Organizational and market factors associated with Medicare dependence in inpatient rehabilitation hospitals.

Rehabilitation hospitals in the USA have been excluded from the Medicare Prospective Payment System (PPS) system since 1982, and have received cost-based reimbursement. However, the 1997 Balanced Budget Act mandated a PPS for inpatient rehabilitation, to be implemented by the end of 2002. This study assesses rehabilitation hospitals' dependency on Medicare. Findings show that not-for-profit hospitals, facilities with fewer services, facilities with lower staffing levels, and hospitals with lower operating expenses and profits, have a higher proportion of their inpatient revenue coming from Medicare. These facilities may be vulnerable to the new PPS payment system.

Association of bond, market, operational, and financial factors with multi-hospital system bond issues.

Despite the growth of multi-hospital systems in the 1990s, their performance in the tax-exempt bond market has not been adequately evaluated. The purpose of this study is to compare bonds issued by multi-hospital systems to those issued by individual hospitals in terms of bond, market, operational, and financial characteristics. The study sample includes 2,078 newly issued, tax-exempt, revenue bonds between 1991 and 1997. The findings indicate that multi-hospital systems issued larger amounts of debt at a lower cost, were more likely to be insured, had higher debt service coverage and higher operating margins.

Financial performance and participation in Medicaid and Medi-Cal managed care.

This article assesses the participation and the financial performance of licensed health maintenance organization (HMOs) in the Medicaid market. The study found that participation by Medicaid Dominant plans has more than doubled from 11 percent in 1992 to 23 percent in 1998 while Medicaid membership in Commercial Dominant plans declined from 71 percent in 1994 to 51 percent in 1998. Both participating and non-participating plans incurred operating losses in 1998. Medi-Cal participating plans had higher operating margins than Medicaid participating plans throughout the United States. Interviews with key informants express concern about competence in program management, rate adequacy, decline in Medicaid enrollment, and turbulence forces of managed care market on Medicaid programs.

What determines hospital sponsorship of an HMO?

Using a strategic adaptation framework, this study evaluates the underlying institutional, market, organizational, and financial factors leading to hospital sponsorship of a health maintenance organization (HMO) insurance product. Analyzing hospitals in Metropolitan Statistical Areas (MSAs) in 1995 and 1996, the study found that a hospital is more likely to sponsor an HMO in markets that see a combined interaction effect of a large number of competing HMOs and high HMO penetration. HMO sponsorship also is more likely among hospitals with relatively low market share. Only in small MSA markets do hospitals with greater liquidity sponsor an HMO. Finally, hospitals that are affiliated with a multihospital system and under public ownership are more likely to sponsor HMOs.

Financial analysis of telecardiology used in a correctional setting.

The aim of this study is to evaluate the cost savings of 3 years of telecardiology used in a prison. This study compares the cost per visit of providing cardiology services by telemedicine (telecardiology) to patients at Powhatan Correctional Center of the Virginia Department of Corrections (PCC) and the cost of providing traditional cardiology services at the cardiology clinic of the Medical College of Virginia Campus of Virginia Commonwealth University (MCV Campus). During 1996 to 1998, telecardiology visits increased from 24 per year to 86. In this study, lower use of telecardiology services in 1996 resulted in higher cost per visit of $189. This was $45 more than the cost of traditional cardiology in the cardiology clinic at the MCV Campus. In 1997 and 1998, however, higher utilization of telecardiology services decreased the cost per visit to $135 and $132, respectively. This resulted in a cost saving with telecardiology of $15 per visit in 1997 and $46 per visit in 1998. Because the vast proportion of telemedicine operating costs are fixed, increased utilization causes reduced cost per visit and results in a cost saving compared with providing these services via a non-telemedicine program.

Association of market, mission, operational, and financial factors with hospitals' level of cash and security investments.

Using a resource dependency framework and financial theory, this study assessed the market, mission, operational, and financial factors associated with the level of cash and security investments in hospitals. We ranked hospitals in the study sample based on their cash and security investments as a percentage of total assets: hospitals in the high cash/security investment category were in the top 25th percentile of all hospitals; those in the low cash/security investment group were in the bottom 25th percentile. Findings indicate that high cash/security investment hospitals are under either public or private nonprofit ownership and have greater market share. They also serve more complex cases, offer more technology services, generate greater profits, incur a more stable patient revenue base, and maintain less debt.

A rural cancer outreach program lowers patient care costs and benefits both the rural hospitals and sponsoring academic medical center.

