An analysis of hospital union election activity: 1985-1987--by hospital ownership, size, and system, and employee organization and bargaining-unit size

During the three-year period 1985-1987, there were 238 elections in nongovernmental, short-term hospitals to determine whether or not unions would represent the employees. Unions had a success rate of 47.1 percent, similar to that of earlier years. This study reports these election results by hospital and election characteristics. For hospitals, the analysis includes elections by census region, ownership, bed size, and multi-institutional characteristics. For elections, the analysis includes the nature and type of election, employee organization, and employee bargaining-unit-size characteristics. This study concludes that the number of union elections decline as hospital bed size increases, and the union success rate is curvilinear and higher in both small and very large hospitals; union success declines as bargaining-unit size increases. Investor-owned and nonprofit, religious hospitals that are members of multi-institutional systems have lower union success rates than nonsystem hospitals do in their ownership category. However, unions are much more successful in multi-union and decertification elections compared with single-unit elections and initial recognition elections.     

An empirical investigation of hospital profitability in the post-PPS era.

In this study, we identify the empirical determinants of hospital profitability, as measured by return on assets, using a comprehensive sample of hospitals from all four U.S. regions over the post-PPS era. We augment previous empirical models of hospital profitability by considering the effects of additional economic and financial variables and the effects of conversion of ownership status. Our empirical findings suggest that the following factors are significant determinants of hospital profitability during the post-PPS era: geographic location, ownership status, teaching status, conversion of ownership status, adjusted number of employees, length of stay, competition, financial indebtedness, bed capacity, and occupancy rate. We also find that a nonlinear relationship characterizes the dependence of hospital profitability on bed capacity and occupancy rate.     

Determinants of capital structure

This study analyzes the determinants of hospital capital structure in a new market setting that are created by the financial pressures of prospective payment and the intense price competition among hospitals. Using California data, the study found hospital system affiliation, bed size, growth rate in revenues, operating risk, and asset structure affected both short- and long-term debt borrowings. In addition, percentage of uncompensated care, profitability, and payer mix influenced short-term borrowings while market conditions and ownership affected long-term borrowings. Most significant of all is the finding that smaller hospitals tend to borrow more, possibly because they cannot generate funds internally.     

Do Diagnosis‐Related Group‐Based Payments Incentivise Hospitals to Adjust Output Mix?

This study investigates whether the diagnosis‐related group (DRG)‐based payment method motivates hospitals to adjust output mix in order to maximise profits. The hypothesis is that when there is an increase in profitability of a DRG, hospitals will increase the proportion of that DRG (own‐price effects) and decrease those of other DRGs (cross‐price effects), except in cases where there are scope economies in producing two different DRGs. This conjecture is tested in the context of the case payment scheme (CPS) under Taiwan's National Health Insurance programme over the period of July 1999 to December 2004. To tackle endogeneity of DRG profitability and treatment policy, a fixed‐effects three‐stage least squares method is applied. The results support the hypothesised own‐price and cross‐price effects, showing that DRGs which share similar resources appear to be complements rather substitutes. For‐profit hospitals do not appear to be more responsive to DRG profitability, possibly because of their institutional characteristics and bonds with local communities. The key conclusion is that DRG‐based payments will encourage a type of ‘product‐range’ specialisation, which may improve hospital efficiency in the long run. However, further research is needed on how changes in output mix impact patient access and pay‐outs of health insurance. Copyright © 2014 John Wiley & Sons, Ltd.     

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.     

The paradox of the not-for-profit hospital

This quantitative research study assesses the organizational characteristics, market factors, and performance of not-for-profit hospitals in the United States. These results have managerial implications related to hospital efficiency, organizational performance, and the role of not-for-profit hospitals within local communities. The study has policy implications on access to clinical services within local communities, the availability of charity care, and the long-term viability of the not-for-profit health care industry due to potential bankruptcy and closure. This study clearly demonstrates that not-for-profit hospital managers are faced with declining profitability and are challenged to reduce hospital-operating expenses while meeting their charitable mission. Additionally, the greater size and increased clinical complexity of not-for-profit hospitals are increasing organizational overhead. In many cases, the increased clinical complexity is a commitment to the organizational mission of providing a full range of services to the community. From a policy perspective, the study suggests that not-for-profit hospitals have aging facilities and reduced cash flow due to lower profit margins. As a result, many not-for-profit hospitals face potential bankruptcy and closure. This study clearly documents a threat to the provision of charity care in local communities and the long-term viability of the not-for-profit health care industry in the United States.     

The effects of Medicare Health Management Organizations on hospital operating profit in Florida.

