Digging Into Hospital Finances: Recent trends and five key documents

Karl Stark, Health & Science Editor, The Philadelphia Inquirer, 215 854-5363

The new Schedule H information on the 990 form that nonprofit hospitals must file with the IRS now includes more details about the charity care that those hospitals provide. Charity care has become a hot issue lately, with Sen. Chuck Grassley leading an investigation into the issue, specific requirements for charity care outlined in the Baucus health-reform bill and the matter recently going before the Illinois Supreme Court.

This extensive tip sheet provides a guide to reporters who need to delve into hospital finances, including a guide to the new information and what you can learn from it.

The tip sheet also includes key trends that reporters should be aware of, what documents you need and how to get them. This tip sheet is FULL of story ideas and examples of how reporters have used these key documents to investigate their local health care systems.

Hospital Finance Highlights

This tip sheet is about demystifying hospital finances by offering
1) a few key definitions
2) five key documents & how to find & use them
3) sources
4) story ideas

One reporter’s account

It was early morning the last day of Health Journalism 2008, the AHCJ conference. I had been out too late the night before. My alarm went off. I so wanted to sleep in.

Somehow I managed to attend a session about something I’d been avoiding for 15 years as a health reporter: hospital finances …

Several months later, I challenged myself to look at charity care and hospital finances in my mid-sized city. The result was a three-day series…

Many reporters have written about this topic. I’m sure many did so better than me, and I view what I’ve done as just a start. But I suspect that others, like me, have been dodging it to escape drudgery (and I was even a math major).

To them, I say: Take the plunge.

It was difficult to sift through these documents and find nuggets readers might care about. Surprisingly, it was equally hard to find appropriate patient stories to include.

But I’m glad I kept up the pursuit for two reasons: Health care is a business while parts of it are also a charitable enterprise, and we (and the public) need to understand that complicated interplay; and I’ve received a lot of feedback, especially from rank-and-file hospital employees who are now telling me much more about how their institutions are run.”

– David Wahlberg, Wisconsin State Journal, Charity Care: How much should hospitals give

Hospital Finances: Why We Care

• Hospitals are among the largest community employers
• A third of all national health expenditures go to hospitals.
• Hospitals regularly grant large contracts, buy expensive equipment, sell bonds, build buildings, pay lavish salaries, employ lobbyists & manage investments. Ascension Health cash 08: $7.4 billion (source: WSJ)
• Many hospitals collect more revenues than local governments yet receive far less media scrutiny.
• Finances can affect quality of care.
• Hospitals are a big part of the safety net, treating the uninsured and leading efforts in an epidemic.

Rise & Fall of the House of AHERF: Case Study in Financial Flimflams

• Once the largest system in PA with 14 hospitals, 31,000 workers, $2b revenues, two med schools
• But Allegheny was $1.3 b in debt when it filed for bankruptcy in July 1998.
• CEO made $1.2 m plus ”•stock options,”– $1m house & low interest loans; Got a $120k raise after laying off 1,700 and vowing to take a pay cut.
• The PR head made $220,000; CFO, $668,000; chief counsel $617,000; big $ to recruit doctors.
• System spent $70m in restricted funds. Held malpractice meetings from Paris to Cayman islands while nurses lacked supplies. Gave $50k to a public high school to upgrade sports facilities.
• High-powered board (execs from Mellon Bank, USX) was a classic case of oversight failure.

Three Different Financial Structures

• Nonprofit, the traditional variety: 59 percent of U.S. hospitals
• Government-owned, public: 23 percent of U.S. hospitals
• For-profit, owned by investors: 18 percent of U.S. hospitals

Source: American Hospital Association; 2008. Cited at www.aha.org under Fast Facts

Note:
The kind of hospital will dictate which documents you can get on them.
Hospitals may be part of systems or companies or they may be stand alone facilities.

Hospital Financial Characteristics

• Low profit margin, 1 percent to 5 percent common (profits/revenues)
• Rely on Medicare and Medicaid (56 percent of revenues nationally 2007). (Higher percent = worse off)
• Rising uncompensated care (charity and bad debt) can mean the difference between profit and loss.
• Nonprofit hospitals are run by self-perpetuating boards, who may have little financial experience
• For-profits have been repeatedly investigated for billing scams.