The Rural Cancer Outreach Program (RCOP) between two rural hospitals and the Medical College of Virginia's Massey Cancer Center (MCC) was developed to bring state-of-the-art cancer care to medically underserved rural patients. The financial impact of the RCOP on both the rural hospitals and the MCC was analyzed. Pre- and post-RCOP financial data were collected on 1,745 cancer patients treated at the participating centers, two rural community hospitals and the MCC. The main outcome measures were costs (estimated reimbursement from all sources), revenues, contribution margins and profit (or loss) of the program. The RCOP may have enhanced access to cancer care for rural patients at less cost to society. The net annual cost per patient fell from $10,233 to $3,862 associated with more use of outpatient services, more efficient use of resources, and the shift to a less expensive locus of care. The cost for each rural patient admitted to the Medical College of Virginia fell by more than 40 percent compared with only an 8 percent decrease for all other cancer patients. The rural hospitals experienced rapid growth of their programs to more than 200 new patients yearly, and the RCOP generated significant profits for them. MCC benefited from increased referrals from RCOP service areas by 330 percent for cancer patients and by 9 percent for non-cancer patients during the same time period. While it did not generate a major profit for the MCC, the RCOP generated enough revenue to cover costs of the program. The RCOP had a positive financial impact on the rural and academic medical center hospitals, provided state-of-the-art care near home for rural patients and was associated with lower overall cancer treatment costs.

Strategic hospital alliances: do the type and market structure of strategic hospital alliances matter?

BACKGROUND: Throughout the 1990s, hospitals formed local alliances to defend against increasingly powerful hospital rivals and to improve their market positions relative to aggressive and consolidating managed-care organizations. An important consequence of hospitals combining or aligning horizontally at the local level is a significant consolidation of hospital markets. OBJECTIVE: The aim of this study was to examine the relationship between the type of the local strategic hospital alliances (SHAs), market, environment, and operational factors with financial performance. METHODS: The study is a cross-sectional analysis of the financial performance across SHAs in all metropolitan statistical areas in 1995. RESULTS: SHAs with dominant or dominant for-profit (FP) hospitals are not more financially successful than other SHAs. SHAs in markets with high health maintenance organization (HMO) or SHA penetration have lower revenues per case-mix adjusted discharge. The operational characteristics, proportion of teaching members in the SHA, and SHA bed size, result in higher revenues and expenses, whereas greater SHA technical efficiency results in lower costs. CONCLUSIONS: Health care organizations are centralizing their operations and governance. This study shows that this trend has not added financial value to hospital collectives, at least at this point in their development.

Reversal of fortune: commercial HMOs in the Medicaid market.

Between 1992 and 1996 the number of health maintenance organizations (HMOs) entering the Medicaid market grew at an average annual rate of approximately 22 percent. Participation among all ownership segments grew, resulting in a broad distribution of beneficiaries across the HMO industry. However, recent declines in financial performance within the industry appear to be more dramatic for plans with many Medicaid members. In addition, growing concerns about rate adequacy and volatility as well as expanding administrative demands raise questions about the long-term commitment of commercial HMOs to Medicaid participation. This paper analyzes operating characteristics and financial performance of licensed commercial HMOs from 1992 through 1996, drawing on indepth interviews with health plan executives and managed care stock analysts.

Cost-minimization analysis: A follow-up study of a telemedicine program.

OBJECTIVE: To present the follow-up findings to a cost-benefit analysis of telemedicine subspecialty services provided between the Powhatan Correctional Center (PCC) of the Virginia Department of Corrections and the Medical College of Virginia Campus of Virginia Commonwealth University (MCV Campus). METHODS: Costs included those of operating the telemedicine system, transportation, litigation avoidance, and the medical care itself. RESULTS: Over a 12-month study period, the total number of consults completed through telemedicine was 290. The cost per visit of treating inmates at the MCV Campus clinics was $401. The cost per visit of treating inmates at PCC via telemedicine was $387, a net saving of $14 per visit with the use of telemedicine. CONCLUSION: As a result of implementing telemedicine, the Department of Corrections for the State of Virginia was able to achieve a cost saving of $14 per visit. Nonmonetary cost savings, such as greater security and increased access to care, should be considered a net benefit as well.

Association of HMO penetration and other credit quality factors with tax-exempt bond yields.

This paper evaluates the relationship of HMO penetration, as well as other credit quality measures of market, institutional, operational, and financial traits, to tax-exempt bond yields. The study analyzed more than 1,500 bond issues from 1990 through 1993 and corrected for simultaneous relationships between bond size and yield and selection bias. The study found lower bond yields for hospitals located in markets with no HMO penetration. Lower yields for bond issues also were found for facilities generating higher numbers of days cash on hand and greater debt service coverage. Finally, results show that hospitals with higher occupancy rates achieve a lower yield.

