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.

"Precision health" for high-need, high-cost patients

It is increasingly clear that high-need, high-cost patients are not a homogenous group, but rather a diverse set of patients with varied circumstances and needs. Acting on this insight requires comprehensive data networks we have not traditionally had, and most analyses to date have focused primarily on claims data. We argue that making clinical and financial gains will require data-sharing networks that integrate clinical factors, genomic information, and social determinants from multiple health systems. Investing in these networks may allow us to better anticipate the unique needs of patients, conceptualize care models to meet those needs, and put targeted interventions into action.

As for-profits stumble, regional systems pick up the pieces

Some regional not-for-profit systems see acquiring the hospital assets of struggling for-profit operators as a way to gain referrals, expand their provider networks and consolidate their regions.

Letters to the Editor

As part of marking Inquiry's 40th year of publication, we are introducing a new feature to the journal—a “Letters to the Editor” section. We invite interested readers to send their comments on research articles or opinion columns published in the journal. Letter topics may range from critiques of methods or models used in articles to presenting alternative views on subjects raised in opinion columns or in interpretations of research findings. Letters should be no longer than 750 words; Inquiry's editors reserve the right to edit the letters for clarity and length. Letters selected for publication will undergo our usual copyediting process; we cannot acknowledge receipt of letters that are not published. Submit letters to: Letters to the Editor, Inquiry, P.O. Box 25399, Rochester, NY 14625–0399.

'We asked what services ... could be better performed at centers of excellence throughout the system'

After becoming CEO of the near bankrupt Mount Sinai Medical Center in New York City in 2003, Dr. Kenneth Davis led a notable financial turnaround with the help of a board filled with some of New York City's wealthiest businessmen. Now, as head of a financially robust system that includes seven hospitals, 7,100 employed physicians and a sprawling network of practices and ambulatory centers that stretches from Westchester County to Florida, he is attempting to lead Mount Sinai into the new era of population health management and affordable care. Modern Healthcare Editor Merrill Goozner asked him about key elements in that transition. This is an edited transcript.

Enhancing the revenue cycle experience for patients

In 2013, Texas Health Resources began to record discussions with patients at each revenue cycle touch point, from scheduling through registration. The recordings give leaders insight on the accuracy and consistency of information communicated at each touch point and provide a tool for improving customer service. The initiative has improved patient satisfaction and increased point-of-service collections.