Net Patient Revenue Research Articles

When Agency Fails: An Analysis of the Association Between Hospital Agency Staffing and Quality Outcomes.

Staffing is critical to hospital quality, but recent years have seen hospitals grappling with severe shortages, forcing them to rely on contract or agency staff for urgent patient care needs. This shift in staffing mix has raised questions about its impact on quality. Consequently, this study investigated whether the increased use of agency staff has affected healthcare quality in hospitals. Given the limited recent research on this topic, practitioners remain uncertain about the effectiveness of their staffing strategies and their potential impact on quality. Drawing from agency theory, data were obtained from Definitive Healthcare which consolidates information from numerous public access databases pertaining to hospitals such as the American Hospital Association Annual Survey (hospital profile) and the Hospital Value-Based Purchasing Program (quality data). We conducted a cross-sectional study using a multivariable linear regression model (2021-2022) with appropriate organizational and market- level control variables. Quality was measured across eight variables while the independent variable of interest was agency labor cost ratio operationalized as the percentage of net patient revenue consumed by agency labor expense. Our results suggested that the employment of agency staff was significantly and negatively associated with six of eight quality measures tested, including the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) star rating, Hospital Compare rating, the hospital Total Performance Score (TPS), and three of the four sub-domains that comprise the TPS: clinical domain score, person and community engagement domain score, and the efficiency and cost reduction score. Our results indicated that the increased use of agency labor may have a significant negative influence on quality outcomes at the hospital level. Our findings support the premise that interventions that promote full-time staffing may be more supportive of the quality of care delivered as well as patients' perceptions of care.

Agency Staffing and Hospital Financial Performance: Insights and Implications.

Staffing is critical to hospital performance. However, in recent years, hospitals have struggled with severe staffing shortages, forcing them to rely on expensive agency staff to meet urgent patient care needs. This substitution of agency staff for permanent employees has raised concerns over its potential impact on financial stability. This study investigated the association of agency labor with hospital financial performance. Utilizing tenets from agency theory and transaction cost theory, data for the calendar year 2022 for active short-term acute care hospitals (n=2771) in the United States were analyzed using multivariable linear regression analysis. Hospital financial performance was assessed using three variables: net patient revenue, operating revenue per bed, and operating expense per bed. The independent variable was agency labor cost, representing the total expenditure on agency labor. Additionally, organizational and market-level control variables that may independently affect hospital financial performance were included. Our regression findings indicated that agency labor cost was significantly associated with all three dependent variables: net patient revenue (β = 0.224, p < 0.001), operating revenue per bed (β = 0.042, p < 0.001), and operating expense per bed (β = 0.032, p < 0.001). The results indicated that increased agency labor was associated with higher revenues, but it also corresponded with increased expenses. Therefore, hospitals should strategically use agency staffing to meet immediate operational needs while remaining cognizant of its financial implications. The judicious use of agency labor can help hospitals balance the benefits of increased revenue against higher costs, while ensuring that they still meet immediate patient needs.

Characteristics of Hospitals by Graduate Medical Education Expense Category: Implications for Rural Residency Program Expansion.

To describe how the characteristics of the hospitals and communities they serve vary across the 4 hospital graduate medical education (GME) expense categories (according to Section 131 of the Consolidated Appropriations Act of 2021) and identify the rurally located never claimer hospitals that are most similar to teaching hospitals, signaling that they might be good candidates for new rural GME programs. Hospital categories and characteristics were gathered from the March 2022 Medicare Cost Reports; 2022 County Health Rankings & Roadmaps data were used for community characteristics. Each acute hospital was classified into 1 of the following 4 mutually exclusive hospital categories: category A, category B, established teaching hospital (ETH), and never claimer. Multinomial logistic regressions were conducted to estimate the adjusted associations of hospital characteristics with hospital categories and to identify the never claimer hospitals in rural locations that have characteristics similar to teaching hospitals (category A, category B, and ETHs). Out of 3,590 hospitals, 2,075 (57.8%) were never claimer hospitals. After adjusting for multiple characteristics, rural hospitals had a similar probability of being in each hospital category to that of urban hospitals. Never claimer hospitals served an older population and were located in communities with more uninsured adults and children and less availability of primary care physicians, dentists, and mental health professionals. This study demonstrated that most hospitals in every category, but especially teaching hospitals (i.e., category A hospitals, category B hospitals, and ETHs), were concentrated in urban areas. Larger hospitals (measured by net patient revenue) were more likely to report GME expenses (i.e., be a category A hospital, a category B hospital, or an ETH). The study suggests that there are roughly 145 rural never claimer hospitals that might be strong candidates for initiating new residency programs.

