Variations in Financial Performance Among Peer Groups of Critical Access Hospitals

CONTEXT: Among the large number of hospitals with critical access hospital (CAH) designation, there is substantial variation in facility revenue as well as the number and types of services provided. If these variations have material effects on financial indicators, then performance comparisons among all CAHs are problematic. PURPOSE: To investigate whether indicators of financial performance and condition systematically vary among peer groups of CAHs. METHODS: Suggestions from CAH administrators, a literature review, expert panel advice, and statistical analysis were used to create peer groups based on whether a CAH: (1) had less than $5 million, $5-10 million, or over $10 million in net patient revenue; (2) was owned by a government entity; (3) provided long-term care; and (4) operated a provider-based Rural Health Clinic. FINDINGS: Significant differences in financial performance and condition exist among CAH peer groups. CONCLUSIONS: CAHs should ensure that they use appropriate peer comparators when assessing their financial performance and condition. If quality, outcome, safety and access are affected by financial performance and condition, it may also be important for research in these areas to control for peer group differences among CAHs.     

The Role of Critical Access Hospital Status in Mitigating the Effects of New Prospective Payment Systems Under Medicare

This article examines rural hospitals that potentially qualify as critical access hospitals (CAH) and identifies facilities at substantial financial risk as a result of Medicare's expansion of prospective payment systems (PPS) to nonacute settings. Using Health Care Financing Administration (HCFA) cost reports from the federal year ending Sept. 30, 1996, combined with county-level sociodemographic data from the Area Resource File (ARF), characteristics of potential CAHs were identified and their finances analyzed to determine whether they could benefit from the cost-based reimbursement rules applicable to CAH status. Rural hospitals were identified as potential CAHs if they met a combination of federal and state criteria for necessary providers. Rural facilities were classified as "at risk" if they had poor financial ratios in conjunction with high levels of dependence on outpatient, home-care or skilled nursing services. Almost 30 percent of all rural hospitals were identified as potential CAHs. Ninety percent of potential CAH facilities were identified as "at risk" by at least one of five possible risk criteria, and one-third were identified by at least three. Of those classified "at risk," 48 percent might not benefit from conversion to CAH because their inpatient Medicare reimbursement would likely be less under CAH payment rules than under their current PPS payment rules. Many potential CAHs were doing well under inpatient PPS because they were sole community hospitals (SCH) and were therefore eligible for special adjustments to the PPS rates. The Rural Hospital Flexibility Act would be more beneficial to the population of isolated rural hospitals if those eligible for both CAH and SCH status were given the option of retaining their SCH inpatient payment arrangements while still qualifying for outpatient cost-based reimbursement.     

Implementing a Hospitalist Program in a Critical Access Hospital

Purpose

The hospitalist model of inpatient care has rapidly expanded, but little is known about hospitalist care in critical access hospitals (CAHs). We aimed to determine the impact of a hospitalist model of care on staff satisfaction, patient volumes, patient satisfaction, length of stay, and care quality in a CAH.

Methods

We initiated a hybrid rotating hospitalist program in September 2008 at Winneshiek Medical Center (Decorah, Iowa), a 25‐bed rural CAH. We reviewed patient volumes, Centers for Medicare and Medicaid Services core quality measures, acute length of stay, and staff satisfaction for primary care—hospitalist physicians and inpatient and clinic nurses. Patient volume and length of stay were compared with CAH data reported by the Iowa Hospital Association.

Findings

Patient volumes (acute, skilled, and observation) increased by 15% compared with a 17% decrease for statewide CAHs. Length of stay decreased from 2.88 to 2.75 days and remained lower than the average stay for Iowa CAHs (3.05 days). In the year after implementation, we observed no deterioration in core quality measures (range, 93%‐100%) or patient satisfaction (86th percentile). Inpatient nurse satisfaction and primary care‐hospitalist satisfaction improved. Early clinic nurse skepticism showed improved satisfaction at the 5‐year review.

Conclusions

Hospitalist care contributed to ongoing delivery of high‐quality care and satisfactory patient experiences while supporting the mission of a CAH in rural Iowa. Implementation required careful consideration of its effects on the outpatient practice. Broader implementation of this model in CAHs may be warranted.     

