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.

'Self-funding project' for four-site campus

In an article which first appeared in Canadian Healthcare Facilities, the monthly magazine of the Canadian Healthcare Engineering Society (CHES), Michelle O'Brodovich and Etienne deMuelenaere, of independent, ISO-certified, energy efficiency specialist, Ecosystem (which has offices across the U.S. and Canada), describe a wide-ranging energy conservation programme, involving 29 different measures at four hospital sites, currently being implemented for Lakeridge Health in Ontario, Canada.

Using a social entrepreneurial approach to enhance the financial and social value of health care organizations

In this study, a conceptual framework was developed to show that social entrepreneurial practices can be effectively translated to meet the social needs in health care. We used a theory-in-use case study approach that encompasses postulation of a working taxonomy from literature scanning and a deliberation of the taxonomy through triangulation of multilevel data of a case study conducted in a Taiwan-based hospital system. Specifically, we demonstrated that a nonprofit organization can adopt business principles that emphasize both financial and social value. We tested our model and found comprehensive accountability across departments throughout the case hospital system, and this led to sustainable and continual growth of the organization. Through social entrepreneurial practices, we established that both financial value creation and fulfilling the social mission for the case hospital system can be achieved.

Success factors for strategic change initiatives: a qualitative study of healthcare administrators' perspectives

Success factors related to the implementation of change initiatives are well documented and discussed in the management literature, but they are seldom studied in healthcare organizations engaged in multiple strategic change initiatives. The purpose of this study was to identify key success factors related to implementation of change initiatives based on rich qualitative data gathered from health leader interviews at two large health systems implementing multiple change initiatives. In-depth personal interviews with 61 healthcare leaders in the two large systems were conducted and inductive qualitative analysis was employed to identify success factors associated with 13 change initiatives. Results from this analysis were compared to success factors identified in the literature, and generalizations were drawn that add significantly to the management literature, especially to that in the healthcare sector. Ten specific success factors were identified for the implementation of change initiatives. The top three success factors were (1) culture and values, (2) business processes, and (3) people and engagement. Two of the identified success factors are unique to the healthcare sector and not found in the literature on change models: service quality and client satisfaction (ranked fourth of 10) and access to information (ranked ninth). Results demonstrate the importance of human resource functions, alignment of culture and values with change, and business processes that facilitate effective communication and access to information to achieve many change initiatives. The responses also suggest opportunities for leaders of healthcare organizations to more formally recognize the degree to which various change initiatives are dependent on one another.

Engineering a fail-safe health system. Memorial Hermann wants to eliminate health care errors (really)

Memorial Hermann Healthcare System is on an all-out mission to eliminate health care-acquired infections. Despite a bit of physician resistance, the results so far are astonishing.

Betting on change: Tenet deal with Vanguard shows it's primed to try ACO effort, new payment model

Tenet Healthcare Corp.'s acquisition of Vanguard Health Systems is a sign the investor-owned chain is willing to take a chance on alternative payment models such as accountable care organizations. There's no certainty that ACOs will deliver the improvements on quality or cost savings, but Vanguard Vice Chairman Keith Pitts, left, says his system's Pioneer ACO in Detroit has already achieved some cost savings.

Reducing pharmacy costs through improved utilization

Strategies Trinity Regional Health System in Rock Island, III., used to reduce pharmacy expenses included: Leveraging benchmarking information to identify opportunities for cost savings. Implementing change management techniques, bolstered by well-presented and coherent data, to promote acceptance of change. Forming a multidisciplinary team of clinical and financial leaders to address quality, outcomes, and cost issues and collaborate on solutions.

Competing for consumers. Coming coordinated-care squeeze prompts providers to push into insurance market

Squeezed by coordinated-care initiatives, a number of hospital systems are looking to help fill beds and reap more revenue by offering insurance plans on the state exchanges set to launch this fall. Some will use narrow networks, a strategy that allows systems to create a captive customer base. "I think it's going to be a huge growth area in the exchanges," says Jonathan Gruber, left, a professor of economics at MIT.