The impact of the Balanced Budget Act on the utilization and financial condition of children's services in California hospitals

The objective of this study was to evaluate the utilization and financial performance of children's services after the Balanced Budget Act of 1997. The author analyzed these performance factors by hospital ownership, HMO penetration, and disproportionate share hospitals. Using data from California hospitals and conducting an analysis from 1997 to 1999, the author found that public hospitals were able to increase their profits from pediatric and neonatal intensive care services. The study also revealed that DSH hospitals located in high HMO penetration markets reduced their operating losses in nursery and pediatric services.

The money issue

Volume is rising at a healthy pact. Technology is improving patient care. Many organizations have, out of necessity, strengthened business fundamentals, controlled costs and refined their focus. Yet not-for-profit hospitals are squeezed by a cash crunch that has balance sheets under pressure and credit downgrades outpacing upgrades--the result of shrinking investment income, rising pension obligations, low government reimbursement and other threats to operational stability. N&HN looks at the challenges, including recent fallout from the most pressing issues, how some systems have responded, and the pros and cons of borrowing now.

Rates of return from hospital conversions

This article presents information on the rates of return obtained by purchasers of U.S. hospitals since the mid 1980s. The key hypothesis tested in this study was whether for-profit acquirers are able to purchase hospitals at below-market prices. We test the hypothesis by comparing internal rates of return to an estimate of the weighted cost of capital for all for-profit hospitals in the year the transaction occurred.

The effect of financial pressure on the quality of care in hospitals

This paper examines the effect of financial pressure on hospital quality, using health outcomes after treatment for acute myocardial infarction (AMI) as quality indicators. The financial pressure variables are: fiscal pressure from the Prospective Payment System (PPS) for inpatient care, and changes in health maintenance organization (HMO) penetration at the county level. The study shows that both types of financial pressures adversely affect short-term health outcomes, but do not affect patient survival beyond 1 year after patients' hospital admissions. Furthermore, the impact of HMO penetration appears to differ from that of Medicare payment changes for certain hospitals because HMO penetration encourages price competition.

The financial experience of hospitals with HMO contracts: evidence from Florida

In this paper, we report results from the first study to systematically examine trends in the financial experience of hospitals with health maintenance organization (HMO) contracts. The longitudinal analysis (1990 through 1997) focused on hospitals in Florida. Hospital operating margins for HMO contracts grew tighter toward the end of the study period when the median margin was less than 1%. Teaching hospitals had operating margins that on average were below that of their nonteaching counterparts. The continued growth of HMOs and other managed care entities may have important implications for the future financial viability of U.S. hospitals.

NFP Investor Conference. Growth is back in sight

In a whirlwind of high-stakes meetings in New York City in mid-May, two dozen of the nation's largest hospitals and health systems strutted their stuff with a single goal: securing their future. Their message was clear: back-to-basics works, and now it's time to grow the business. Executives from 23 providers outlined their work on increasing revenue, boosting margins and shoring up balance sheets. They presented their market positions, strategic initiatives and financial results for investment analysts, credit raters and bond traders. The third annual Non-Profit Healthcare Investor Conference was co-sponsored by the American Hospital Association, Health Forum, the Healthcare Financial Management Association and Salomon Smith Barney. The focus on growth doesn't come without challenges Several common themes emerged from the presentations, among them pressure on reimbursement, workforce shortages, liability insurance issues and capacity constraints. Yet executives agree: it all comes down to the basics, and building the strength to keep their missions alive. As Thomas Meier, vice president and treasurer of Oakland, Calif.-based Kaiser Permanente, put it: "No margin, no mission, no más."

Healthcare's crown jewels. A looming 15% reduction in Medicare payments could tarnish the financial viability of teaching hospitals, studies say. Others, however, say they'll keep shining despite the scheduled cuts

Though saddled with higher costs than other hospitals, teaching hospitals reap plump margins on Medicare. But that could change this fall. A volley of studies say a looming 15% cut in indirect medical education payments and disproportionate-share payments could threaten the financial viability of healthcare's crown jewels unless Congress reverses current law.

Loyal clients. Despite Arthur Andersen's indictment, healthcare companies aren't defecting

In contrast to about 50 defections by public companies, many healthcare clients of Andersen are standing by the troubled auditor--at least for now. Saying that it's too soon to judge, clients such as the Catholic Health Association are sitting tight to see what the fallout is from the Enron scandal before making any decisions. And even if many part ways with Andersen, there's a host of consultants to take its place.

A multitude of strains add up to one big headache. Feeling the pressure?

A multitude of strains--most beyond the control of health care executives--are converging to create major headaches for hospitals and systems. Skyrocketing insurance premiums, surging drug spending, Medicaid cuts, a staffing crisis and huge hikes in liability insurance rates contribute to the unprecedented confluence of pressures. And there's more.

An empirical investigation of hospital profitability in the post-PPS era

In this study, we identify the empirical determinants of hospital profitability, as measured by return on assets, using a comprehensive sample of hospitals from all four U.S. regions over the post-PPS era. We augment previous empirical models of hospital profitability by considering the effects of additional economic and financial variables and the effects of conversion of ownership status. Our empirical findings suggest that the following factors are significant determinants of hospital profitability during the post-PPS era: geographic location, ownership status, teaching status, conversion of ownership status, adjusted number of employees, length of stay, competition, financial indebtedness, bed capacity, and occupancy rate. We also find that a nonlinear relationship characterizes the dependence of hospital profitability on bed capacity and occupancy rate.

Health care capital market and product market constraints and the role of the chief financial officer

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. The constraints imposed on health care systems by both capital and product markets has made the role of the CFO a challenge.

The financial health of California hospitals: a looming crisis

This paper summarizes a Shattuck Hammond Partners study, released in late 2000, that found marked erosion in California hospitals' financial health. The study examined the revenue and expense dynamics that contributed to this erosion and explored future challenges, some of which are unique to California's regulatory environment, in the context of the hospital industry's current financial performance. The study concluded that California hospitals face a potential crisis--defined as the potential nonviability of a large portion of its hospital infrastructure--and explored the policy questions and implications of this situation.

Future financial viability of rural hospitals

Policymakers are concerned that some rural hospitals have suffered significant losses under the Balanced Budget Act (BBA) of 1997 and that access to inpatient and emergency care may be at risk. This article projects that the median total profit margin for rural hospitals will fall from 4 percent in 1997 to between 2.5 and 3.7 percent after the BBA, Balanced Budget Refinement Act (BBRA) of 1999, and Benefits Improvement and Protection Act (BIPA) of 2000 are fully implemented in 2004. The Critical Access Hospital (CAH) Program is expected to prevent reductions in inpatient and outpatient prospective payments from causing an increase in rural hospital closures.

Bond-market skepticism and stock-market exuberance in the hospital industry

The hospital industry needs funds to refurbish physical facilities, upgrade clinical and information technologies, and rebuild financial positions weakened by past external challenges and unwise organizational strategies. The financial markets offer a marked contrast in capital access, as bond creditors remain skeptical while stock investors plunge back into the once-shunned industry. Ironically, high stock prices may drive the for-profit chains to repeat past cycles of overexpansion, while weak bond ratings may save non-profit systems from a comparable loss of focus on the core business of operating and improving inpatient facilities. This turbulence has implications for public payment, antitrust, and financial disclosure policies.