Analysis of nursing home capital reimbursement systems

An increasing number of States are using a fair-rental approach for reimbursement of nursing home capital costs. In this study, two variants of the fair-rental capital-reimbursement approach are compared with the traditional cost-based approach in terms of after-tax cash flow to the investor, cost to the State, and rate of return to investor. Simulation models were developed to examine the effects of each capital-reimbursement approach both at specific points in time and over various periods of time. Results indicate that although long-term costs were similar for the three systems, both fair-rental approaches may be superior to the traditional cost-based approach in promoting and controlling industry stability and, at the same time, in providing an adequate return to investors.

The ongoing capital pass-through battle: is a solution in sight?

The debate over whether and how to incorporate Medicare Part A capital payments into the prospective pricing system is beginning to seem like a political rerun, as the Health Care Financing Administration prepares its third proposed capital regulations. And once again hospitals are sprucing up opposing arguments to convince Congress that they are right and HCFA is wrong.

Accounting based risk measures for not-for-profit hospitals

This paper discusses the issues involved with determining an appropriate discount rate for not-for-profit hospitals and develops a method for computing measures of systematic risk based on a hospital's own accounting data. Data on four hospital management companies are used to demonstrate the method. Results indicate the need for sensitivity analysis in the selection of estimation methods and in the final determination of a discount rate.

Third party reimbursement

The decisions made by materiel managers will continue to be driven to a great extent by cost and budgetary considerations. In fact, the movement to more fixed-rate payment systems tends to create even a greater emphasis on materiel management programs. However, there are strategies that are available to materiel managers to react to the various third party payment systems. In most cases, implementation of these strategies will require coordination between accounting/finance personnel and materiel managers.

Occupational medicine. The science of accounting

Accounting is inextricably linked to professional practice, industry and commerce. Having knowledge of some fundamental concepts may ease the burdens imposed by the need to maintain accounting records and help occupational health professionals to operate better within the corporate realm. The material in this chapter is intended to provide a bare-bones introduction to accounting for the novice and a brief review for those with more experience. More advanced material is contained in Chapter 4.

Fair rental systems: paying nursing homes for capital costs

Fair rental systems pay an imputed rent for the housing a nursing home provides for its residents. The rent is paid in place of reimbursement for capital costs covered by the system--depreciation, interest, lease payments, and return on equity capital. It is an approach that is intended to overcome the inflationary incentives of cost-based reimbursement. Several state Medicaid programs have adopted fair rental systems using different approaches. And although it is too early to tell which approach is best, one point seems clear--a fair rental system can be a distinct improvement over cost-based reimbursement, depending on design and administration.

[Management of electron accelerators for radiotherapy. Data as of 31 December 1984]

Several italian radiotherapeutic centers have supplied the data analysed, regarding problems connected with the management of electron accelerators in the years 1982-1983-1984. The data concern 27 out of the 35 accelerators settled in Italy. The average cost of purchase has proved to be of 940 M pounds with an expense of annual allowance of 94 M pounds. We have then analysed the incidences of the allowance of the purchase expenditure of the machine (23%), the allowance of the expenses for the construction of the bunker (22%), the expenses of maintenance of the machine (5%), the cost of the staff (48%) and the cost of the power supply (2%) on the management costs (about pounds 820.000 per each handled patient). The duration of the various phases of the machinery installment, from the purchase to the beginning of the treatment, the charge of work supported in the three considered years, the daily use of the machinery and the problems deriving from days of time out of services due to failures or to periodical maintenance have then been studied. The analysis of the average values of the parameters studied and of the range of their variability allows us to find out the sector in which it is possible, also at present, to intervene in order to ameliorate the employment of a linear accelerator, regarding the costs and the performance.

Assessing present and future capital expense levels under PPS

The expected shift in the method of payment for capital costs will affect the way decisions are made by hospital executives. The capital expense ratio model is one way executives can better assess their present and future capital expense levels as payments begin to be made under a prospective payment system.

No easy answers: issues in accounting for hospital acquisitions

A real and often overlooked concern created by the Deficit Reduction Act of 1984 is the effect these amendments have on the cash flow generated by an acquisition. Financial managers, therefore, should be aware of the accounting issues created by the act--depreciation and its effect on appraised values, reevaluation to the present value of assumed indebtness, and capitalization of acquisition costs--to accurately evaluate the feasibility of an acquisition.

Prospective payment for hospital capital by Medicare: issues and options

After this year, Medicare will no longer reimburse capital-related expenses. Instead, a new approach may be implemented. Should the new capital payment scheme be prospective? Should Medicare continue to recognize return on equity? What will be the relationship between Medicare payment and health care planning? These and other questions should be asked since the answers will directly affect the health care setting.

Treating the merger as a taxable versus tax-free combination

A key issue in any business combination is whether the transaction is to be a taxable acquisition or a tax-free reorganization. Neither structure's benefits clearly dominate. Taxable acquisitions result in greater inventory cost and depreciation tax benefits to the buyer and more tax to the seller. Tax-free reorganizations allow the seller to avoid current payment of at least some taxes but result in less favorable tax benefits to the buyer. Each merger must therefore be tailored to fit the specific needs and wishes of the parties involved.

The physician as a source of hospital capital

As hospitals search for means of financing renovation during the next decade, physicians will represent a source of capital through tax-shelter financing. Limited partnerships, condominiums , and joint ventures in acquiring medical equipment or syndicating existing facilities are among the most promising investment vehicles for taking advantage of tax benefits that normally do not apply to nonprofit institutions. In a hospital-physician limited partnership, tax deductions are passed through to the partners, of which there are two kinds: general partners and limited partners. Income (or loss) and tax credits from the entire venture can be divided among the partners and reflected on an individual limited partner's tax return. Rather than shouldering the whole cost of renovating a medical office building, thereby losing the potential tax credit, a hospital could carry out the renovation through a limited partnership with physicians. This would reduce the hospital's capital costs and debt requirements, maintain its credit, and enable it to take advantage of the depreciation deduction. In a condominium venture, the individual physician actually owns the office within which he or she works. As with the limited partnership, the hospital will want to restrict physicians' ability to dispose of their ownership interests.(ABSTRACT TRUNCATED AT 250 WORDS)

A proposal for capital cost payment

This article proposes new bases for the payment of hospital capital costs. Separate distinctions between proprietary and voluntary hospitals are made based on their definition of capital and the requirements for capital maintenance. Replacement cost depreciation is suggested as the payment basis for voluntary hospitals.

New tax law hobbles tax-exempt hospitals

The Economic Recovery Tax Act of 1981 left tax-exempt hospitals at a significant disadvantage in the competition for capital. Although the new law's accelerated depreciation schedules and liberalized investment tax credits contain some marginal benefits for tax-exempt hospitals, these benefits are probably more than offset by the impact of the law on charitable giving.

Coping with the capital shortage

A growing capital shortage problem is affecting the long-range financial viability of hospitals. Trustees can ensure their hospital's future financial viability by asking key questions and by participating in the development of a long-range financial plan.