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.