The use of volume standards in health services.

The ways in which volume standards are implemented by health services organizations are not clear. Therefore, the authors sought to evaluate the extent of use of volume standards, the purposes for which such standards were developed, and the sources of the standards in a sample of health services organizations. The authors found that volume standards were used widely by accrediting organizations, professional societies, and hospitals in their sample, but almost never by health maintenance organizations. Volume standards were used for ensuring adequate experience among residents, providing guidelines to residency programs, and privileging and credentialing physicians. Expert consensus appeared to be the usual source of volume standards.

Financial management in leading health care systems.

To understand better the financial management practices and strategies of modern health care organizations, we conducted interviews with chief financial officers (CFOs) of several leading health care systems. In this introduction, we present an overview of the project and summary responses on corporate financial structures and strategic challenges facing CFOs.

Capital investment strategies in health care systems.

Capital investment decisions are among the most important decisions made by firms. They determine the firm's capacity for providing services and commit the firm's cash for an extended period of time. Interviews with chief financial officers of leading health care systems reveal capital investment strategies that generally follow the recommendations of modern finance theory. Still, there is substantial variation in capital budgeting techniques, methods of risk adjustment, and the importance of qualitative considerations in investment decision making. There is also variation in delegation of investment decision making to operating units and methods of performance evaluation. Health care systems face the same challenges as other organizations in developing and implementing capital investment strategies that use consistent methods for evaluation of projects that have inconsistent aims and outcomes.

Capital structure strategy in health care systems.

The capital structures (the relative use of debt and equity to support assets) of leading health care systems are viewed as a strategic component of their financial plans. While not-for-profit hospitals as a group have maintained nearly constant levels of debt over the past decade, investor-owned hospitals and a group of leading health care systems have reduced their relative use of debt. Chief financial officers indicated that in addition to reducing debt because of less favorable reimbursement incentives, there was a focus on maintaining high bond ratings. Debt levels have not been reduced as sharply in these health care systems as they have in investor-owned hospitals, in part due to the use of debt to support investments in financial markets. Because these health care systems do not have easy access to equity, high bond ratings and solid investment earnings are central to their capital structure policies of preserving access to debt markets.

Sources of project financing in health care systems.

Through discussions with chief financial officers of leading health care systems, insights are offered on preferences for project financing and development efforts. Data from these same systems provide at least anecdotal evidence in support of pecking-order theory.

Cash management in health care systems.

Cash is one of the most precious assets held by health systems. This article presents results of discussions on cash management and investment policies at a dozen major not-for-profit health systems. Health system data indicate that cash holdings have increased dramatically since 1993, mostly due to investment earnings. Discussions with chief financial officers of these health systems reveal that cash holdings are significant, that decisions about cash balances are strategic, and that most systems aim to increase cash balances to levels that permit access to capital markets on more favorable terms.