Efficiency and profitability in US not-for-profit hospitals.

This article examines the relationship between hospital profitability and efficiency. A cross-section of 1317 U.S. metropolitan, acute care, not-for-profit hospitals for the year 2015 was employed. We use a frontier method, stochastic frontier analysis, to estimate hospital efficiency. Total margin and operating margin were used as profit variables in OLS regressions that were corrected for heteroskedacity. In addition to estimated efficiency, control variables for internal and external correlates of profitability were included in the regression models. We found that more efficient hospitals were also more profitable. The results show a positive relationship between profitability and size, concentration of output, occupancy rate and membership in a multi-hospital system. An inverse relationship was found between profits and academic medical centers, average length of stay, location in a Medicaid expansion state, Medicaid and Medicare share of admissions, and unemployment rate. The results of a Hausman test indicates that efficiency is exogenous in the profit equations. The findings suggest that not-for-profit hospitals will be responsive to incentives for increasing efficiency and use market power to increase surplus to pursue their objectives.

Performance Of Safety-Net Hospitals In Year 1 Of The Comprehensive Care For Joint Replacement Model.

The Comprehensive Care for Joint Replacement (CJR) model introduced in 2016 aims to improve the quality and costs of care for Medicare beneficiaries undergoing hip and knee replacements. However, there are concerns that the safety-net hospitals that care for the greatest number of vulnerable patients may perform poorly in CJR. In this study we used Medicare's CJR data to evaluate the performance of 792 hospitals mandated to participate in the first year of CJR. We found that in comparison to non-safety-net hospitals, 42 percent fewer safety-net hospitals qualified for rewards based on their quality and spending performance (33 percent of safety-net hospitals qualified, compared to 57 percent of non-safety-net hospitals), and safety-net hospitals' rewards per episode were 39 percent smaller ($456 compared to $743). Continuation of this performance trend could place safety-net hospitals at increased risk of penalties in future years. Medicare and hospital strategies such as those that reward high-quality care for vulnerable patients could enable safety-net hospitals to compete effectively in CJR.

Financial performance of English NHS trusts and variation in clinical outcomes: a longitudinal observational study.

OBJECTIVES: To examine the association between financial performance as measured by operating margin (surplus/deficit as a proportion of turnover) and clinical outcomes in English National Health Service (NHS) trusts. SETTING: Longitudinal, observational study in 149 acute NHS trusts in England between the financial years 2011 and 2016. PARTICIPANTS: Our analysis focused on outcomes at individual NHS Trust-level (composed of one or more acute hospitals). PRIMARY AND SECONDARY OUTCOMES: Outcome measures included readmissions, inpatient satisfaction score and the following process measures: emergency department (Accident and Emergency (A&E)) waiting time targets, cancer referral and treatment targets and delayed transfers of care (DTOCs). RESULTS: There was a progressive increase in the proportion of trusts in financial deficit: 22% in 2011, 27% in 2012, 28% in 2013, 51% in 2014, 68% in 2015 and 91% in 2016. In linear regression analyses, there was no significant association between operating margin and clinical outcomes (readmission rate or inpatient satisfaction score). There was, however, a significant association between operating margin and process measures (DTOCs, A&E breaches and cancer waiting time targets). Between the best and worst financially performing Trusts, there was an approximately 2-fold increase in A&E breaches and DTOCs overall although this variation decreased over the 6 years. Between the best and worst performing trusts on cancer targets, the magnitude of difference was smaller (1.16 and 1.15-fold), although the variation slowly rose during the 6 years. CONCLUSIONS: Operating margins in English NHS trusts progressively worsened during 2011-2016, and this change was associated with poorer performance on several process measures but not with hospital readmissions or inpatient satisfaction. Significant variation exists between the best and worst financially performing Trusts. Further research is needed to examine the causal nature of relationships between financial performance, process measures and outcomes.

Doing well by doing good: Evaluating the influence of patient safety performance on hospital financial outcomes.

