The association of debt financing with not-for-profit hospitals' operational and capital-investment efficiency

Increased debt in companies can motivate both operational and capital-investment efficiency. This positive influence of debt is attributed to creditors' oversight of corporate behavior and the need to generate cash flows to service debt. Our study investigates whether debt has a similar relationship with efficiency in not-for-profit hospitals. Using statistical analysis of a database of audited financial statements of not-for-profit hospitals, we test whether debt is associated with six distinct measures of operational and capital-investment efficiency. We find that debt either has no association with efficiency or predicts decreased efficiency. Possible explanations are that creditors' oversight is less tight in the not-for-profit setting and that debt may at times motivate excessive capital investment because of a legal requirement to tie tax-exempt debt with a capital-investment project.     

Factors associated with the provision of uncompensated care in Pennsylvania hospitals

Data from 190 Pennsylvania hospitals in 1995 were used in regression analysis of the determinants of uncompensated care and profitability. Uncompensated care as a percentage of operating expenses was negatively related with hospital size and positively associated with obstetrical services emphasis, emergency visit mix, area unemployment rate, and sole community hospital status. Hospital profitability was not associated with uncompensated care; it was negatively associated with HMO penetration, Medicare and Medicaid share of admissions and religious ownership; and it was positively associated with medium size. Pennsylvania hospitals may have been shielded from the financial burdens of uncompensated care by the availability of funds from other sources that may not be available in the future. Consequently, unless new sources of funding are developed or insurance coverage expanded, financial pressures from providing uncompensated care may cause hospitals to face the dilemma of abandoning uninsured patients or risking financial insolvency.     

Balancing the goals of health care provision and financing

A desirable system for providing and financing health care must balance three goals: (1) preventing the deprivation of care because of a patient's inability to pay; (2) avoiding wasteful spending; and (3) allowing care to reflect the different tastes of individual patients. This essay discusses the application of these goals and uses them to consider a reform of the system of health savings accounts (HSAs) that was enacted as part of the 2003 Medicare legislation and, separately, the challenge posed by the very expensive treatments for rare diseases that are becoming more frequently available.     

The rise and fall of New Jersey's uncompensated care fund

Since 1982, acute care hospitals in New Jersey have been reimbursed on a diagnosis-related group (DRG) basis along with a provision for 100 percent reimbursement of uncompensated care (bad debts and charity care). Initially, that system was based on a hospital-specific surcharge. Eventually, that was replaced with a uniform charge for all hospitals, including reimbursement by Medicare. But the growth in the number of uninsured, an inequitable financing system, increases in bad debts, and the elimination of Medicare payments led to the program's demise. An extended legislative stalemate has resulted in a pair of temporary extensions--aided by an infusion of federal Medicaid dollars--but the state still must find a permanent solution.     

The value of a mission statement in an association of not-for-profit hospitals

PURPOSE: When a mission statement is introduced to enhance the quality of health care management, it is vital to assess the actual impact. This article aims to consider the effect of introducing a single mission statement into an association of 18 not-for-profit hospitals by investigating the views of different groups of employees. DESIGN/METHODOLOGY/APPROACH: The paper explores the impact a mission statement has had by examining questionnaire responses from different groups of staff including the designers of the mission statement and those at the delivery point of services. FINDINGS: The study's outcomes indicate the value of examining the views of staff that are not in senior management. The evaluation of the mission statement's impact by senior managers was at variance with that of other staff. ORIGINALITY/VALUE: The findings highlight the inadequacy of only examining senior management's opinions when considering the benefits of having introduced a mission statement into an organisation. In this study we identify those who originated or contributed to the mission statement in the first place. Once launched, a mission statement can have an impact throughout all staff, and that information needs to be captured in any assessment. This is consistent with the high rating normally given to a mission statement being an aid to motivating all staff. An important dimension of this study is the impact of a single mission statement throughout a group of dissimilar hospitals.     

The supply of uncompensated care in Pennsylvania hospitals: motives and financial consequences

The need for uncompensated care has increased during a period in which hospitals are confronted with public and private-sector fiscal pressures. Using a panel design (1995--1998) on Pennsylvania private, not-for-profit general hospitals, we found the provision of uncompensated care is positively associated with financial surpluses, the provision of uncompensated care by neighboring hospitals, bed capacity, proportion of outpatient visits that are emergency, and the unemployment rate (a proxy for need for uncompensated care). Other analysis found that the provision of uncompensated care was not associated with operating surplus, except in hospitals that provide very large amounts of uncompensated care. Provision of services to Medicaid patients and HMO penetration had a negative impact on profitability.     

The financing of long term care in Ireland

Major changes are proposed for the financing and regulation of the nursing home sector in Ireland. For the first time the payment of public subvention is to be related explicitly to the means and dependency of old people. More detailed proposals have, however, yet to be worked out. This paper reviews the proposed developments and makes concrete recommendations with respect to the means testing of income and assets. The issue of consumer sovereignty is also considered. Finally, the necessity for a co-ordinated and integrated policy with respect to the financing, regulation and organisation of public and private care is stressed, particularly as a means of improving the quality of service provision.     