Hospital Financial Trends 2009

• A new wave of closures & mergers may be coming. Biggest impact is likely to be on small urban & rural hospitals. Staff cuts are becoming common even in rich hospitals.
• Half of all hospitals are in the red (total margin). The rich hospitals in systems are doing ok; the poor single hospitals are among the worst off.
• Suburban hospitals are generally doing better than rural or small urban ones.
• Uncompensated care & bad debt are rising
• Hospitals’ investment income is down dramatically
• Elective surgeries are down; (check hips & knees). But vasectomies seem to be up! (An indicator of recession?)
• Many hospitals have aging facilities. The 2008 market meltdown made it harder – and more costly –to get credit.e
• More & more services are going outpatient. (outside the hospital)
• Docs are becoming hospital employees. Key specialties may be in short supply.
• Staff shortages for some physicians, nurses, some staff.

Key Hospital Finance Concepts

A charge is the list price for services. Only self-payers and possibly some private insurers pay this ”• sticker price. Cost is closer to what it actually costs the hospital to provide the services. Private insurers, public insurers, and the uninsured may all pay different amounts for the same services. Big insurers tend to pay the least due to market muscle.

• www.vimo.com* shows gulf between costs & charges. Hospitals can inflate how much they care for the poor by using charges.
• The uninsured were getting stuck with paying ”•charges, the highest bills. Is this still true?
• Operating income vs. total income (op inc investments)

Note: Other key measures include total margin, operating margin, cash on hand, assets, investments, payer mix;

• * Vimo of Mountain View, Calif., sells health insurance over the Web and allows viewers to "comparison shop" for procedures. It’s not a primary source of this information but it does show the gulf between charges and costs.

Is your hospital sick?

The five most frequent indicators of financial distress

• Board and senior management accept poor financial performance over several years.
• Erosion of profitable “payer mix” (less commercial insurance, more Medicare and Medicaid);
• Poor physician relations
• Slipping market share even in growth markets
• A liquidity squeeze, such as decreasing cash reserves and days cash on hand.

Source: Healthcare Financial Management Association

Five financial documents you need

Records don’t tell the whole story

• Don’t just rely on documents alone.
• Interview! Never print a number without understanding how it was arrived at.
• Use the documents described here to inform the reporting and use reporting to illuminate these documents.

1) Audited Financial Statements

• The gold standard for determining a hospital's overall finances
• Hospitals give these documents to banks, bondholders, suppliers and gov’t agencies so they should give them to reporters.
• TIP: Don’t accept a simplified, glossy version often given to the public.
• Find an independent academic expert to review them. Don’t tough it out the first few times.

Finding hospital financials online

• Massachusetts
• California
• Pennsylvania
• Washington State
• www.dacbond.com Real time lookup for hospitals that use it. The site has given access to journalists though not every bond issue is covered. Many other sites offer similar services.

Note: Starting July 2009, the Securities and Exchange Commission will consolidate financial reporting by municipal bond issuers into one publicly accessible repository, stripping authority from four proprietary depositories that collect and release annual reports and other key documents to investors for fees.

2) Bond Prospectuses

This is the best document to get if budgets scare you. Nonprofit hospitals sell bonds to raise $ & modernize their facilities. The prospectus summarizes the risks of those bonds. They discuss a hospital's market position, financial performance and future prospects. Major litigation is disclosed.

How to get them

• from the hospital
• a well-connected bond/stock broker
• sometimes the Bloomberg terminal
• the firms selling the bonds
• the public authorities that issue them
• Web sites:
  • www.munios.com
  • www.dacbond.com
  • http://www.munifilings.com/munifilings/IndexAction.do (munifilings charges)
  • http://www.muninetguide.com

Drawbacks: They are issued only when the bonds are to be sold so they may be out of date. They are only issued by nonprofits and public hospitals, not forprofits.

A bond prospectus led to this story:

Temple Health faces probes
Sept. 21, 2003
Karl Stark, Inquirer staff writer

After closing three nursing homes and making hundreds of elderly residents move to new quarters last winter, the Temple University Health System is facing another challenge: criminal investigations of its defunct homes by state and federal prosecutors. The health system disclosed the probes in documents describing a bond sale to renovate and add to Temple University Hospital….

Marvin Abrams of Huntingdon Valley said his mother, Ida, now 90, was a longtime resident of Philadelphia Geriatric Center, which Temple bought in 1999 and renamed Temple Continuing Care Center. She spent nearly two years under Temple's care. She developed a serious rash from poor care and got so dehydrated that she left in April 2002 and was admitted to a hospital, her son said.