BACKGROUND: As financial pressures on hospitals increase because of changing reimbursement structures and heightened focus on quality and value, the association between patient safety performance and financial outcomes remains unclear. PURPOSE: The purpose of this study is to investigate if hospitals with higher patient safety performance are associated with higher levels of profitability than those with lower safety performance. METHODOLOGY/APPROACH: Using multinomial logistic regression, we analyzed data from the spring 2014 Leapfrog Hospital Safety Score and the 2014 American Hospital Association to determine the association between Leapfrog Hospital Safety Score performance and three dimensions of organizational profitability: operating margin, net patient revenue, and operating income. RESULTS: Our findings suggest that improved hospital safety scores are associated with a relative risk of being in the top versus bottom quartile of financial performance: 5.41 times greater (p < .001) for operating margin, 10.98 times greater (p < .001) for net patient revenue, and 4.03 times greater (p < .001) for operating income. PRACTICE IMPLICATIONS: Our findings suggest that improved patient safety performance, as evaluated within the Leapfrog Hospital Safety Score, is associated with improved financial performance at the hospital level. Targeted focus on patient safety may allow hospitals to improve financial performance, maximize scarce resources, and generate additional capital to continue to positively evolve care.

The Impact of Maryland's Global Budget Payment Reform on Emergency Department Admission Rates in a Single Health System.

BACKGROUND: In 2014, the state of Maryland (MD) moved away from fee-for-service payments and into a global budget revenue (GBR) structure where hospitals have a fixed revenue target, independent of patient volume or services provided. We assess the effects of GBR adoption on emergency department (ED) admission decisions among adult encounters. METHODS: We used hospital medical record and billing data from adult ED encounters from January 1, 2011, through December 31, 2015, with four MD hospitals and two District of Columbia (DC) hospitals within the same health system. We performed difference-in-differences analysis and calculated the effects of the GBR model on ED admission rates (inpatient and observation) using hospital fixed-effect regression adjusted for patient, hospital, and community factors. We also examined changes in the distribution of acuity among ED admissions with GBR adoption. RESULTS: The study sample included 1,492,953 ED encounters with a mean ED admission rate of 20.5%. The ED admission rate difference pre- and post-GBR was -1.14% (95% confidence interval [CI] = -0.89 to -1.40) for MD hospitals and -0.04% (95% CI = -0.24 to 0.32) for DC hospitals with a difference-in-differences result of -1.10% (95% CI = -1.34 to -0.86). This change was attributable to a -3.3% (95% CI = -3.54 to -3.08) decline in inpatient admissions and 2.7% (95% CI = 2.53 to 2.79) increase in observation admissions. Declines in admissions were observed primarily among mild-to-moderate severity of illness encounters with a low risk of mortality. CONCLUSIONS: Within the same health system, implementation of global budgeting in MD hospitals was associated with a decline in ED admissions-particularly lower-acuity admissions-compared to DC hospitals that remained under fee-for-service payments.

Analysis of Factors Influencing Hospitals' Implementation of a Green E-Procurement System Using a Cloud Model.

Currently, the green procurement activities of private hospitals in Taiwan follow the self-built green electronic-procurement (e-procurement) system. This requires professional personnel to take the time to regularly update the green specification and software and hardware of the e-procurement system, and the information system maintenance cost is high. In the case of a green e-procurement system crash, the efficiency of green procurement activities for hospitals is affected. If the green e-procurement can be moved to a convenient and trusty cloud computing model, this will enhance the efficiency of procurement activities and reduce the information maintenance cost for private hospitals. However, implementing a cloud model is an issue of technology innovation application and the technology-organization-environment (TOE) framework has been widely applied as the theoretical framework in technology innovation application. In addition, finding the weight of factors is a multi-criteria decision-making (MCDM) issue. Therefore, the present study first collected factors influencing implementation of the cloud mode together with the TOE as the theoretical framework, by reviewing the literature. Therefore, an expert questionnaire was designed and distributed to top managers of 20 private hospitals in southern Taiwan. The fuzzy analysis hierarchical process (FAHP), which is a MCDM tool, finds the weights of the factors influencing private hospitals in southern Taiwan when they implement a cloud green e-procurement system. The research results can enable private hospitals to successfully implement a green e-procurement system through a cloud model by optimizing resource allocation according to the weight of each factor. In addition, the results of this research can help cloud service providers of green e-procurement understand users' needs and develop relevant cloud solutions and marketing strategies.