Community financing of health care

This article discusses ways to lesson the restrictions on health development in sub-Saharan Africa caused by limited public health budgets. Health improvements can be funded by the implementation of health insurance, the use of foreign aid, the raising of taxes, the reallocation of public money, and direct contributions by users or households either in the form of charges for services received or prepayments for future services. Community financing, i.e. the direct financing of health care by households in villages or distinct urban communities, is seen as preferable to a national or regional plan. When community financing is chosen, a choice must then be made between direct payment, fee-for-service, and prepayment (insurance) systems. The 3 systems, using the example of an essential drugs program, are described. Theoretically, with direct payment the government receives full cost recovery, and the patients receive the drugs they need, thereby improving their health. Of course the poor may not be able to purchase the drugs, therefore a subsidy system must be worked out at the community level. Fee-for-service means charging for a consultation or course of treatment, including drugs. A sliding scale of fees or discounts for certain types of consultations (e.g. pre-and post natal) can be used. In fee-for-service the risk is shared; because the cost of drugs is financed by the fees, those who receive costly treatments are subsidized by those whose treatments are relatively inexpensive. With prepayment or health insurance the risk of illness is shifted from the patient to the insurance firm or state. 2 issues make insurance plans hard to implement. When patients are covered by insurance, they may demand "too much" medical care (moral hazard) and thus premiums may be too small to cover treatment costs. On the other hand, people in low-risk groups may be unwilling to pay a higher premium, thus leading to adverse selection. Eventually, premiums may rise to the point where even high-risk individuals no longer find it worthwhile. 2 forms of insurance which may be more successful in sub-Saharan Africa are extended family insurance and compulsory collective insurance organized by an enterprise, cooperative, community, or government. It is necessary to involve the population and to gather in-depth information about a community's socioeconomic status, preferences, and administrative know-how before advice is formulated on policy concerning the financing of drugs and health care.     

The effects of price competition and reduced subsidies for uncompensated care on hospital mortality

OBJECTIVE: To determine whether hospital mortality rates changed in New Jersey after implementation of a law that changed hospital payment from a regulated system based on hospital cost to price competition with reduced subsidies for uncompensated care and whether changes in mortality rates were affected by hospital market conditions. DATA SOURCES/STUDY SETTING: State discharge data for New Jersey and New York from 1990 to 1996. Study Design. We used an interrupted time series design to compare risk-adjusted in-hospital mortality rates between states over time. We compared the effect sizes in markets with different levels of health maintenance organization penetration and hospital market concentration and tested the sensitivity of our results to different approaches to defining hospital markets. DATA COLLECTION/EXTRACTION METHODS: The study sample included all patients under age 65 admitted to New Jersey or New York hospitals with stroke, hip fracture, pneumonia, pulmonary embolism, congestive heart failure, hip fracture, or acute myocardial infarction (AMI). PRINCIPAL FINDINGS: Mortality among patients in New Jersey improved less than in New York by 0.4 percentage points among the insured (p=.07) and 0.5 percentage points among the uninsured (p=.37). There was a relative increase in mortality for patients with AMI, congestive heart failure, and stroke, especially for uninsured patients with these conditions, but not for patients with the other four conditions we studied. Less competitive hospital markets were significantly associated with a relative decrease in mortality among insured patients. CONCLUSIONS: Market-based reforms may adversely affect mortality for some conditions but it appears the effects are not universal. Insured patients in less competitive markets fared better in the transition to price competition.     

The plight of the not-for-profit

Recent controversies in the hospital sector have questioned whether the levels of charity care, community benefit, and executive compensation provided by not-for-profit hospitals are consistent with mandates of their tax-exempt status and mission statements. This article demonstrates that these recent controversies stem from a combination of historical influences, regulatory inequities, and competitive disadvantages, which are suffocating many not-for-profit hospitals across the nation. Once the current environment is described, the article discusses each threat and offers actionable recommendations to quell current attacks faced by the industry. First, to address the current probe by the Internal Revenue Service, hospitals must begin to link their executive compensation with their organizational mission. Second, to address recent lawsuits, the article presents a standardized definition of community benefit and recommends an alternative model to classify charity care. Finally, to address recent congressional hearings, the article offers a plan for hospitals to gauge their expected benefit to the community they serve.     

A determination of institutional and patient factors affecting uncompensated hospital care

For this study, a sample of 985 patients classified as "charity" and "bad debt" cases in 1986 were identified from 28 Indiana hospitals. In a multiple regression model, insurance coverage, total hospital charge, pregnancy-related diagnoses, marital status, employment status, discharge status, urban location, and total hospital revenue were significant factors in predicting unpaid hospital bills, when controlling other demographic characteristics. Sixty percent had some form of insurance and were responsible for 40 percent of the uncompensated amount, justifying the need to examine the adequacy of patient insurance coverage. However, providing insurance coverage will not entirely eliminate the problem of uncompensated care; hospitals also need to increase collection efforts for all unpaid bills.