"The care just markedly declined after Temple took over," Marvin Abrams said. "You could see it in the staff turnover, the quality of the care, the food. Everything changed."

Many similar complaints were then reaching Diane Menio, executive director of CARIE, the Philadelphia nonprofit advocacy group for the elderly. "Residents were being harmed," Menio said. "The commitment wasn't there. They would have had to invest an awful lot more money to make it work. . . . Maybe they did the right thing getting out because they saw that they couldn't do it well."

3) Bond Rating Reports

Rating agencies typically give the most recent hospitals' bond ratings reports free to media. Bond ratings evaluate a hospital’s business and gauge investors' risk to be repaid.

• S&P; media_relations@standardandpoors.com 212-438-6667
• Moody’s Investors Service: press line 212 553-0376 or 0377 mediarelations@moodys.com
• Lexis may have these reports.
• Ratings explained: http://www.treasurer.ca.gov/ratings/moodys.asp

Downside: They can miss stuff and be lied to. Rating firms are paid by hospitals. Last year, both Moody’s and S&P gave high ratings to 11 of the largest distressed financial institutions. Insurer A.I.G. was rated AA. Lehman Brothers got an A a month before it collapsed. Until recently, the agencies had AAA ratings on thousands of near-worthless subprime securities.

4) IRS Form 990s: Great year to look

Hospitals issue them annually to justify their tax free status. Useful for salaries, leads, businesses, & board members, not finances.

The new 990 will be available this year (2009) for tax year 2008.

• The new Schedule H documents a hospital’s community benefits, for-profit joint ventures with executives and doctors, and CEO compensation
• How to get them: Download from www.Guidestar.org or the hospital. By law hospitals have to give them to you in a timely way.
• Drawbacks: They tend to be much older than the most recent financial statements. The 990s may conflict with audited financial statements because of arcane IRS rules and differing interpretations.

990 key parts:

• Line 12 total revenues
• Line 17 expenses
• Line 18 excess/deficit (the key profit or loss line for the year)
• Line 21 Net assets are the cushion for the following year.
• Line 64A: Debt. Too much can be a problem.
• Line 67 Unrestricted Assets. (If cash is declining, then financial strength may be falling too.)
• Line 90B number of employees (could be full-or part-time employees. Ask!)
• Schedule A — Parts 1&2: highest paid employees and contractors (Great for getting the salaries of some top doctors.)
• Part V — Board members, top executive salaries (There’s a rich tradition of stories on these salaries.)
• Part VI — Related Organizations ( Many nonprofits now have for-profit subsidiaries and they would be listed here.)

How One Reporter Did It:

Cox confirms federal probe fund
Kathleen O’Dell, Springfield (Mo.) News-Leader (Sept. 16, 2007)

CoxHealth officials have confirmed the system has set aside $26 million in a special fund for possible expenses and settlement of an ongoing, wide-ranging federal probe.

A health system representative said Cox is being prudent and does not know if it will have to turn over the money to the government.

A form prepared for the IRS and a statement by a Cox official show that Cox has been preparing for a possible payout since fiscal 2005, although Cox officials have declined through the years to publicly discuss the effects of the investigation on the Springfield-based health system.

The federal probe, which includes looking at possible Medicare billing fraud, began in 2004 and became public in 2005.

Asked about the IRS form, Cox Chief Financial Officer Jake McWay confirmed that a $26 million entry under a category "loss contingency reserve" is, in his words, "a liability reserve for a potential government settlement."

The figure appears in CoxHealth's most current Form 990. The IRS requires nonprofits to file such forms annually to justify their tax-exempt status.

A review of 990 forms shows that the system put $13 million into the loss contingency reserve during fiscal 2005, and again in fiscal 2006.

One Seattle hospital’s 990

• Swedish Health Services claims to be the largest health system in Seattle area (3 hospitals)
• Paid one doc $10 million in 2007. Sleep disorder specialist. Director of Sleep Medicine Associates, a medical group with clinics and sleep labs at Swedish/Cherry Hill, Swedish/Issaquah and the Northwest Hospital
• Board includes former Microsoft executive, Nordstrom department store heir, current chair of the Seattle Repertory Theatre Board, etc.