An Exploratory Analysis of the Association between Hospital Quality Measures and Financial Performance.

Hospitals are perpetually challenged by concurrently improving the quality of healthcare and maintaining financial solvency. Both issues are among the top concerns for hospital executives across the United States, yet some have questioned if the efforts to enhance quality are financially sustainable. Thus, the aim of this study is to examine if efforts to improve quality in the hospital setting have a corresponding association with hospital profitability. Recent and directly relevant research on this topic is very limited, leaving practitioners uncertain about the wisdom of their investments in interventions which enhance quality and patient safety. We assessed if eight different quality measures were associated with our targeted measure of hospital profitability: the net patient revenue per adjusted discharge. Using multivariate regression, we found that improving quality was significantly associated with our targeted measure of hospital profitability: the net patient revenue per adjusted discharge. Significant findings were reported for seven of eight quality measures tested, including the HCAHPS Summary Star Rating (p < 0.001), Hospital Compare Overall Rating (p < 0.001), All-Cause Hospital-Wide Readmission Rate (p < 0.01), Total Performance Score (p < 0.001), Safety Domain Score (p < 0.01), Person and Community Engagement Domain Score (p < 0.001), and the Efficiency and Cost Reduction Score (p < 0.001). Failing to address quality and patient safety issues is costly for US hospitals. We believe our findings support the premise that increased attention to the quality of care delivered as well as patients' perceptions of care may allow hospitals to accentuate profitability and advance a hospital's financial position.

The Association Between Facility Affiliations and Revenue Generation in Skilled Nursing Facilities - An Exploratory Study.

Although hospitals have been the traditional setting for interventional and rehabilitative care, skilled nursing facilities (SNFs) can offer a high-quality and less costly alternative than hospitals. Unfortunately, the financial health of SNFs is often a matter of concern. To partially address these issues, SNF leaders have increased engagement in a number of affiliations to assist in improving quality and reducing operational costs, including Accountable Care Organizations (ACOs), Health Information Exchanges (HIEs), and participation in Bundled Payment for Care Improvement (BPCI) programs. What is not well understood is what impact these affiliations have on the financial viability of the host organizations. Given these factors, this study aims to identify what association, if any, exists between SNF affiliations and revenue generation. Data from calendar year 2022 for n=13,447 SNFs in the US were assessed using multivariate regression analysis. We evaluated two separate dependent measures of revenue generation capacity: net patient revenue per bed and net patient revenue per discharge and considered three unique facility affiliations including (1) ACOs, (2) HIEs, and (3) BPCI participants. Six multivariable linear regressions revealed that ACO affiliation is negatively associated with revenue generation on both dependent measures, while HIE affiliation and BPCI participation reflected mixed results. A better understanding of the financial impact of SNFs' affiliations may prove insightful. By carefully considering the value of each affiliation, and how each is applicable to any given market, policymakers, funding agencies, and facility leaders may be able to better position SNFs for more sustainable financial performance in a challenging economic environment.

The impact of Medicare shared savings program participation on hospital financial performance: An event-study analysis.