Between 1992 and 1997, the number of members enrolled in Medicare Health Management Organizations (HMOs) nationwide in the USA more than doubled. During this period, managed care organizations wielded considerable influence over the health care of a large segment of the Medicare population in Florida. This study examined the impact on operational profit of 148 short-term, acute-care Florida hospitals in this period from Medicare HMO patients, as part of a hospital's payer mix. Three measures of hospital profitability were used: operating profit per actual bed, total operating profit with no adjustment for bed size, and operating margins. The multivariate statistical model employed in this study was a linear mixed model with an autoregressive order one (AR[1]) parametric structure on the covariance matrix. The results of the study indicate that Florida hospitals experienced greater profit pressures from Medicare HMO inpatients than from traditional Medicare inpatients. Further, these hospitals could have experienced positive profit effects with greater traditional Medicare participation and negative financial effects with greater Medicare HMO participation. Additionally, Medicare HMO patients appear to have been admitted to hospitals in worse health condition than those in traditional Medicare. Medicare HMO patients were more likely to have used emergency rooms as the source of admission than traditional Medicare patients. Also, Medicare HMO patients were more likely to have been admitted as emergent cases than traditional Medicare patients. Other research has shown that Medicare HMO patients, at the time of enrolment, are probably healthier than traditional Medicare enrollees, but here they appear to have been admitted to hospitals with higher levels of severity of illness. Explanations are offered for these findings.     

Using return on equity and total profit margin to evaluate hospital performance in the U.S.: a piecewise regression analysis

We investigated hospital profitability by comparing Total Profit Margin (TPM) and Return on Equity (ROE) as measures of profitability, while controlling for inflation and other salient factors. We controlled for variables such as, Disproportionate Share Hospital status, location, type of ownership control, teaching status, conversion to or from nonprofit status, Critical Access Hospital status, sole Medicare provider status, case mix adjusted patient length of stay, bed size, number of employees, and occupancy rate. We allowed for nonlinearities in our model, and used 1996 and 1998 data in our analysis to bridge potential effects of the Balanced Budget Act of 1997. Most of the hospitals we examined were nonprofit organizations that did not convert their type of ownership control. As a consequence, we found TPM to be a better measure of profitability than ROE, and profitability was mainly influenced by location, size, occupancy rate, volume of Medicare and Medicaid patients, and teaching status. Our results clarify the primary factors associated with profitability for our sample hospitals, and will assist creditors, managers and regulators in their assessments of comparative hospital financial performance.     

The effect of hospital ownership conversions on nonacute care providers

Since 1985, the proportion of for‐profit community hospitals has hovered around 15 percent ( AHA 1988, 2002 ). Although nonprofit hospital conversions to for‐profit status have yet to significantly alter the overall distribution of investor ownership in the hospital sector, the consequences continue to cause considerable concern ( Claxton et al. 1997 ; Cutler 2000 ). This is true primarily because investor ownership imposes new fiduciary responsibilities that may undermine a hospital's implicit social contract to meet the needs of the community it serves, regardless of profitability. Given this, many worry that for‐profit health institutions will harm local communities, particularly the availability of services for uninsured and underinsured populations. Thus, much attention has focused on the impact of ownership change on a hospital's provision of uncompensated care and other unprofitable but socially valuable services.     

Assessing the effect of increased managed care on hospitals

This study uses a new relative risk methodology developed by the author to assess and compare certain performance indicators to determine a hospital's relative degree of financial vulnerability, based on its location, to the effects of increased managed care market penetration. The study also compares nine financial measures to determine whether hospital in states with a high degree of managed-care market penetration experience lower levels of profitability, liquidity, debt service, and overall viability than hospitals in low managed care states. A Managed Care Relative Financial Risk Assessment methodology composed of nine measures of hospital financial and utilization performance is used to develop a high managed care state Composite Index and to determine the Relative Financial Risk and the Overall Risk Ratio for hospitals in a particular state. Additionally, financial performance of hospitals in the five highest managed care states is compared to hospitals in the five lowest states. While data from Colorado and Massachusetts indicates that hospital profitability diminishes as the level of managed care market penetration increases, the overall study results indicate that hospitals in high managed care states demonstrate a better cash position and higher profitability than hospitals in low managed care states. Hospitals in high managed care states are, however, more heavily indebted in relation to equity and have a weaker debt service coverage capacity. Moreover, the overall financial health and viability of hospitals in high managed care states is superior to that of hospitals in low managed care states.     