New Schedule H Highlights

• Sets the first national criteria for disclosing charity care and community benefits. 1^st overhaul since 1979
• Requires hospitals to report expenses based on costs, not charges, which can be radically inflated
• Hospitals will begin using the new Form 990 for the 2008 tax year (returns filed in 2009). But many started early.
• Schedule H looks like: http://www.990forhospitals.org/docs/form_990H.pdf
• More detailed disclosure of governance policies and executive compensation. top 20 workers with compensation of more than $150,000
• Does the hospital have a charity-care policy? Does it budget for charity care, and did spending exceed budget?
• Itemized list of expenses and any revenue supporting 9 categories of charity care or community benefits.
• Breakdown of expenses and revenue to support community-building such as housing and economic development initiatives.
• Bad-debt reporting, Medicare revenue (reimbursement shortfalls) and patient-care loss reporting
• Management companies and joint ventures

How One Reporter Did It:

John Ryan, Reporter KUOW-94.9 Puget Sound Public Radio

• "Million-Dollar Doctors"
• "The Charity of Hospitals"

5) Medicare Cost Reports

• Nearly every hospital files one. Great for for-profit hospitals.
• Shows the average cost by department. expenses by category (drugs, nursing services, and salaries)
• Schedule A-8-1 Part B details payments to outside businesses owned by hospital leaders (A-8-1 Part A is for related organizations)
• Worksheet C Part, total cost and total charges for services. Cost-charge ratio.
• Worksheet E Part A -how much the hospital received in "outlier" payments from Medicare (Tenet paid up to $900b for billing problems, including outliers)
• Worksheet E Part B Graduate Medical Education, how much in outpatient care?
• Schedule G. Finances. Bad Debt, G-3. (As with 990s, beware of conflicts between Schedule G and audited financial statements.)
• S-10 Uncompensated care; Hospital Census, Worksheet S-3 Part 1

Downsides: limited to Medicare population.

How to get them:

• From the hospital
• from the Medicare Fiscal Intermediary
• From CMS
• From firms that collect them:
  • American Hospital Directory
  • CostReportData.com
  • Solucient's "Profiles of U.S. Hospitals"
  • Cleverley & Associates: "State of the Hospital Industry" report that includes a "community value index" for individual hospitals

Cost Reports in action:

How hospitals can manipulate Medicare billings through:

• Creative coding (unbundling services)
• Chasing after nonpayers (Medicare reimburses 70 percent of bad debt)
• Raising income from medical residents (by cutting beds or exaggerating number of residents)

Source: Yamil Berard of the Fort Worth Star-Telegram
Read "Deciphering cost reports helps paint picture of hospital's financial health"

Story idea: CEO compensation

Perhaps the most common finance story from the 990 involves compiling the CEO’s salary from "Part V_ List of Officers, Directors & Trustees." Look also at “Schedule A, Part 1: Compensation of the Five Highest Paid Employees Other Than Officers, Directors and Trustees.” This will often list the highest-paid doctors.

• Tip: Nonprofit hospitals have created many for-profit subsidiaries, and may divide executives' salaries on each subsidiary. You may have to add up salary & benefits from each subsidiary.

Compare the biggest salaries at your local hospital to those of leaders of similar institutions in your area or in around the country. (Modern Healthcare does a survey.) Benchmarking comparing executive's salaries to others in region/U.S. is critical to evaluating CEO salaries.

Contrast executive salary increases to past hospital performance. If salaries are dramatically up, has the hospital's performance also improved?

Get specifics on executive benefit packages. Are a car and driver included? A country club membership? Unusual perks? Nonprofits have gotten creative about designing pay packages, which often mimic those in the for-profit sector.

A big focus for 2009: How much do nonprofits give back?

Not much in Wisconsin: That state's hospitals, from 2003 to 2007, provided about 40 percent less charity care and bad debt than the national average.

Wisconsin hospitals gave $209 million in charity care in 2007. That was 1.6 percent of their expenses, according to the Wisconsin Hospital Association. Combined with bad debt, which hospitals say should be considered with charity care, the total was $432 million, or 3.3 percent of expenses. The national average for the two categories combined was 5.8 percent of expenses, says the American Hospital Association, which doesn't provide information just on charity care.

Hospitals frequently pursue patients who don't pay their bills through collection agencies and lawsuits.

St. Mary's Hospital in Madison made 11-15 percent margins and didn't borrow any money to build its $140 million addition.

U.S. Sen. Chuck Grassley, R-Iowa is soon to introduce a bill requiring nonprofits hospitals to spend 5 percent of budgets on charity care.

State & local gov’ts may also "tax" nonprofits.

Source: Charity Care: How much should hospitals give, by David Wahlberg, Wisconsin State Journal

If a hospital closes in Philly, does anyone hear it?

