Which metric best reflects a hospital's ability to meet short-term obligations with cash?

• A. AR aging analysis
• B. CMI
• C. Payer mix
• D. Days cash on hand (DCOH)

Answer: (D)

Liquidity questions focus on how long a hospital can cover its near-term bills with cash on hand. Days cash on hand directly captures that by converting cash and near-cash assets into a practical runway for operating expenses. It answers, in days, how long the organization could continue to operate using only cash if new inflows paused. The typical formula is unrestricted cash and investments plus marketable securities divided by average daily operating expenses (annual operating expenses divided by 365). A larger number means more cushion against cash shortfalls, while a smaller number signals tighter liquidity.

The other metrics don’t measure this immediate cash cushion. Accounts receivable aging looks at the timing and collectibility of outstanding bills, which affects cash inflow timing but not the current cash reserves. Case mix index reflects patient acuity and the resource intensity of care, which influences reimbursement levels and profitability, not how much cash is on hand. Payer mix indicates where revenue comes from, not the hospital’s current ability to cover short-term obligations with available cash.