Performance-oriented: toward a successful strategy

Changes in the health care industry have profoundly affected hospital management and have caused severe declines in hospital profitability. In 1993, Health Care Management Review reported that the average operating profit margin, around 2% in 1984, had declined to a 0.2% loss by 1990. In the past, hospitals were buffered by entry regulations and cost reimbursement; thus, they rarely dealt with traditional market pressures. But the changed terrain means that competitive factors now underscore all strategic decisions. This study examines the strategic significance of market orientation in the health care industry. The authors identified forms of market orientation by emphasizing different components, and discovered that hospitals fell into four distinct clusters or groups. They also found a critical relationship between market orientation and performance scores on a number of criteria. Finally, the authors suggest that different forms of market orientation should be employed to target specific performance measures.     

Has Medicare Been a ‘Bad Deal’ for Rural Hospitals?

Understanding the links between Medicare involvement and financial performance in rural hospitals is important for evaluating reimbursement policy under Medicare's prospective payment system (PPS). While simple comparisons between urban and rural hospitals suggest that the latter have lower PPS profit margins on average, there is little multivariate evidence on how Medicare involvement affects financial performance in rural hospitals and whether this relationship differs between rural and urban hospitals. Existing multivariate evidence suggests that Medicare involvement improves PPS profits in both rural and urban hospitals after controlling for other hospital- and market-specific factors. By contrast, the present analysis considers the relationship between Medicare involvement and broader measures of profitability than PPS profits. This provides insight into whether Medicare reimbursement is adequate relative to other forms of third-party payment. The results indicate that Medicare involvement has a markedly different effect on the profitability of rural versus urban hospitals. Greater Medicare involvement is associated with lower patient care profitability in rural hospitals but has a strong positive and significant effect on both patient care and overall (i.e., patient and nonpatient) profitability in urban ones. Medicare involvement is not significantly related to overall profitability in rural hospitals, however, suggesting that these hospitals may be able to mitigate patient care revenue shortfalls from greater Medicare involvement by increasing their nonpatient care revenue sources.     

Moving towards culturally competent health systems: organizational and market factors

Cultural competency has been proposed as an organizational strategy to address racial/ethnic disparities in the healthcare system; disparities are a long-standing policy challenge whose relevance is only increasing with the increasing population diversity of the US and across the world. Using an integrative conceptual framework based on the resource dependency and institutional theories, we examine the relationship between organizational and market factors and hospitals' degree of cultural competency. Our sample consists of 119 hospitals located in the state of California (US) and is constructed using the following datasets for the year 2006: Cultural Competency Assessment Tool of Hospitals (CCATH) Survey, California's Office of Statewide Health Planning & Development's Hospital Inpatient Discharges and Annual Hospital Financial Data, American Hospital Association's Annual Survey, and the Area Resource File. The dependent variable consists of the degree of hospital cultural competency, as assessed by the CCATH overall score. Organizational variables include ownership status, teaching hospital, payer mix, size, system membership, financial performance, and the proportion of inpatient racial/ethnic minorities. Market characteristics included hospital competition, the proportion of racial/ethnic minorities in the area, metropolitan area, and per capita income. Regression analyses were conducted to assess the relationship between the CCATH overall score and organizational and market variables. Our results show that hospitals which are not-for-profit, serve a more diverse inpatient population, and are located in more competitive and affluent markets exhibit a higher degree of cultural competency. Our results underscore the importance of both institutional and competitive market pressures in guiding hospital behavior. For instance, while not-for-profit may adopt innovative/progressive policies like cultural competency simply as a function of their organizational goals, linking cultural competency with organizational performance may be essential to attract more profit driven hospitals.     

Rural hospital ownership: medical service provision, market mix, and spillover effects

Objective. To test whether nonprofit, for‐profit, or government hospital ownership affects medical service provision in rural hospital markets, either directly or through the spillover effects of ownership mix. Data Sources/Study Setting. Data are from the American Hospital Association, U.S. Census, CMS Healthcare Cost Report Information System and Prospective Payment System Minimum Data File, and primary data collection for geographic coordinates. The sample includes all nonfederal, general medical, and surgical hospitals located outside of metropolitan statistical areas and within the continental United States from 1988 to 2005. Study Design. We estimate multivariate regression models to examine the effects of (1) hospital ownership and (2) hospital ownership mix within rural hospital markets on profitable versus unprofitable medical service offerings. Principal Findings. Rural nonprofit hospitals are more likely than for‐profit hospitals to offer unprofitable services, many of which are underprovided services. Nonprofits respond less than for‐profits to changes in service profitability. Nonprofits with more for‐profit competitors offer more profitable services and fewer unprofitable services than those with fewer for‐profit competitors. Conclusions. Rural hospital ownership affects medical service provision at the hospital and market levels. Nonprofit hospital regulation should reflect both the direct and spillover effects of ownership.     