• The 189-bed Northeastern Hospital treats many poor and uninsured patients in Philly’s blue collar Port Richmond area. It closed July 1, 2009.
• The hospital lost $6 million in fiscal 2008 and is projected to lose $15 million this year on about $120 million in revenues.
• Patient admissions are falling. Charity care has risen 33 percent over the last four years, reaching a projected $19.2 million in charges this year.
• Medicare and Medicaid account for 76 percent of revenue, compared to Philly hospitals’ average of 46 percent.
• This safety-net hospitals treats 50,000 patients in its ER a year, making it the city’s sixth-busiest adult ER. It delivers 1,800 babies a year. Only six maternity hospitals remain.
• The parent, Temple University Health System, logged a $31 million net loss in the last six months of 2008.

Hospitals give unequal amounts of care for the poor

FY2007 (1000s)	Op Rev	Op Inc	Net Inc	% uncompensated care	%Medicare	%Medicaid	total gov't
Philly all	$79,001,113	352,445	527,703	2.41	29.67	18.7	48
HUP (Penn)	$1,503,510	214,765	269,189	2.16	25.94	8.69	35
Einstein	521,804	21,020	38,602	3.34	43.97	26.69	71
Mercy	134,705	-511	-511	4.61	42.22	33.69	76
Main Line Paoli	197,777	46,884	51,934	1.08	34.06	1.37	35
Main Line Lankenau	343,070	34,766	45,361	1.63	43.13	7.88	51
Main Line BrynMawr	259,212	40,133	46,082	1.08	41.46	2.88	44
Philly suburbs PA	4,330,705	185,203	242,939	1.88	38.95	7.23	46

Source: Pennsylvania Health Care Cost Containment Council

How One Reporter Did It:

Willie Mae White’s $36,224 bill
Baltimore Sun series (December 2008)

• Willie Mae White got a $36,224 bill from Johns Hopkins Bayview Medical Center for emergency brain surgery. Bayview promised to forgive her bill in part, then sued her 15 months later. She agreed to pay $50 a month, for the next 59 years. After The Sun asked Johns Hopkins about her case, the hospital wiped out the debt and agreed to pay White $2,207. Three decades ago, Maryland officials devised a novel system that set rates for all patients and paid hospitals to cover such charity care. ($921 million was paid last year) Over the past five years, some Maryland hospitals received millions from the system even as they sued tens of thousands of patients over unpaid bills.
• Hospitals filed more than 132,000 of these suits in the past five years, winning at least $100 million in judgments and filing 8,000 liens. In some cases they added annual interest at twice the rate allowed for other types of debts.
• The "rocket docket" virtually guaranteed swift action on debtors.
• Read more about how this story was reported.

Story Ideas

How are the uninsured being treated at your local hospital? The numbers are rising nationally – so are the “underinsured” – and the combination is raising bad debt expense and charity care for many hospitals. The new 990 this years asks about a charity care policy. What’s your hospital’s policy? Are uninsured patients bargaining for care? Are they getting a better deal than before? How much does a new hip cost?

How has the credit crunch has affected your hospital? SWAPs, falling interest rates, & bonds have all touched hospitals. Yet this is an underreported area. In some cases they have bought back their own bonds to get out of contracts. Some have paid millions to get out of SWAPs that went bad. Hospitals have also found it much harder – and more expensive – to borrow money, if they can borrow at all. Many building projects are stalled.

Despite the poor economy, hospitals are still in an arms race for new technology, from robotic surgery to vast proton therapy facilities for cancer. Well-funded hospitals are snapping up these items while poorer ones are falling behind. What key equipment is your hospital missing? What areas is your hospital investing in that may not pay off?

Well-endowed hospitals have large amount of investment income. How poorly has the portfolio done during the recent market meltdown? Who is managing it? How’s it doing compared to others? Is the investment firm connected to any board members?

The Board: Nonprofit hospitals have self-perpetuating boards that often include families through multiple generations. Members historically have been among the richest people in a community. Who is on the board and what are their healthcare qualifications? How do they help the hospital? Do board members get income from the hospital in any way?

Paying more for high quality (aka “pay for performance” keeps growing, albeit slowly. What are the implications for your hospital? A 2008 JAMA article concluded that pay incentive systems may worsen the disparity among hospitals.

The Rich Getting Richer… The top hospital providers, often the bigger systems, are generally doing ok while the weaker ones – typically the small, stand-alone hospitals – face mounting challenges, and their size makes it harder to stay competitive, according to Standard & Poors, the bond rating agency. Which type is your hospital?

