Days cash on hand (DCOH) is how many days a hospital or health system could keep paying its operating expenses using only the cash it has now, with no new money coming in. It's one of the main liquidity measures used by hospital CFOs, boards, lenders and rating agencies.
The formula
Days cash on hand = unrestricted cash and investments ÷ ((total operating expenses − depreciation and amortization) ÷ 365)
Depreciation and amortization are taken out because they aren't cash expenses. Rating agencies and loan agreements each define exactly which cash and investments count, so check the definition that applies to you. Loan covenants often set a minimum.
A worked example
A hospital has $50 million in unrestricted cash and investments. Its annual operating expenses are $215 million, including $15 million of depreciation and amortization.
- Cash operating expenses: $215M − $15M = $200M a year
- Per day: $200M ÷ 365 ≈ $548,000
- Days cash on hand: $50M ÷ $548,000 ≈ 91 days
Why it matters, and what moves it
Rating agencies and lenders read higher DCOH as resilience, so it affects borrowing costs and covenant headroom. That's also why hospitals hold large cash reserves rather than investing them in care. DCOH falls when payments slow down: denials, payer delays or a clearinghouse outage all keep earned revenue in receivables instead of in the bank.
Collecting faster raises DCOH without cutting spending. That can mean fewer denials and better revenue cycle management, or converting receivables into cash sooner through medical receivables financing. Capital Pulse turns billed claims into cash, which raises days cash on hand without adding debt.
Frequently asked questions
How do you calculate days cash on hand?
Divide unrestricted cash and investments by daily cash operating expenses. Daily cash operating expenses are total operating expenses minus depreciation and amortization, divided by 365.
What is a good days cash on hand for a hospital?
There is no single number. Rating agencies publish medians by rating level, and loan covenants set minimums, so hospitals compare themselves with peers of similar size and rating. More days means more cushion against payment delays.
What is the difference between days cash on hand and days in A/R?
Days cash on hand measures how long cash would cover expenses. Days in accounts receivable measures how long it takes to collect what the hospital has billed. Collecting faster lowers days in A/R and raises days cash on hand.
Related terms
- What Are Medical Receivables?
- What Is Medical Receivables Financing?
- What Is Healthcare RCM (Revenue Cycle Management)?
- All glossary terms