Prediction of hospital failure: a post-PPS analysis

This study investigates the ability of discriminant analysis to provide accurate predictions of hospital failure. Using data from the period following the introduction of the Prospective Payment System, we developed discriminant functions for each of two hospital ownership categories: not-for-profit and proprietary. The resulting discriminant models contain six and seven variables, respectively. For each ownership category, the variables represent four major aspects of financial health (liquidity, leverage, profitability, and efficiency) plus county marketshare and length of stay. The proportion of closed hospitals misclassified as open one year before closure does not exceed 0.05 for either ownership type. Our results show that discriminant functions based on a small set of financial and nonfinancial variables provide the capability to predict hospital failure reliably for both not-for-profit and proprietary hospitals.     

The relationship between the Balanced Budget Act (BBA) and hospital profitability

The Balanced Budget Act of 1997 (BBA) reduced the payment for fees for service providers and reduced the subsidy paid by the government for teaching hospitals. Since the passage of such cost containment measures, debates regarding their impact on hospitals, graduate medical education, and access to health care were raised. The need to examine the effect of such payment reduction on hospital profitability was widely ignored. We examined the relationship between the BBA and hospital profitability by using return on assets to measure profitability, by running an ordinary least squares regression for 1996 as pre-BBA and 1999 as post-BBA. We controlled for variables that were not included in previous literature, such as disproportionate share hospital status, critical access hospital status, and graduate medical education, measured by teaching hospitals to measure the effect of BBA cuts on teaching hospitals. Furthermore we incorporated several economic, financial, and utilization variables in the model. We used 1996 and 1999 data in our analysis to bridge potential effects of the BBA. To locate hospitals that changed ownership status we cross-matched the Medicare Cost Report data with the American Hospital Association Annual Survey. We found that overall hospital profitability declined as a result of the introduction of the BBA; however, small rural hospitals that converted to critical access status enjoyed improvement in financial status over the period of our study. Hospitals that converted to for-profit status did not improve in financial status, and showed a lower earning after the conversation. Our results show that the BBA had a negative effect on hospitals because of cuts in its reimbursement policy, except for critical access hospitals, which show improvement because of their exemption from the prospective payment system. Our study differs from others by using national comprehensive data for years that focus exclusively on the Balanced Budget Act period. We deliberately excluded any period that might be affected by the Balanced Budget Refinement Act (BBRA) of 1999, to clarify the severity of the BBA cut on hospital financial performance. Furthermore, because of the few studies that focused on the effect of the BBA on hospital profitability, this study is an important addition to the literature.     

Do Robotic Surgical Systems Improve Profit Margins? A Cross-Sectional Analysis of California Hospitals

Background

The aim of this study was to examine the association between ownership of robotic surgical systems and hospital profit margins.

Severity of illness and profitability: a patient level analysis.

Crafting a payment mechanism for hospitals that provides for the legitimate operating needs of efficient institutions is an enduring health policy dilemma. The Prospective Payment System used by Medicare and some other payers in the US has been criticized for not adjusting for differences in severity of illness within diagnosis-related groups (DRGs). Previous studies have examined the relationship between profitability and severity of illness at the hospital level. This study examines the relationships between severity of illness and cost, revenue, and profit at the patient level. Two measures of severity (disease stage and number of unrelated diseases) were significant predictors of cost per case, and often had better predictive power than DRGs. In most instances, payers did not compensate adequately for severity so that higher values for the severity variables resulted in financial losses for the hospital.     

Working capital management policy in health care: The effect of leverage

Hospitals, which are mainly capital intensive, require large amounts of financial resources to render high-quality services. Accordingly, health care managers and policy makers should take into account the level of debt in managing working capital. This study, therefore, aims to explore whether the financial leverage moderates the relationship between the working capital and profitability for the publicly-listed European Hospitals. The data set including 52 hospitals with 468 observations was solicited from the ORBIS. A regression analysis was carried out. The results reveal that increasing the length of the cash conversion cycle for hospitals with high financial leverage decreases profitability. On the contrary, increasing the length of the cash conversion cycle for the ones having low leverage boosts profitability. The findings of this study suggest that since leverage influences the relationship between the cash conversion cycle and profitability, the degree of financial leverage is an important indicator to be considered by health care managers and policy makers in managing working capital. In addition, by clarifying the effect of leverage, this study helps policy makers understand and estimate the possible impact of working capital changes on profitability. This study also helps managers and decision makers not only apply a tight working capital policy but also decide whether to increase or decrease the length of cash conversion cycle to improve hospital profitability.