Healthcare Finance Definitions

by Marquis Codjia; Updated September 26, 2017
Health care finance helps patients pay for medical expenses.

Health care finance is a branch of finance that helps patients and health care beneficiaries pay for medical expenses in the short and long terms. Some health care finance concepts have a general meaning, while others relate specifically to the health care sector.

Health Benefits Ratio

Health benefits ratio equals medical expenses as a percent of premium revenues. This ratio provides insight into an insurance company's profit levels compared to medical expenses paid.

Change in Health Benefits Ratio

Change in health benefits ratio helps an analyst determine trends in medical expense payments. A negative value means margin improvement, because previous expenses are higher than current costs.

Administration to Premium

Administration to premium equals administrative expenses as a percent of medical claims paid. This ratio measures how efficient an insurance firm is in managing administrative and medical expenses.

Long-Term Debt

Long-term debt is a liability that a health care finance company must repay at the maturity date or over a specified number of periods.

Operating Income

Operating income is a profitability indicator and equals pretax income plus interest expense minus interest income.

Operating Margin

Operating margin equals operating income divided by operating revenues. This ratio provides insight into the health plan's operating performance.

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.

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