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The Role of Financial Reserves

The Role of Financial Reserves in a Hospice

Reserves play an important role in a Hospice. They are a symbol of strength and capability. They decrease stress and anxiety. They provide a physiological as well as a very real material advantage. Hospice leaders need to have a clear idea of the value of having financial reserves. They are part of the Vision of a World Class organization.

How much does a Hospice need?These are important questions. A Hospice needs enough money to fund its Vision. This may sound like an easy, pat answer, but it is the truth. Some Hospices need $100,000,000 in the bank. Some need $10,000,000. Many need less. A Hospice that has cash in the bank can rapidly move on projects such as inpatient units, new programs, drive competition into the ground, etc. Not having cash reserves may eventually mean the end for many Hospices.

Reasons to Be Profitable and Build Reserves

This section is repeated in many of the MVI materials because it is so important. The reason a Hospice needs to be profitable and thus build reserves, is simply the fact that an organization cannot survive in the long-term without reserves. An event or combination of events WILL occur in the future of every organization that will test its capabilities. No Hospice is immune to these challenges. Money makes things easier.

We also need to have top-of-mind awareness of the reasons why we need reserves so that we respond to daily decisions with balance. This is part of the culture shift. Every staff member should be aware of WHY being profitable and building reserves is critical. Here is our stock list of reasons:

It is just a "nice feeling" to be able to afford to care for high cost and indigent patients or to build an Inpatient Unit and say, "No problemo!" It just feels GOOD!


ADC Average Length of Stay Benefits Percent Caseload Expectations Computed Caseloads Crisis Care Percent Served Days Cash on Hand Days in AP Days in AR Debt to Equity Development to Return Ratio Development Signature Programs Direct Labor % of All Labor Direct Labor NPR Direct Labor PD Direct Patient Related Expenses NPR Direct Patient Related Expenses PD Facility Mix Percentage Facility Related Facility Team Patient Days Percent Indirect Labor Marketing Incentive Median Length of Stay Mileage Rate Net Operational Income Net Revenue PD Operational Costs Organizational Net Income % of Hospice Homecare Net Revenue Revenue to Payroll Dollar Segment Indirect Percent Net Revenue Segment Net Income The Role of Financial Reserves Total Indirect Volunteer Level of Activity What is Net Patient Revenue What is The Model