical and practical suggestions to hospitals. The sample of study consists of 3272 Ministry of Health Hospitals which have revolving funds and 208 private hospitals which stated the database of Turkey Central Bank between 2004 and 2008 years. In the first stage of the study, financial ratios derived from financial statements were used in analyzing financial risks of hospitals. However taking into consideration that the interrelations of financial ratios and usage of all financial ratios will make more difficult to interpret the results of analysis, the sets of financial risk indicators were constituted by means of factor analysis. In the second stage of the study, a financial risk rating model which was developed by researcher was used to determine the levels of financial risk of hospitals according to the sets of financial risk indicators. In the final stage of the study, different models for each financial risk level by latent class regression analysis was developed instead of only one regression equation consisting of all hospitals. Therefore different and similar effects of financial risk indicators on financial risk levels could be determined. Towards the results of the study, some suggestions related to financial management and financial risk management were offered to both public and private hospitals.