The case of Powhatan Correctional Center/Virginia Department of Corrections and Virginia Commonwealth University/Medical College of Virginia.

OBJECTIVE: To implement a cost/benefit analysis of telemedicine subspecialty care provided between the Powhatan Correctional Center (PCC) of the Virginia Department of Corrections (Corrections) and the Medical College of Virginia campus of Virginia Commonwealth University (MCV/VCU). METHODS: We evaluated the costs and benefits of the implementation of telemedicine for HIV-positive inmates. Benefits included dollar savings in transportation and medical reimbursement. Costs included those of operating the telemedicine system and of medical care. Non-dollar benefits included implementing more consistent and timely treatment of inmates and reducing security risk. RESULTS: Over the 7-month study period, the total number of HIV consults by telemedicine was 165. The Department of Corrections was able to achieve transportation and medical savings of $35,640 and $21,123, respectively. The operating costs for the telemedicine services totaled $42,277. The net benefit, which is the difference between cost savings and total operating costs, was $14,486. CONCLUSION: Telemedicine increased access to care for HIV-positive inmates and generated cost savings in transportation and care delivery.

Association of ownership and system affiliation with the financial performance of rehabilitation hospitals.

This study used a cross-sectional design in which regression models were used to test the association of ownership and system affiliation of private rehabilitation hospitals with profit, revenue and expense measures. The study also examined the association of ownership and system affiliation with other choice variables. The study found that new for-profit rehabilitation hospitals had higher revenues and expenses than older non-profit rehabilitation hospitals. In addition, new for-profit hospitals charged more for their ancillary services and treated more of their patients on an inpatient basis. Study findings show higher revenues and expenses per adjusted discharge for new for-profit facilities. Given the cost-based system of reimbursement for Medicare, there appears to be a strong incentive for new for-profits to maximize costs.

Strategic hospital alliances: impact on financial performance.

Acute care hospitals have increasingly been forming local strategic hospital alliances (SHAs), which consume considerable resources in forming and may affect the competitiveness of provider markets. This research shows that SHAs and market factors, which have been perceived to be threats to hospitals, are related to hospitals' financial performance. Among the findings are that SHA members have higher net revenues but that they are not more effective at cost control. Nor do the higher net revenues result in higher cash flow. However, increasing SHA penetration in a market is related to lower net revenues per case. In addition, the penetration of private health maintenance organizations in markets is associated with lower revenues and expenses.

Assessing the characteristics of hospital bond defaults.

OBJECTIVES: The authors identify market, operational, and financial characteristics associated with the default of hospital revenue bonds using logistic regression analysis. METHODS: Data from 22 defaulted hospitals and 260 nondefaulted hospitals from 1988 to 1992 are analyzed. RESULTS: Findings indicated that defaulted hospitals had smaller market shares, were located in near-urban markets, and incurred higher expenses per discharge than nondefaulted hospitals. Defaulted hospitals also were highly leveraged and had lower debt service coverage ratios compared with nondefaulted hospitals. CONCLUSIONS: Results suggest that market share, ability to generate sufficient case flow to meet debt service, and amount of debt on hand are critical factors in avoiding a bond default but not government payer mix.

The performance of Hospital Corporation of America and Healthtrust hospitals after leveraged buyouts.

The authors examine performance changes after two leveraged buyouts (LBOs) in the hospital industry, one an employee stock ownership plan (ESOP) and the other a managed buyout (MBO). The findings show that hospitals owned by HCA, the MBO firm, and Health Trust, the ESOP firm, did not increase revenues, decrease operating expenses, or improve profitability after the LBOs, relative to other hospitals in their local markets. Nor were the numbers or salaries of employees at these facilities decreased. Although performance incentives associated with LBOs did not change performance at the hospital level, incentives to meet debt payments did result in corporate changes. More specifically, the LBOs led to corporate downsizing through the sale of hospitals and subsidiaries.

Measuring the technical efficiency of psychiatric hospitals.

The purpose of this study was to assess the efficiency of psychiatric hospitals. Data Envelopment Analysis was used to examine the technical efficiency for sample of the 85 profit and not-for-profit psychiatric hospitals. Results suggests reduction of excessive resource use by all inefficient facilities would result, on average, in a $7.2 million dollar savings in operational expenses, a total of 1715 FTEs in labor reductions, and a reduction of 1129 beds.