To evaluate the impact of hospitals' participation in the Medicare Shared Savings Program (MSSP) on their financial performance. Centers for Medicare & Medicaid Services Hospital Cost Reports and MSSP Accountable Care Organizations (ACO) Provider-Level Research Identifiable File from 2011 to 2018. We used an event-study design to estimate the temporal effects of MSSP participation on hospital financial outcomes and compared within-hospital changes over time between MSSP and non-MSSP hospitals while controlling for hospital and year fixed effects and organizational and service-area characteristics. The following financial outcomes were evaluated: outpatient revenue, inpatient revenue, net patient revenue, Medicare revenue, operating margin, inpatient revenue share, Medicare revenue share, and allowance and discount rate. Secondary data linked at the hospital level. Controlling for trends in non-MSSP hospitals, MSSP participation was associated with differential increases in net patient revenue by $3.28 million (p < 0.001), $3.20 million (p < 0.01), and $4.20 million (p < 0.01) in the second, third, and fourth year and beyond after joining MSSP, respectively. Medicare revenue differentially increased by $1.50 million (p < 0.05), $2.24 million (p < 0.05), and $4.47 million (p < 0.05) in the first, second, and fourth year and beyond. Inpatient revenue share differentially increased by 0.29% (p < 0.05) in the second year and 0.44% (p < 0.05) in the fourth year and beyond. Medicare revenue share differentially increased by 0.17% (p < 0.01), 0.25% (p < 0.01), 0.32% (p < 0.01), and 0.41% (p < 0.01) in consecutive years following MSSP participation. MSSP participation was associated with 0.33% (p < 0.05) and 0.39% (p < 0.05) differential reduction in allowance and discount rate in the second and third years. MSSP participation was associated with differential increases in net patient revenue, Medicare revenue, inpatient revenue share, and Medicare revenue share, and a differential reduction in allowance and discount rate.

Equity And The Uneven Distribution Of Federal COVID-19 Relief Funds To US Hospitals.

People of color, immigrants, and those relying on the safety net have experienced a disproportionate share of the death and disease resulting from COVID-19 in the US. At the same time, Congress delegated great power to the Trump administration to distribute $178billion in funding to health care providers. We studied the relationship between the relief received by 2,709 hospitals and community- and hospital-level characteristics. Funding through early February 2021 averaged $25.7million per hospital. Our findings offer a mixed picture. Some correlates of real-world need, including serving a community with a very high share of Black residents or having a very high ratio of Medicaid revenue to beds, were associated with meaningfully increased funding. Other correlates of need-including serving a very high share of Hispanic residents or a Medically Underserved Area-were associated with decreased funding or no difference in funding. Our findings emphasize that funding formulas reflect consequential political judgments. In future allocations, the relationship between need and aid should be strengthened by de-emphasizing historical net patient revenue in favor of a broader set of community and hospital characteristics.

FQHC Designation and Safety Net Patient Revenue Associated with Primary Care Practice Capabilities for Access and Quality.

Concerns exist about the ability of safety net health care organizations to participate in US health care reform. Primary care practices are key to several efforts, but little is known about how capabilities of primary care practices serving a high share of disadvantaged patients compare to other practices. To assess capabilities around access to and quality of care among primary care practices serving a high share of Medicaid and uninsured patients compared to practices serving a low share of these patients. We analyzed data from the National Survey of Healthcare Organizations and Systems (response rate 46.8%), conducted 2017-2018. A total of 2190 medical practices with at least three adult primary care physicians. Our key exposures are payer mix and federally qualified health center (FQHC) designation. We classified practices as safety net if they reported a combined total of at least 25% of annual revenue from uninsured or Medicaid patients; we then further classified safety net practices into those that identified as an FQHC and those that did not. FQHCs were more likely than other safety net practices and non-safety net practices to offer early or late appointments (79%, 55%, 62%; p=0.001) and weekend appointments (56%, 39%, 42%; p=0.03). FQHCs more often provided medication-assisted treatment for opioid use disorders (43%, 27%, 25%; p=0.004) and behavioral health services (82%, 50%, 36%; p<0.001). FQHCs were more likely to screen patients for social and financial needs. However, FQHCs and other safety net providers had more limited electronic health record (EHR) capabilities (61%, 71%, 80%; p<0.001). FQHCs were more likely than other types of primary care practices (both safety net practices and other practices) to possess capabilities related to access and quality. However, safety net practices were less likely than non-safety net practices to possess health information technology capabilities.

Does Eco-Certification Correlate with Improved Financial Performance? Evidence From a Longitudinal Study in the US Hospital Industry.