Patient Bypass Behavior and Critical Access Hospitals: Implications for Patient Retention

PURPOSE: To assess the extent of bypass for inpatient care among patients living in Critical Access Hospital (CAH) service areas, and to determine factors associated with bypass, the reasons for bypass, and what CAHs can do to retain patients locally. METHODS: Six hundred and forty-seven subjects, aged 18 years and older, who had been admitted to a hospital for inpatient care in the past 12 months and lived within 15-20 miles of 25 randomly selected CAHs were surveyed by phone during the period from early February through late July 2005. Survey questions included demographic characteristics, general health status, travel time/distance to health care, questions on satisfaction with local health services, bypass behavior, and solicited suggestions on how local hospitals could retain patients locally. FINDINGS: About 60% of surveyed patients bypassed their local CAHs for inpatient care including 16% who were referred to another facility by the local CAH/health care providers and would use the local hospital if needed services were available. Bypass rates ranged from 16% to 70% across the sampled CAHs. Factors associated with bypass included age, income, satisfaction with the local hospital, and traveling distance/time. Lack of specialty care, limited services, and the quality/reputation of local services/doctors were most frequently mentioned as reasons why patients bypass local CAHs. CONCLUSIONS: The bypass rate for sampled CAHs is considerably higher than the 20%-50% bypass rates documented in the literature for all hospitals in general using discharge/administrative data. The sizeable variation in bypass rates across CAHs suggests that the appropriate response/fix should come from the facility/community levels.     

Critical Access Hospitals and Retail Activity: An Empirical Analysis in Oklahoma

Purpose: This paper takes an empirical approach to determining the effect that a critical access hospital (CAH) has on local retail activity. Previous research on the relationship between hospitals and economic development has primarily focused on single‐case, multiplier‐oriented analysis. However, as the efficacy of federal and state‐level rural health subsidies come under increasing scrutiny, more comprehensive investigations can provide support for continued funding. Methods: Data from 105 rural Oklahoma communities are used to explore whether the presence of a CAH impacts several measures of retail activity. The measures are: total retail sales, total number of retail establishments, and number of micro and small retail establishments. Ordinary least squares regression is used to evaluate the impact of a CAH after controlling for a host of other factors influencing retail activity such as local demographics, unemployment rates, and the presence of a Wal‐Mart. Findings: The presence of a CAH has a positive and significant influence on each measure of retail activity. The parameter estimates suggest that a CAH has a similar influence on rural retail sales as a Wal‐Mart, increasing total retail sales by approximately 28% over towns without a CAH. Other model results indicate that a CAH presence significantly increases the number of total retail establishments and the number of micro and small business establishments. Conclusions: The positive results provide additional evidence on the far‐reaching economic development impacts of CAHs. The results also emphasize the importance of continued support for these rural institutions, including federal and state subsidies.     

Intensive Care in Critical Access Hospitals

CONTEXT: Although critical access hospitals (CAHs) have limitations on number of acute care beds and average length of stay, some of them provide intensive care unit (ICU) services. PURPOSE: To describe the facilities, equipment, and staffing used by CAHs for intensive care, the types of patients receiving ICU care, and the perceived impact of closing the ICU on CAH staff and the local community. METHODS: A semistructured interview of directors of nursing at CAHs that provide intensive care services. RESULTS: Two thirds of CAHs that provide intensive care do so in a distinct unit. Most have continuous or computerized electrocardiography and ventilators. Other ICU equipment common in larger hospitals was reported less frequently. Nurse:patient ratio ranged from 1:1 to 1:3, and some or all nursing staff have advanced cardiac life support certification. Most CAHs admit patients to the ICU daily or weekly, primarily treating cardiac, respiratory, gastrointestinal, endocrine, and drug- or alcohol-related conditions. ICUs are also used for postsurgical recovery. Respondents felt that closure of the ICU would be burdensome to patients and families, result in lost revenue, negatively impact staff, and affect the community's perception of the hospital. CONCLUSIONS: Intensive care services provided by CAHs fall along a continuum, ranging from care in a unit that resembles a scaled-down version of ICUs in larger hospitals to care in closely monitored medical-surgical beds. Nurse to patient ratio, not technology, is arguably the defining characteristic of intensive care in CAHs. Respondents believe these services to be important to the well-being of the hospital and of the community.     

Technical efficiency of Critical Access Hospitals: an application of the two-stage approach with double bootstrap

The Critical Access Hospital (CAH) Program has offered Medicare cost-based reimbursement to small hospitals that meet certain eligibility criteria to improve their financial viability and quality of care. However, cost-based reimbursement has been associated with inefficiency in hospital operations. This study uses a two-stage approach and bootstrap procedures to examine the effects of environmental variables on the technical efficiency of CAHs. The two-stage approach with quality controls significantly improved statistical efficiency of parameter estimates in the second stage bootstrapped truncated regression relative to a similar model without quality controls. Overall, our results suggest that enhanced Medicare reimbursement may not have had detrimental effects on the technical efficiency of CAHs.     

