Cash holdings of not-for-profit hospitals

Many not-for-profit (NFP) hospitals hold substantial cash reserves. Using a national sample of 608 NFP hospitals over the period 1996-1999, we related theories of cash holdings to NFP hospitals to develop a conceptual framework for understanding cash holdings. We tested whether these hospitals differentially managed operating and strategic cash with respect to establishing target balances and investigated motivations for holding cash. NFP hospitals actively targeted levels of operating cash, but did not target strategic cash balances. Strategic cash balances were positively related to profitability and growth in assets, but negatively associated with the use of debt.     

The economics of for-profit and not-for-profit hospitals

This paper examines the economics of for-profit and not-for-profit hospitals through the prism of capital acquisitions. The exercise suggests that of two hospitals that are equally efficient in producing health care, the for-profit hospital would have to charge higher prices than the not-for-profit hospital would, to break even on capital acquisitions. The reasons for this divergence are (1) the typically higher cost of equity capital that for-profit hospitals face; and (2) the income taxes they must pay. The paper recommends holding tax-exempt hospitals more formally accountable for the social obligation they shoulder, in return for their tax preference.     

'Profit' variability in for-profit and not-for-profit hospitals

This paper proposes two tests of the hypothesis that not-for-profit hospitals (NFPs) behave differently than for-profit hospitals. The profit variability test states that the profits of an NFP will be less variable over time than profits of a for-profit hospital if the NFP maximizes utility subject to a profit constraint. The second test examines whether NFP profits respond less to change in exogenous factors, such as Medicare reimbursement rates, than profits of for-profit hospitals. Both tests, performed on panel data from 1983 to 1988, support the hypothesis that NFPs behave differently than for-profit hospitals.     

Uncompensated care provided by for-profit,not-for-profit,and government owned hospitals

Background  

There is growing concern certain not-for-profit hospitals are not providing enough uncompensated care to justify their tax exempt status. Our objective was to compare the amount of uncompensated care provided by not-for-profit (NFP), for-profit (FP) and government owned hospitals.     

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.     

Collection performance: an empirical analysis of not-for-profit community hospitals

Many not-for-profit community hospitals had major shifts in their annual collection performance between 1986 and 1988. The collection performance is measured by excess collection time; this is computed as the difference between the actual average collection time for a hospital and the median for one of the six panels to which the hospital is assigned based on ownership, control code, and financial reporting practices. The sample for this study has 1,246 not-for-profit hospitals comprising over 50 percent of total revenue and expenses of all community hospitals (about 5,500). More than 16 percent of these hospitals had annual changes of ten-plus days in each of the years. Excess collection time within the six panels was examined by state, payer mix (Medicare, Medicaid, and Blue Cross), membership in the Council of Teaching Hospitals, medical school affiliation, case-mix index for Medicare, contractual allowance rate, debt-service coverage, return on assets, new investments, age of property, and urban location. Major findings were that collection patterns are different among some states. The proportions of Medicare, Medicaid, and Blue Cross are negatively associated with excess collection time in three of the panels. Contractual allowance is positively related, and return on assets is negatively associated with excess collection time in two of the panels. The other factors had virtually no effect on the collection performance.     

Returns on equity to not-for-profit hospitals: theory and implementation.

It is argued that not-for-profit hospitals can be assumed to generate a return on equity capital due, in principle, to competition in the final product market for hospital services and in the capital market. Practical difficulties in identifying claimants to the net income of the firm, as well as the incentive problems of cost-based reimbursement, suggest that a competitive pricing approach is likely to be the appropriate means to provide a reasonable return on equity for the not-for-profit and the for-profit hospital. Implications of the analysis for the correct discount rate in investment decisions are outlined.     

The improving efficiency frontier of religious not-for-profit hospitals

By using data-envelopment analysis (DEA), this study evaluates the efficiency of religious not-for-profit hospitals. Hospital executives, healthcare policy makers, taxpayers, and other stakeholders benefit from studies that improve hospital efficiency. Results indicate that overall efficiency in religious hospitals improved from 72% in 1998 to 74% in 2001. What is more important is that the number of religious hospitals operating on the efficiency frontier increased from 40 in 1998 to 47 in 2001. This clearly documents that religious hospitals are becoming more efficient in the management of resources. From a policy perspective, this study highlights the economic importance of encouraging increased efficiency throughout the healthcare industry.     

Tax exemption. Challenge and opportunity for not-for-profit hospitals

As healthcare reform is debated over the next several years, not-for-profit hospitals will see increased challenges to their tax-exempt status. Over the past forty years, the requirements for maintaining a tax-exempt status have undergone numerous changes. In the last several years, several states have challenged the right of hospitals to maintain this desired status. As we move toward the mid-1990s, it will be critical for not-for-profit hospitals to demonstrate and communicate their commitment to charitable endeavors.     