Health care-based negative production externalities, such as greenhouse gas emissions, underscore the need for hospitals to implement sustainable practices. Eco-certification has been adopted by a number of providers in an attempt, for instance, to curb energy consumption. While these strategies have been evaluated with respect to cost savings, their implications pertaining to hospitals' financial viability remain unknown. We specify a fixed-effects model to estimate the correlation between Energy Star certification and 3 different hospitals' financial performance measures (net patient revenue, operating expenses, and operating margin) in the United States between 2000 and 2016. The Energy Star participation indicators' parameters imply that this type of eco-certification is associated with lower net patient revenue and lower operating expenses. However, the estimated negative relationship between eco-certification and operating margin suggests that the savings in operating expenses are not enough for a hospital to achieve higher margins. These findings may indicate that undertaking sustainable practices is partially related to intangible benefits such as community reputation and highlight the importance of government policies to financially support hospitals' investments in green practices.

Does IT Improve Revenue Management in Hospitals?

In this study, we examine the question of how the adoption of IT systems influences revenue management in hospitals. We posit that IT plays a vital role in enhancing revenue by increasing net patient revenue and decreasing the uncompensated care ratio. Using unique datasets from various proprietary resources, we test the relationships between IT (clinical and business) investment and revenue management performance using dynamic panel data models with the generalized method of moments (GMM). Empirical results generally support our hypotheses. We found that both clinical and business IT investment have short-term and long-term effects on boosting net patient revenue and that clinical IT investment has a short-term contemporaneous effect on reducing the uncompensated care ratio. Moderation analyses suggest that: (1) larger hospitals tend to utilize business IT systems better in facilitating revenue management through both channels over the long run, but not necessarily using clinical IT; and (2) for-profit hospitals outperform their nonprofit counterparts when it comes to managing revenues through clinical IT; however, no interaction effect with business IT was found. This paper contributes to the literatures on the business value of IT investment and healthcare IT in the fields of information systems, revenue management, healthcare administration. We conclude this paper by discussing theoretical and managerial implications.

For Rural Hospitals That Merged, Inpatient Charges Decreased and Outpatient Charges Increased: A Pre-/Post-Comparison of Rural Hospitals That Merged and Rural Hospitals That Did Not Merge Between 2005 and 2015.

To determine whether inpatient and outpatient charges changed at rural hospitals after a merger. Hospital mergers were derived from proprietary Irving Levin Associates data through manual review and validation. Hospital-level characteristics were derived from HCRIS, CMS Impact File Hospital Inpatient Prospective Payment System, Hospital MSA file, AHRF, and US Census data. A difference-in-differences approach was used to determine whether inpatient and outpatient charges changed at rural hospitals after a merger. The comparison group, rural hospitals that did not merge at any point during the sample period, was weighted using inverse probability of treatment weights. Key outcome measures were total inpatient and total outpatient charges (logged). Hospitals that merged billed 17.73% more inpatient charges and 12.66% more outpatient charges at baseline compared to hospitals that did not merge. Our results indicate that merging was associated with a 3.04% decrease in inpatient charges (P<.001) and a 1.07% increase in outpatient charges (P=.082). Merging was also associated with a 4.38% decrease in total revenue, a 3.58% decrease in net patient revenue, and no change in total inpatient discharges or average daily census. Merging was strongly associated with a decrease in inpatient charges and somewhat associated with an increase in outpatient charges for rural hospitals. Future work could build upon this work to determine whether acquirers reduce or eliminate certain services at rural hospitals after a merger, and ultimately how changes in service delivery could impact patients in those rural communities.

Does Patient Safety Pay? Evaluating the Association Between Surgical Care Improvement Project Performance and Hospital Profitability.