What do troubled hospitals do to get well? Try to attract more doctors and build more profitable services, such as heart surgeries and procedures while cutting back unprofitable areas, such as baby deliveries and certain clinics.

Community hospitals are increasingly moving to employ doctors. Many doctors want regular hours and don’t want to pay for insurance. How hospitals relate to doctors can be an important indicator of an institution’s fiscal success.

Hospitals are outsourcing services offshore, like many other U.S companies. Many people likely do not know that the person transcribing medical records may be in India while the doctor reading radiology films could be in Australia.

U.S. Hospital Finance Experts

NOTE: This list was created by asking AcademyHealth for researchers working on hospital finances.

• Glenn Melnick, RAND king@rand.org, researching The Effects of Health Plan Concentration on Hospital Prices, Costs, Capacity, Charity Care, and Outcomes and Hospital Pricing and the Uninsured
• Bradford Gray, Urban Institute bgray@ui.urban.org
• Karen Eggleston, Tufts University karen.eggleston@tufts.edu
• Kevin Volpp, University of Pennsylvania School of Medicine volpp70@mail.med.upenn.edu
• Jill Horwitz, University of Michigan Law School jrhorwit@umich.edu
• Lisa Simonson, California Office of Statewide Health Planning and Development, infotree@jps.net
• William White, Cornell University wdw8@cornell.edu
• Mary Pittman, Health Research and Educational Trust 312-422-2622 mpittman@aha.org
• Alan B. Cohen, Boston University Health Policy Institute 617-353-9222 abcohen@bu.edu
• HCFO Grantees with a focus on Health Insurance Coverage

More consultants, profs

From AHCJ's Health Journalism 2009

• William L. Dowling, Ph.d., former chair of University of Washington's health policy department ( dowling@u.washington.edu )
• Dennis Stillman, former CFO of the University of Washington Medical Center ( stillman@u.washington.edu )
• Frank Fox, Phd, Washington state-based economic consultant fgf19702@aol.com
• Robert Gift, a director with the Chadds Ford, Penn., firm IMA Consulting
• Alan Zuckerman, President at Health Strategies & Solutions, Inc., Philadelphia. azuckerman@hss-inc.com
• Tom Getzen, executive director of the International Health Economics Association and a health management professor at Temple University in Philadelphia.
• Janet Zeigler, a partner with Foley & Lardner in Chicago, who oversees the firm's healthcare finance practice.
• Patrick Smyth, a consultant at Kurt Salmon Associates
• Gerald Katz, Kurt Salmon Associates
• James Orlikoff, a health-care consultant in Chicago
• Frank Fox, Phd, Washington state-based economic consultant fgf19702@aol.com
• Robert Gift, a director with the Chadds Ford, Pa., firm IMA Consulting
• Alan Zuckerman, President at Health Strategies & Solutions, Inc., Philadelphia. azuckerman@hss – inc.com
• Tom Getzen, executive director of the International Health Economics Association and a health management professor at Temple University in Philadelphia.
• Janet Zeigler, a partner with Foley & Lardner in Chicago, who oversees the firm's healthcare finance practice.
• Patrick Smyth, a consultant at Kurt Salmon Associates
• Gerald Katz, Kurt Salmon Associates
• James Orlikoff, a health-care consultant in Chicago

NOTE:
1) Consultants may be more reluctant to be quoted than finance professors.
2) This is far from a complete list.

Related resources

• How to understand a 990
• Medicare and Medicaid 101

Further Reading

The current recession and U.S. hospitals

Comparison of Change in Quality of Care Between Safety-Net and Non–Safety- Net Hospitals
JAMA 2008;299(18):2180-2187 Rachel M. Werner, MD, PhD et al
Safety-net hospitals (those that predominantly treat poor and underserved patients) often have lower quality of care than non–safety-net hospitals. Over time, hospitals with high percentages of Medicaid patients had a lower probability of achieving highperformance status. In a simulation model, these hospitals were more likely to incur financial penalties due to low performance and were less likely to receive bonuses.
Conclusions: Safety-net hospitals tended to have smaller gains in quality performance measures over 3 years and were less likely to be high-performing over time than non-safety-net hospitals. An incentive system based on these measures has the potential to increase disparities among hospitals.

New Jersey Commission on Rationalizing Health Care Resources, Final Report
2008 Chapter 6: Hospital Economics101