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.

Public hospital reform in Turkey: The "public hospital union" case (2012-2017).

The issue of public hospital reform in Turkey was raised in the mid-1980s due to the desire to restrict public expenditures for health care services. In the last 30 years, transformations of public hospitals into health enterprises with administrative and financial autonomy have been attempted in various ways. The process of subjecting public hospitals to reform evolved into the provincial "public hospital unions" model with the Decree Law No. 663 in November 2011. However, this model, which was created to use resources effectively and efficiently in the field of health, was terminated in 2017. The purpose of this study is to review and evaluate the "public hospital union" model of public hospital reform implemented between 2012 and 2017 as an integrated part of reforms in the Turkish health care system and to examine the factors and obstacles that led to the failure of this model. The level of autonomy, in terms of key management functions of unions and hospitals, was analyzed using the toolkit proposed by Chawla et al (1996), and Preker and Harding (2003). In the study, it is asserted that instead of autonomization and decentralization, such organizational reforms result in centralization and political control.

Qualitative analysis of the dynamics of policy design and implementation in hospital funding reform.

BACKGROUND: As in many health care systems, some Canadian jurisdictions have begun shifting away from global hospital budgets. Payment for episodes of care has begun to be implemented. Starting in 2012, the Province of Ontario implemented hospital funding reforms comprising three elements: Global Budgets; Health Based Allocation Method (HBAM); and Quality-Based Procedures (QBP). This evaluation focuses on implementation of QBPs, a procedure/diagnosis-specific funding approach involving a pre-set price per episode of care coupled with best practice clinical pathways. We examined whether or not there was consensus in understanding of the program theory underpinning QBPs and how this may have influenced full and effective implementation of this innovative funding model. METHODS: We undertook a formative evaluation of QBP implementation. We used an embedded case study method and in-depth, one-on-one, semi-structured, telephone interviews with key informants at three levels of the health care system: Designers (those who designed the QBP policy); Adoption Supporters (organizations and individuals supporting adoption of QBPs); and Hospital Implementers (those responsible for QBP implementation in hospitals). Thematic analysis involved an inductive approach, incorporating Framework analysis to generate descriptive and explanatory themes that emerged from the data. RESULTS: Five main findings emerged from our research: (1) Unbeknownst to most key informants, there was neither consistency nor clarity over time among QBP designers in their understanding of the original goal(s) for hospital funding reform; (2) Prior to implementation, the intended hospital funding mechanism transitioned from ABF to QBPs, but most key informants were either unaware of the transition or believe it was intentional; (3) Perception of the primary goal(s) of the policy reform continues to vary within and across all levels of key informants; (4) Four years into implementation, the QBP funding mechanism remains misunderstood; and (5) Ongoing differences in understanding of QBP goals and funding mechanism have created challenges with implementation and difficulties in measuring success. CONCLUSIONS: Policy drift and policy layering affected both the goal and the mechanism of action of hospital funding reform. Lack of early specification in both policy goals and hospital funding mechanism exposed the reform to reactive changes that did not reflect initial intentions. Several challenges further exacerbated implementation of complex hospital funding reforms, including a prolonged implementation schedule, turnover of key staff, and inconsistent messaging over time. These factors altered the trajectory of the hospital funding reforms and created confusion amongst those responsible for implementation. Enacting changes to hospital funding policy through a process that is transparent, collaborative, and intentional may increase the likelihood of achieving intended effects.