Financial issues are top concerns for hospital executives. Evolving reimbursement structures focused on value provide an incentive to fully understand how patient safety performance and financial outcomes are connected. To that end, this study examines the relationships between Surgical Care Improvement Project (SCIP) measurements and hospital financial performance.Using multinomial logistic regression, we determined the association between hospital patient safety performances via analysis of eight prophylaxis data elements drawn from the archived Hospital Compare data. The measures are SCIP-Inf-1 (prophylactic antibiotic prophylaxis received within 1 hr prior to surgical incision), SCIP-Inf-2 (prophylactic antibiotic selection for surgical patients), SCIP-Inf-3 (prophylactic antibiotics discontinued within 24 hr after surgery end time), SCIP-Inf-4 (cardiac surgery patients with controlled 6 A.M. postoperative serum glucose management), SCIP-Inf-9 (urinary catheter removal postsurgery), SCIP-Inf-Card-2 (beta-blocker during the perioperative period), and SCIP-Inf-VTE-2 (venous thromboembolism prophylaxis). Data from the American Hospital Association provided two dimensions of organizational profitability: operating margin and net patient revenue. Our results indicate that improved hospital safety performance is associated with a relative risk of higher operating margin and net patient revenue, with some variation noted among the measures of patient safety. Our findings suggest that targeted improvement in patient safety performance, as evaluated in the Hospital Compare data, is associated with improved financial performance at the hospital level. Increased attention to safe care delivery may allow hospitals to generate additional patent care earnings, improve margins, and create capital to advance hospital financial position.

The impact of an acute care surgery model on general surgery service productivity

BackgroundThe Acute Care Surgery (ACS) model has been widely adopted by hospitals across the United States, with ACS services managing emergency general surgery (EGS) patients previously treated by general surgery (GS) services. We evaluated the operational and financial impact of an ACS service model on general surgeons at an academic medical center. MethodsUsing WiseOR® (Palo Alto, CA), we compared surgical case volumes for the GS service two years before (October, 2013–September, 2015) and two years after (October, 2015–September, 2017) implementation of an ACS service at the University of Vermont Medical Center. From financial reports, we obtained monthly wRVUs, clinical FTEs, net patient revenue, and payer mix for the GS service and compared the two years before and after ACS model implementation. ResultsThere was a significant reduction in the average number of cases performed by the GS service following ACS service implementation (monthly mean ± SD, 139.1 ± 16.0 vs. 116.7 ± 14.0, p < 0.001). The normal-hours caseload remained stable, while a significant decrease in after-hours cases accounted for the reduction in overall volume. Despite the reduction in operative volume, the decrease in mean monthly wRVU/FTE for the GS service when comparing the pre- and post-ACS periods did not reach statistical significance (614.9 ± 82.9 vs. 576.3 ± 62.1, p = 0.08). There was a significant increase in average monthly clinic-derived wRVU/FTE for the GS service (106.3 ± 13.5 vs. 120.5 ± 16.4, p = 0.007). ConclusionsShifting EGS patient management from the GS to ACS service did not negatively impact the productivity of the GS service.

Patient experience and hospital profitability: Is there a link?

Patient experience has had a direct financial impact on hospitals since value-based purchasing was instituted by the Centers for Medicare & Medicaid Services in 2013 as a method to reward or punish hospitals based on performance on various measures, including patient experience. Although other industries have shown an indirect impact of customer experience on overall profitability, that link has not been well established in the health care industry. Return-to-provider rate and perceptions of health quality have been associated with profitability in the health care industry. Our aims were to assess whether, independent of a direct financial impact, a more positive patient experience is associated with increased profitability and whether a more negative patient experience is associated with decreased profitability. We used a sample of 19,792 observations from 3767 hospitals over the 6-year period 2007-2012. The data were sourced from Centers for Medicare & Medicaid Services and Hospital Consumer Assessment of Healthcare Providers and Systems. Using generalized estimating equations to account for repeated measures, we fit four separate models for three dependent variables: net patient revenue, net income, and operating margin. Each model included one of the following independent variables of interest: percentage of patients who definitely recommend the hospital, percentage of patients who definitely would not recommend the hospital, percentage of patients who rated the hospital 9 or 10, and percentage of patients who rated the hospital 6 or lower. We identified that a positive patient experience is associated with increased profitability and a negative patient experience is even more strongly associated with decreased profitability. Management should have greater justification for incurring costs associated with bolstering patient experience programs. Improvements in training, technology, and staffing can be justified as a way to improve not only quality but now profitability as well.

