What formula is used to calculate the operating margin of a healthcare entity?

The operating margin of a healthcare entity is calculated using the formula that subtracts operating expenses from operating revenue and then expresses this difference as a percentage of the operating revenue. This margin is a key indicator of a healthcare organization’s financial health and operational efficiency, reflecting how much profit is generated from total revenues after covering operating expenses.

When calculating the operating margin, the correct formula ensures that you are assessing the core operations' profitability. By taking the difference between operating revenue and operating expenses, and then multiplying it by 100, you can derive the operating margin as a percentage, indicating how much of each dollar in revenue is converted into profit after covering operational costs.

This metric is essential for management within healthcare entities to better understand financial performance and to make informed decisions regarding budgeting, resource allocation, and strategic planning.