Financial Indicators for Critical Access Hospitals

CONTEXT: There is a growing recognition of the need to measure and report hospital financial performance. However, there exists little comparative financial indicator data specifically for critical access hospitals (CAHs). CAHs differ from other hospitals on a number of dimensions that might affect appropriate indicators of performance, including differences in Medicare reimbursement, limits on bed size and average length of stay, and relaxed staffing rules. PURPOSE: To develop comparative financial indicators specifically designed for CAHs using Medicare cost report data. METHODS: A technical advisory group of individuals with extensive experience in rural hospital finance and operations provided advice to a research team from the University of North Carolina at Chapel Hill. Twenty indicators deemed appropriate for assessment of CAH financial condition were chosen and formulas determined. Issues 1 and 2 of the CAH Financial Indicators Report were mailed to the chief executive officers of 853 CAHs in the summer of 2004 and 1,092 CAHs in the summer of 2005, respectively. Each report included indicator values specifically for their CAH, indicator medians for peer groups, and an evaluation form. FINDINGS: Chief executive officers found the indicators to be useful and the underlying formulas to be appropriate. The multiple years of data provide snapshots of the industry as a whole, rather than trend data for a constant set of hospitals. CONCLUSIONS: The CAH Financial Indicators Report is a useful first step toward comparative financial indicators for CAHs.     

Increasing graduate medical education (GME) in critical access hospitals (CAH) could enhance physician recruitment and retention in rural America

Critical Access Hospitals (CAHs) are essential to a functinoning health care safety net and are a potential partner of rural Graduate Medical Education (GME) which is associated with greater likelihood of service in rural and underserved areas. Currently very little Medicare funding supports GME in the CAH setting, highlighting a missed opportunity to improve access to care in rural America.     

Quality Improvement Strategies and Best Practices in Critical Access Hospitals

ABSTRACT: Context: Critical access hospitals (CAHs) face many challenges in implementing quality improvement (QI) initiatives, which include limited resources, low volume of patients, small staffs, and inadequate information technology. A primary goal of the Medicare Rural Hospital Flexibility Program is to improve the quality of care provided by CAHs. Purpose: This article describes key quality improvement initiatives for a national sample of CAHs that are actively involved in implementing quality-related initiatives in collaboration with support hospitals and statewide organizations. Methods: Researchers conducted a national telephone survey of 72 CAHs and 2 in-depth case studies of CAHs. Findings: The survey and case studies demonstrate that many CAHs are successfully implementing QI activities, including patient safety initiatives, improvements in overall QI processes and peer review processes, and implementation of QI projects focused on treatment of 1 or more specific diseases. The CAHs are involved with multiple external organizations in these activities. The administrators of the 2 case study CAHs have made QI a priority for their hospitals; ensured that resources are available for QI activities; and worked with their support hospitals, statewide organizations, and other CAHs to develop and implement rural-relevant QI initiatives. Conclusions: Cost-based Medicare reimbursement has been a key factor in the ability of CAHs to fund additional staff, staff training, and equipment to improve patient care. The commitment of hospital leaders and key staff is a crucial factor in moving QI initiatives forward in CAHs.     

Translating Research Into Practice: Voluntary Reporting of Medication Errors in Critical Access Hospitals

CONTEXT: Low service volume, insufficient information technology, and limited human resources are barriers to learning about and correcting system failures in small rural hospitals. PURPOSE: This paper describes the implementation of and initial findings from a voluntary medication error reporting program developed by the Nebraska Center for Rural Health Research (NCRHR) to overcome these barriers in 6 Nebraska critical access hospitals (CAHs). METHODS: Participating Nebraska CAHs mailed copies of medication error reports to the NCRHR monthly for entry into a database. Quarterly summaries enabled each CAH to compare its reports by severity, type, phase of the medication use process, contributing factors, and causes to those of its peers and MEDMARX, a national medication error reporting program. Workshops emphasized learning from the reported errors by identifying system sources of variation in medication use and initiating change to achieve best practices. FINDINGS: Similar to MEDMARX, 99% of medication errors reported by 6 Nebraska CAHs were not harmful, reported errors most often originated in the administration phase, and the most common error type was omission. The CAHs reported significantly smaller proportions of "near miss" errors and errors originating in the prescribing phase than in MEDMARX. CONCLUSIONS: By collaborating with CAHs, an academic medical center, and a national reporting program, the NCRHR is translating the Institute of Medicine's recommendation for voluntary error reporting into practices that allow CAHs to learn about and improve their medication use systems. However, limited presence of pharmacists in CAHs is a barrier to implementing double checks and learning from system failures in the medication use system.     