Are the Affordable Care Act Restrictions Warranted? A Contemporary Statewide Analysis of Physician-Owned Hospitals

BackgroundThe Affordable Care Act placed a moratorium on physician-owned hospital (POH) expansion. Concern exists that POHs increase costs and target healthier patients. However, limited historical data support these claims and are not weighed against contemporary measures of quality and patient satisfaction. The purpose of this study was to investigate the quality, costs, and efficiency across hospital types. MethodsOne hundred forty-five hospitals in a single state were analyzed: 8 POHs; 16 proprietary hospitals (PHs); and 121 general, full-service acute care hospitals (ACHs). Multiyear data from the Centers for Medicare and Medicaid Services Medicare Cost Report and the statewide Health Care Cost Containment Council were analyzed. ResultsACHs had a higher percentage of Medicare patients as a share of net patient revenue, with similar Medicare volume. POHs garnered significantly higher patient satisfaction: mean Hospital Consumer Assessment of Healthcare Providers and Systems summary rating was 4.86 (vs PHs: 2.88, ACHs: 3.10; P = .002). POHs had higher average total episode spending ($22,799 vs PHs: $18,284, ACHs: $18,856), with only $1435 of total spending on post–acute care (vs PHs: $3867, ACHs: $3378). Medicare spending per beneficiary and Medicare spending per beneficiary performance rates were similar across all hospital types, as were complication and readmission rates related to hip or knee surgery. ConclusionPOHs had better patient satisfaction, with higher total costs compared to PHs and ACHs. A focus on efficiency, patient satisfaction, and ratio of inpatient-to-post–acute care spending should be weighted carefully in policy decisions that might impact access to quality health care.

Is There a Business Case for Magnet Hospitals? Estimates of the Cost and Revenue Implications of Becoming a Magnet

Although Magnet hospitals (MHs) are known for their better nursing care environments, little is known about whether MHs achieve this at a higher (lower) cost of health care or whether a superior nursing environment yields higher net patient revenue versus non-MHs over an extended period of time. To examine how achieving Magnet status is related to subsequent inpatient costs and revenues controlling for other hospital characteristics. Data from the American Hospital Association Annual Survey, Hospital Cost Reporting Information System reports collected by Centers for Medicare & Medicaid Services, and Magnet status of hospitals from American Nurses Credentialing Center from 1998 to 2006 were combined and used for the analysis. Descriptive statistics, propensity score matching, fixed-effect, and instrumental variable methods were used to analyze the data. Regression analyses revealed that MH status is positively and significantly associated with both inpatient costs and net inpatient revenues for both urban hospitals and all hospitals. MH status was associated with an increase of 2.46% in the inpatient costs and 3.89% in net inpatient revenue for all hospitals, and 2.1% and 3.2% for urban hospitals. Although it is costly for hospitals to attain Magnet status, the cost of becoming a MH may be offset by higher net inpatient income. On average, MHs receive an adjusted net increase in inpatient income of $104.22-$127.05 per discharge after becoming a Magnet which translates to an additional $1,229,770-$1,263,926 in income per year.

A Profile of Hospitals With Leadership Development Programs

Community hospitals face increasing organizational and environmental complexities that challenge effective leadership. Hospitals are embracing leadership development programs in efforts to ensure leadership talent. While prior literature has described the intent and availability of these programs, the characteristics and performance of hospitals having such programs and their associated market characteristics have not been fully addressed. This article identifies significant differences in organizational, operational, performance, and market factors that are associated with hospitals offering a leadership development program, compared with those hospitals lacking such a program. The authors used American Hospital Association Survey data for 2008, the Area Resource File, and Centers for Medicare & Medicaid data to identify hospitals with and without leadership development programs and analyzed the differences for a number of organizational, operational, performance, and market variables. Findings indicate that hospitals having leadership development programs were large-bed-size facilities, had not-for-profit ownership, were system affiliated, were located in metropolitan statistical areas, and were teaching affiliated facilities. These hospitals also generated higher patient discharges, had higher occupancy, and had a longer average length of stay, compared with hospitals without such programs. In addition, these hospitals had higher net patient revenue per adjusted discharge and higher total profit margins relative to the comparison group.

