Biomedical subjects
Publications and source records attributed to W O Cleverly.
In this issue, we look at the business side of health care from two different vantage points. First, how will health care fare in 1995 in the context of the overall economy? We've gathered a panel of economic experts to make predictions. Their conclusions? In general, providers won't benefit from a probable upturn in the broader economy.
Many hospital executives use operating margin as their primary measure of financial position in their hospitals. This article shows that return on equity (ROE) should be the primary test of financial performance for both taxable and tax-exempt hospitals. The ROE framework can be related to specific management actions that may improve performance through the strategic management model structure. Benchmarking data are employed to suggest successful management strategies.
In its 1990 report to the U.S. Congress and to the Secretary of Health and Human Services, the Council on Graduate Medical Education noted that the financial status of teaching hospitals, as measured by trends in profit margins, had deteriorated during the years 1985-1988, and that major teaching hospitals had the lowest margins in the hospital industry. To gain insight into the financial viability of major teaching hospitals, the authors updated the analysis of the financial status of these hospitals and further analyzed their financial performance. They identified academic medical center hospitals using criteria established by the Association of American Medical Colleges' Council on Teaching Hospitals; accessed financial performance data on these institutions from the Health Care Financing Administration's prospective payment system minimum-data sets for the years 1987-1991; evaluated the financial performance of these institutions for the five-year period by calculating their total margin, return on equity, and financial leverage; and determined the percentage of Medicaid discharges for each year. The analyses show that academic medical center hospitals had stabilized their short-term financial performance in recent years. Nevertheless, their financial position is not strong. Their return on equity and debt financing percentages suggest that they will be forced to reduce their future rate of investment in new plant and equipment. Further, their overall financial performance is threatened by the growing percentage of Medicaid discharges. These observations raise serious concerns about the financial viability of these institutions in the face of continued changes in the financing of hospital services.
An examination of factors related to hospital closures reveals a disconcerting trend. Hospitals that closed in 1991 appear to have been more efficient than hospitals that closed in 1990, and hospitals that closed in 1990 appear to have been more efficient than hospitals that closed in 1989. This trend suggests that future hospital closures may pull relatively efficient hospitals out of the healthcare system. The end result may be increases, not decreases, in total healthcare costs.
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Two hospitals budget systems, a conventional budget and an input-output budget, are compared to determine how they affect management decisions in pricing, output, planning, and cost control. Analysis of data from a 210-bed not-for-profit hospital indicates that adoption of the input-output budget could cause substantial changes in posted hospital rates in individual departments but probably would have no impact on hospital output determination. The input-output approach promises to be a more accurate system for cost control and planning because, unlike the conventional approach, it generates objective signals for investigating variances of expenses from budgeted levels.
Explore the source record for details and available documents.
Explore the source record for details and available documents.