Choosing to convert to critical access hospital status

The authors profile facilities converting to critical access hospitals (CAHs) from 1998-2000, comparing characteristics of their communities, operations, and finances to those of other small rural providers. Counties where CAHs are located are more sparsely populated, but do not have substantially different sociodemographic profiles than other rural counties. Converting hospitals' acute daily census averaged well below the statutory limit of 15, but over one-half reduced unused bed capacity to meet CAH size limitations. The average case-mix adjusted Medicare cost per case was 16-percent higher for CAH converters than for other small hospitals and their financial ratios were substantially worse, although many other operating characteristics were similar.     

The Medicare Critical Access Hospital Program: The First Year

The Medicare Critical Access Hospital (CAH) program, part of the Balanced Budget Act of 1997, is a nationwide limited service hospital program. Structured interviews were conducted in August and September 1998 with key people in state offices of rural health, state hospital associations, departments of health or departments of facility licensing in all 50 states to assess their progress in the development of the CAH program. The majority of states expressed interest in the CAH program. Twenty-one states were moving formally toward involvement in the program. States that had developed or were in the process of developing a state plan estimated that between 183 to 227 hospitals would convert to CAHs in the next one to two years. States that were the most successful with plan development appeared to be states that participated in the Essential Access Community Hospital/Rural Primary Care Hospital program, states where there was dialogue about the possibility of a limited service hospital program and states with widespread support in the state. A pressing need for most states is for reliable fiscal consulting or analysis that could be applied to individual hospitals that are considering conversion to CAHs. The CAH program shows promise for successful implementation based on its early results.     

Adoption and perceived effectiveness of financial improvement strategies in critical access hospitals

Purpose: To ascertain the use and perceived success of strategies to improve the financial performance of Critical Access Hospitals (CAHs). Methods: Information about the use and perceived effectiveness of 44 specific strategies to improve financial performance was collected from an online survey of 291 CAH Chief Executive Officers and Chief Financial Officers. Responses were merged with financial and operational characteristics of the respondents’ hospitals obtained from Medicare cost reports. Use rates and perceived success and failure were calculated for each strategy. A cluster analysis was applied to classify strategies based on their use and success. Finally, CAH characteristics were examined to predict the use of individual strategies. Findings: Financial improvement strategies are pervasive among CAHs. The administrators who responded to the survey in this study reported using an average of 17.0 of the maximum 44 strategies listed in the survey questionnaire. Revenue/cost, human resource, and capital strategies were more frequently used than service expansion and reduction strategies. Overall, CAH characteristics did not explain the use or perceived success of specific strategies, but they did partially predict the number of strategies attempted. Conclusions: CAH administrators have used multiple strategies to improve financial performance with a wide variety of reported success. More research into the effectiveness of specific interventions is needed to help administrators select evidence‐based strategies.     

Financial performance monitoring of the technical efficiency of critical access hospitals: a data envelopment analysis and logistic regression modeling approach

From 1980 to 1999, rural designated hospitals closed at a disproportionally high rate. In response to this emergent threat to healthcare access in rural settings, the Balanced Budget Act of 1997 made provisions for the creation of a new rural hospital--the critical access hospital (CAH). The conversion to CAH and the associated cost-based reimbursement scheme significantly slowed the closure rate of rural hospitals. This work investigates which methods can ensure the long-term viability of small hospitals. This article uses a two-step design to focus on a hypothesized relationship between technical efficiency of CAHs and a recently developed set of financial monitors for these entities. The goal is to identify the financial performance measures associated with efficiency. The first step uses data envelopment analysis (DEA) to differentiate efficient from inefficient facilities within a data set of 183 CAHs. Determining DEA efficiency is an a priori categorization of hospitals in the data set as efficient or inefficient. In the second step, DEA efficiency is the categorical dependent variable (efficient = 0, inefficient = 1) in the subsequent binary logistic regression (LR) model. A set of six financial monitors selected from the array of 20 measures were the LR independent variables. We use a binary LR to test the null hypothesis that recently developed CAH financial indicators had no predictive value for categorizing a CAH as efficient or inefficient, (i.e., there is no relationship between DEA efficiency and fiscal performance).