Analysis of Cash Flow in Academic Medical Centers in the United States

To examine cash flow margins in academic medical centers (AMCs; i.e., teaching hospitals) in an effort both to determine any significant differences in a set of operational and financial factors known to influence cash flow for high- and low-cash-flow AMCs and to discuss how these findings affect AMC operations. The authors sampled the Medicare cost report data of 103 AMCs for fiscal years 2005, 2006, and 2007, and then they applied the t test to test for significant mean differences between the two cash flow groups across operational and financial variables (e.g., case mix, operating margin). Compared with low-cash-flow AMCs, high-cash-flow AMCs were larger-bed-size facilities, treated cases of greater complexity, generated higher net patient revenue per adjusted discharge, served a significantly lower percentage of Medicaid patients, had significantly higher average operating profit margins and cash flow margin ratios, possessed a higher number of days of cash on hand, and collected their receivables more quickly. Study findings imply that high-cash-flow AMCs were earning higher cash flow returns than low-cash-flow AMCs, which may be because high-cash-flow AMCs generate higher patient revenues while serving fewer lower-paying Medicaid patients.

HealthSouth's Inpatient Rehabilitation Facilities: How Does Their Performance Compare With Other For-Profit and Nonprofit Inpatient Rehabilitation Facilities?

McCue MJ, Thompson JM. HealthSouth's inpatient rehabilitation facilities: how does their performance compare with other for-profit and nonprofit inpatient rehabilitation facilities? Objectives To assess the financial and operational differences in freestanding inpatient rehabilitation facilities (IRFs) that are operated by HealthSouth Corporation relative to other for-profit and nonprofit system-affiliated ownership groups. Since 2003, when it faced fraud charges and financial penalties, HealthSouth has experienced new management and refocused its business strategy. Because HealthSouth is the largest provider of freestanding IRF services, it is important to understand how their performance may differ relative to other ownership groups. Design We used the Mann-Whitney U test to assess differences in median values for financial and operational variables of HealthSouth-owned IRFs compared with other for-profit system IRFs and nonprofit system IRFs. Setting System-affiliated freestanding IRFs in the United States. Participants Sixty-four HealthSouth IRFs, 18 nonprofit system-affiliated IRFs, and 18 for-profit system-affiliated IRFs. Interventions Not applicable. Main Outcome Measures Net patient revenue per adjusted discharge, operating expense per adjusted discharge, salary expense per full-time equivalent, and cash flow margin. Results HealthSouth IRFs had significantly lower net patient revenue per adjusted discharge and operating expense per adjusted discharge; however, its cash flow margin was significantly higher than other comparison groups. HealthSouth IRFs treated a higher case mix of patients relative to these comparison groups. Conclusions The financial and operating performance of HealthSouth IRFs is stronger than other ownership groups. Strong cash flow will enable HealthSouth to pay down long-term debt.

Do non-profit hospitals provide more charity care when faced with a mandatory minimum standard? Evidence from Texas

Policymakers often question whether not-for-profit (NFP) hospitals provide enough charity care to justify tax advantages. In 1993, Texas enacted legislation requiring NFP hospitals to provide certain community benefits at levels set forth in specific criteria to retain tax-exempt status; this paper focuses on the effect of the legislation’s requirement that NFP hospitals spend a minimum of 4% of net patient revenue on charity care. We also study a modification of the law passed in 1995, which allows the deduction of bad debts expense when calculating net patient revenue. This change effectively lowers required charity care spending, and our study considers whether Texas hospitals responded by reducing charity care spending. We test the Texas laws’ effect on hospital charity care spending using financial data for 1992 through 1997. As anticipated, results show that, on average, NFP hospitals spending below the 4% threshold increased their charity care spending to meet this threshold. Surprisingly, NFP hospitals spending above the threshold experienced a marginally significant decrease in spending. After the 1995 law change, hospitals with higher total margins decreased charity care spending, an unintended consequence of the legislation. Overall, the Texas law changes did not, on average, lead to increased charity care spending by NFP hospitals. While spending increased by NFPs providing too little charity care prior to the law, this group represents less than 20% of our sample. These findings are particularly important given the increase in Texas uninsurance rates during the sample period. Seventeen states have followed Texas’ lead by enacting legislation regarding the charity care spending by NFPs, thus an empirical investigation into the impact of this precedent-setting legislation is critical for evaluating the effectiveness of specific charity care requirements.