Longitudinal analysis of high-technology medical services and hospital financial performance.

BACKGROUND: U.S. hospitals have been investing in high-technology medical services as a strategy to improve financial performance. Despite the interest in high-tech medical services, there is not much information available about the impact of high-tech services on financial performance. PURPOSE: The aim of this study was to examine the impact of high-tech medical services on financial performance of U.S. hospitals by using the resource-based view of the firm as a conceptual framework. METHODOLOGY/APPROACH: Fixed-effects regressions with 2 years lagged independent variables using a longitudinal panel sample of 3,268 hospitals (2005-2010). It was hypothesized that hospitals with rare or large numbers (breadth) of high-tech medical services will experience better financial performance. FINDINGS: Fixed effects regression results supported the link between a larger breadth of high-tech services and total margin, but only among not-for-profit hospitals. Both breadth and rareness of high-tech services were associated with high total margin among not-for-profit hospitals. Neither breadth nor rareness of high-tech services was associated with operating margin. Although breadth and rareness of high-tech services resulted in lower expenses per inpatient day among not-for-profit hospitals, these lower costs were offset by lower revenues per inpatient day. PRACTICE IMPLICATIONS: Enhancing the breadth of high-tech services may be a legitimate organizational strategy to improve financial performance, especially among not-for-profit hospitals. Hospitals may experience increased productivity and efficiency, and therefore lower inpatient operating costs, as a result of newer technologies. However, the negative impact on operating revenue should caution hospital administrators about revenue reducing features of these technologies, which may be related to the payer mix that these technologies may attract. Therefore, managers should consider both the cost and revenue implications of these technologies.

Hospital Capital Investment During the Great Recession.

Hospital capital investment is important for acquiring and maintaining technology and equipment needed to provide health care. Reduction in capital investment by a hospital has negative implications for patient outcomes. Most hospitals rely on debt and internal cash flow to fund capital investment. The great recession may have made it difficult for hospitals to borrow, thus reducing their capital investment. I investigated the impact of the great recession on capital investment made by California hospitals. Modeling how hospital capital investment may have been liquidity constrained during the recession is a novel contribution to the literature. I estimated the model with California Office of Statewide Health Planning and Development data and system generalized method of moments. Findings suggest that not-for-profit and public hospitals were liquidity constrained during the recession. Comparing the changes in hospital capital investment between 2006 and 2009 showed that hospitals used cash flow to increase capital investment by $2.45 million, other things equal.

Point-of-Care Ultrasound Work Flow Innovation: Impact on Documentation and Billing.

OBJECTIVES: To evaluate the impact that an innovative automated ultrasound (US) work flow, which allows for bedside performance of examination documentation and order placement, has on point-of-care US billing compared to ordering US examinations through an electronic medical record. METHODS: We conducted a retrospective review of point-of-care US billing data (March 2014-February 2016) for adult and pediatric emergency departments with an emergency medicine residency and a US fellowship. An innovative work flow with the ability to automate US billing and selectively transfer the images and reports for patient care examinations to an electronic medical record and picture archiving and communication system using the QPath US work flow solution (Telexy Healthcare, Maple Ridge, British Columbia, Canada) was implemented. The total number of examinations billed and percent increase in technical and professional revenue, excluding examinations performed by US fellows, before and after implementation of the automated work flow innovation were determined. RESULTS: After implementation of our automated US work flow process, the number of patient care US examinations billed increased significantly due to completing documentation and immediate billing determination at the bedside. The increase in percent billing relative to total examinations was noted in both technical (32% to 61%; P < .0001) and professional (37% to 65%; P < .0001) billing components. In addition, there was a net increase in technical and professional fee revenue to 96% and 78%, respectively. CONCLUSIONS: The implementation of an innovative automated work flow to include bedside point-of-care US documentation, order placement, and the automated transfer of images and reports led to a significant increase in US billing revenue, documentation, and compliance.

