Strengths:

• Accreditation and Quality:Rhode Island Health Plans is the first MCO in Rhode Island to receive accreditation from the National Committee for Quality Assurance (NCQA). Each of its component plans has been rated as excellent, demonstrating a commitment to high-quality healthcare.
• Revenue Growth:The organization has shown revenue growth from 2017 to 2018, with premium revenue increasing from $313.7 million to $357.6 million. This suggests an ability to attract and retain members.
• Profitability:The net income of Rhode Island Health Plans improved from $11.6 million in 2017 to $20.7 million in 2018, indicating sound financial performance.
• Asset Growth:Total assets increased from $113.6 million in 2017 to $127.2 million in 2018, demonstrating financial stability and potential for investment.
• Market Presence:Rhode Island Health Plans serves a large population in 17 counties, including major cities, which indicates a broad market presence.

Weaknesses:

• Medical Loss Ratio:The medical loss ratio increased from 81.6% in 2017 to 83.8% in 2018, indicating that a higher proportion of premium revenue is being spent on medical expenses. This might be a concern, as it suggests increased healthcare costs relative to revenue.
• Administrative Cost Ratio:The administrative cost ratio increased from 13.2% in 2017 to 13.6% in 2018. This indicates rising administrative expenses, which could impact profitability and operational efficiency.
• Inpatient Expense:Although inpatient expenses decreased from 32.2% to 30.3% in 2018, they are relatively high, potentially indicating inefficiencies in inpatient care.
• Physician Expense:The physician expense ratio decreased from 54.1% to 56.9%, indicating a higher proportion of expenses dedicated to physician services. This could signify increased healthcare costs.
• Other Medical Expense:Rhode Island Health Plans has relatively high other medical expenses, with a significant increase from 0.1% in 2017 to 0.1% in 2018. This might indicate inefficiencies in managing non-physician medical costs.

Medicare Revenue:Data for Medicare revenue is not available for Rhode Island Health Plans in 2018. This gap could affect the organization's financial stability and diversification.

\fExhibit 1.]: contains selected nancial and operating ratios for Rhode Island's primary competitors as well as the means and medians for all Rhode Island HMOs. Exhibit [.4 contains selected national data. in which all comparative data are for HMO plans only. Exhibit 1.5 contains selected ratio denitions. You have just started an administrative residency at Rhode Island Health Plans. On your rst day at the organization. IChief Executive Officer [C EC!) Charles Redman, stated that the best way to get to know the nancial and operating condition of any business is to do a brief nancial statement and operating indicator analysis: thus. he assigned you the task. Although you agree that this is a great way to learn more about Rhode Island and its competitors' HMO plans. you wonder whether he has any hidden motives. Perhaps Rhode Island Health Plans is having nancial problems with these plans and Charles thinks that you can spot them, or perhaps he just wants to test your analytical skills. In any event. he has already scheduled a nancial and operating performance analysis presentation for the next executive committee meeting as a way for you to demonstrate your skills to Rhode Island's senior managers. In preparing for the meeting. you called Jennifer Wall, the previous administrative resident, to get some advice for your presentation to the executive committee. Jennifer just left Rhode Island for greatjob with Humana. Her advice was to do a standard nancial statement analysis. including statement ofcash tlows analysis, and ratio and operating indicator analyses. Your rst impression ofthis task should be a "piece of cake." as you had performed a similar analysis for a hospital during your intern ship. However. as you begin the task. it became apparent that the ratios used and the interpretations differ across industries; that is. the ratios that are critical to identifying the financial condition ofa hospital are not necessarily the same as the ratios that are critical to a managed care plan. In addition. many of the ratios that are relevant to both hospitals and managed care plans have values that differ substantially. Consider the medical loss ratio [dened as medical expenses divided by premium revenue). which measures the proportion ofpremium revenue that is spent on providing member healthcare services. Clearly, this ratio is not applicable to providers such as hospitals. Many policymakers propose that large group insurance plans should spend at least 85 percent of premiums on medical services. If they fail to do so, then insurers should pay a rebate to customers. To help the executive committee interpret your presentation. you plan to point out key differences between your analysis for a health plan and analysis for a health plan and analysis for a hospital as they emerge. In addition. you know that identifying key areas of concern and recommending courses of action are more important than merely going over numbers. Rhoda island Health Plan: Page 2 of'