Assessing financial outcomes of not-for-profit community hospitals

Health care executives and health professionals often compare financial outcomes among not-for-profit community hospitals, such as operating margins and excess of revenue over expenses. Some performance measures used in these comparisons tend to be uniform yardsticks across community hospitals; other measures may vary significantly by legal, organizational, and reporting-practice differences among hospitals. A unique database of certified financial statements now permits an examination of these reporting-practice differences in the context of a three-year study of financial outcomes for 1,297 hospitals. Six panels are used in the study for partitioning hospitals in response to differences in reporting practices. Revenue over expenses expressed to net patient revenue and to total unrestricted assets are partially explained by 15 factors. The relative outcomes for these measures within a panel are combined with two common yardsticks of financial condition so the 1,297 hospitals can be classified into five status categories: (1) 121 hospitals in a crisis status, (2) 203 hospitals in a warning status, (3) 511 hospitals with average results, (4) 312 hospitals with excellent performance, and (5) 150 hospitals with outstanding performance.