Patient experience and hospital profitability: Is there a link?

BACKGROUND: Patient experience has had a direct financial impact on hospitals since value-based purchasing was instituted by the Centers for Medicare & Medicaid Services in 2013 as a method to reward or punish hospitals based on performance on various measures, including patient experience. Although other industries have shown an indirect impact of customer experience on overall profitability, that link has not been well established in the health care industry. Return-to-provider rate and perceptions of health quality have been associated with profitability in the health care industry. PURPOSE: Our aims were to assess whether, independent of a direct financial impact, a more positive patient experience is associated with increased profitability and whether a more negative patient experience is associated with decreased profitability. METHODOLOGY/APPROACH: We used a sample of 19,792 observations from 3767 hospitals over the 6-year period 2007-2012. The data were sourced from Centers for Medicare & Medicaid Services and Hospital Consumer Assessment of Healthcare Providers and Systems. Using generalized estimating equations to account for repeated measures, we fit four separate models for three dependent variables: net patient revenue, net income, and operating margin. Each model included one of the following independent variables of interest: percentage of patients who definitely recommend the hospital, percentage of patients who definitely would not recommend the hospital, percentage of patients who rated the hospital 9 or 10, and percentage of patients who rated the hospital 6 or lower. FINDINGS: We identified that a positive patient experience is associated with increased profitability and a negative patient experience is even more strongly associated with decreased profitability. PRACTICE IMPLICATIONS: Management should have greater justification for incurring costs associated with bolstering patient experience programs. Improvements in training, technology, and staffing can be justified as a way to improve not only quality but now profitability as well.

Business performance management in university hospitals: a diagnosis in Brazilian institutions.

OBJECTIVES: To investigate whether business performance management practices are used by Brazilian federal university hospitals, and if so, to determine which practices are used and explore characteristics that may be related to their adoption. METHOD: Descriptive ex post facto research on the effects of the studied variables in relation to the technical procedures. Secondary data and survey resources were used. RESULTS: Four hospitals use practices to assess business performance. Three of them stated that they use two different types of practices and that 75 % of university hospitals with at least one business performance management practice also have a strategic plan that includes vision, mission, objectives and long-term operational plans. Among the hospitals that do not use business performance management practices, 55.6 % claim to have strategic planning composed at least of mission, vision and long-term objectives. However, they stated that the entity has no plans to adopt any method. CONCLUSIONS: This diagnosis intends to draw the attention of managers and other actors in the field of public health on the possibilities offered by performance evaluation systems to promote administrative improvements in a complex internal scenario with a need for rationalization of hospital costs in order to direct these institutions towards achieving their social mission.

Hospitals benefiting from healthy bond market.

The bond market continues to be favorable for hospitals looking to finance projects, growth.

Role of Surgical Services in Profitability of Hospitals in California: An Analysis of Office of Statewide Health Planning and Development Annual Financial Data.

With constant changes in health-care laws and payment methods, profitability, and financial sustainability of hospitals are of utmost importance. The purpose of this study is to determine the relationship between surgical services and hospital profitability. The Office of Statewide Health Planning and Development annual financial databases for the years 2009 to 2011 were used for this study. The hospitals' characteristics and income statement elements were extracted for statistical analysis using bivariate and multivariate linear regression. A total of 989 financial records of 339 hospitals were included. On bivariate analysis, the number of inpatient and ambulatory operating rooms (ORs), the number of cases done both as inpatient and outpatient in each OR, and the average minutes used in inpatient ORs were significantly related with the net income of the hospital. On multivariate regression analysis, when controlling for hospitals' payer mix and the study year, only the number of inpatient cases done in the inpatient ORs (ß = 832, P = 0.037), and the number of ambulatory ORs (ß = 1,485, 466, P = 0.001) were significantly related with the net income of the hospital. These findings suggest that hospitals can maximize their profitability by diverting and allocating outpatient surgeries to ambulatory ORs, to allow for more inpatient surgeries.