IT investment planning: the best hospitals

A study of hospitals' best practices regarding capital investments in information systems indicates that (1) the process may need more input from IT professionals to cover the technical aspects of planning; (2) the most successful projects are highly aligned with the organization's overall business strategy; and (3) disappointments could be avoided by conducting a better analysis of the organization and its technology, evaluation of past IS performance, and assessment of IS staff capabilities.     

Financing and planning of public and private not-for-profit hospitals in the European Union

While much has been written about health care financing in Europe in recent years, discussion has almost entirely focused on revenue. In contrast, there has been remarkably little written on financing of capital investment in European health care systems. Yet major changes are underway in several countries, in particular involving new forms of public-private partnerships (PPP). At the same time, there is growing recognition of the way in which the inherited structure of the health care delivery system constrains the system's ability to adapt to changing circumstances. This paper reports the results of a survey undertaken among key informants in the member states of the European Union to begin to ascertain existing practices and future plans in relation to hospital planning and financing amongst public and private not-for-profit hospitals. The locus of hospital planning decisions reflect the constitutional framework of the country involved, and thus the emphasis on national or local plans. There has been an expansion of private sector involvement, with four basic models identified: private loans direct to the hospital; private loans to a regional health body; a PPP where the private sector's role is to build, design and operate the non-clinical functions of the hospital; and, finally, a PPP, where the private sector's involvement also includes management of the clinical functions of the hospital. It is too early to say whether these approaches will be more successful than the models they are replacing.     

In the same boat. For-profit, not-for-profit hospitals face peril of tax reform

The ongoing, escalating rift between for-profit and not-for-profit hospitals could be the crowbar that pries open the Pandora's box of tax reform, an issue so complicated and fraught with political peril it makes Medicare reform look easy. While everyone waits for congressional leaders to signal their intentions, people from both ownership sectors are laying the groundwork for future action.     

The five critical areas for effective governance of not-for-profit hospitals

The pressures on hospitals continue to mount. Voluntary boards increasingly are nervous, making management's tasks all the more difficult. We believe the environment demands a new approach to the process of not-for-profit institutional governance. The volunteer board model has worked very well, but it must be adapted to the changed environment. There must be a direct link between the function of institutional governance and the priorities identified through the strategic planning process. It is our observation that truly effective boards have the following areas clearly in focus within the board and between the board and management: (1) a common working definition of "governance"; (2) a clearly defined mission with specific goals and objectives; (3) a well-planned decision-making process; (4) a board structure tailored to the priorities at hand; and (5) an information, reporting, and communication system that keeps the priorities clearly in focus. This article explores these factors and suggests ways to link the board's work directly to the strategic plan.     

Comparison of efficiency and profitability of investor-owned multihospital systems with not-for-profit hospitals

It is often assumed that investor-owned hospitals are more market driven than are not-for-profit hospitals, and that they will maximize output and minimize inputs, to the exclusion of other management strategies. To resolve the conflicting research evidence, this study analyzed efficiency and profitability measures for approximately 50 investor-owned and 60 not-for-profit hospitals in Florida for the period from 1982 through 1988. The results indicate that the investor-owned hospitals used significantly fewer FTE staff per bed, had significantly fewer manhours per adjusted patient day, and paid significantly less in wages and had significantly higher operating margins (profit) than did the not-for-profit institutions.     

An empirical investigation of quality improvement initiatives in for-profit and not-for-profit hospitals: environmental, competitive and outcome concerns

PURPOSE: The objective of this study is to shed some light on quality improvement practices of for-profit and not-for-profit hospitals DESIGN/METHODOLOGY/APPROACH: The scope and effectiveness of several quality improvement efforts are studied for a sample of 110 hospitals. Factor analysis was utilized to analyze the data collected. FINDINGS: The results of this study tended to suggest that for-profit and not-for-profit hospitals were more similar than different with the regard to the effective utilization of quality improvement initiatives, thus underscoring the utility of quality improvement efforts despite differences in operating characteristics, strategies and operating constraints. RESEARCH LIMITATIONS/IMPLICATIONS: The sample used in this study is limited. Thus, the results should be interpreted accordingly. PRACTICAL IMPLICATIONS: This study offers decision-makers in healthcare operational settings empirical evidence of the operational and strategic effectiveness of different quality improvement efforts, thus justifying investments related to the initiation and implementation of such quality improvement efforts. ORIGINALITY/VALUE: This study represents an important step toward understanding the effective implementation of quality improvement initiatives in different operational settings.