Journal of Health Care Finance

OBJECTIVES: The Patient Protection and Affordable Care Act (PPACA) includes a provision that penalizes insurance companies if their Medical Loss Ratio (MLR) falls below a specified threshold. The MLR is roughly measured as the ratio of health care expenses to premiums paid by enrollees. I investigate whether there is a relationship between MLRs and the quality of care provided by insurance companies. METHODS: I employ a ten-year sample of market-level financial data and quality variables for Texas insurers, as well as relevant control variables, in regression analyses that utilize insurer and market fixed effects...

This article examines the availability of fiscal space in the context of health spending and the challenges and constraints in raising additional resources for health given the macroeconomic situations, in the ten countries of the South-East Asia region (SEAR) of the World Health Organization (WHO). Using a variety of secondary data, the analysis indicates that there are differences among the SEAR countries with respect to the various indicators of fiscal space. While the aid situation is under control, there are concerns regarding public debt, fiscal deficit, and revenues...

Skyrocketing health care costs are forcing payers to demand delivery efficiencies that preserve and promote quality care while reducing costs. Hospitals are challenged to meet the pressure from payers to deliver value and outcome-based health care while preserving sufficient financial margins. The fee-for-service (FFS) model with its perverse incentives to incur high-volume services is no longer, if ever, sufficient to ensure quality, cost-efficient health care. In response, payers have sought to force the issue through accelerated efforts to bundle payments to providers...

The purpose of this study is to develop an estimation model for health care costs and cost recovery, and evaluate service sustainability under an uncertain environment. The Palestinian National Authority's recent focus on improving financial accountability supports the need to research health care costs in the Palestinian territories. We examine data from Rafidya Hospital from 2005-2009 and use step-down allocation to distribute overhead costs. We use an ingredient approach to estimate the costs and revenues of health services, and logarithmic estimation to prospectively estimate the demand for 2011...

We have overestimated the ability of electronic health records (EHR) systems to enhance efficiency by eliminating transcription and the need to physically pull charts. Hospital managers typically underestimate the costs of upgrade fees and support. To avoid this problem, hospitals must develop a full total cost of ownership (TCO) analysis to independently forecast total lifecycle costs for EHR information technology. Vendor information must be checked for validity and a milestone payment schedule must be devised to pay for results (outcomes) not promises...

The recent Omnibus Rule published by the Department of Health and Human Services greatly expanded liability for breaches of health information privacy and security under the HIPAA statute and regulations. This expansion could have dire financial consequences for the health care industry. The Rule expanded the definition of business associates to include subcontractors of business associates and made covered entities and business associates liable for breaches of the entities who perform a service for them involving the use of individually identifiable health information under the federal common law of agency...

Health care spending in both the governmental and private sectors skyrocketed over the last century. This article examines the rapid growth of health care expenditures by analyzing the extent of this financial boom as well some of the reasons why health care financing has become so expensive. It also explores how the market concentration of insurance companies has led to growing insurer profits, fewer insurance providers, and less market competition. Based on economic data primarily from the Government Accountability Office, the Kaiser Family Foundation, and the American Medical Associa tion, it has become clear that this country needs more competitive rates for the business of health insurance...

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) authorized a three-year demonstration program using recovery audit contractors (RACs) to identify and correct improper payments in the Medicare Fee-For-Service program. More recently, Section 6411 of the Affordable Care Act (ACA) expanded the RAC program to include the Medicaid program. This shows the Cent ers for Medicare & Medicaid Services (CMS) believe RAC audits are a cost-effective method to ensure health care providers are paid correctly and thereby protect the Medicare Trust Fund...

This article summarizes key features of Stark Law and the Anti-Kickback Statute, statutes used to fight health care fraud and abuse within Medicare and Medicaid, and explains how attorneys can help health care providers comply with these laws.

Substance abuse (SA) imposes a substantial economic burden on society. This burden arises largely from indirect costs associated with lost productivity (morbidity), premature mortality, and crime. The economic impact of SA has been estimated on a national level, but state-level estimates, needed for resource allocation and policy development, are lacking. I used standard cost-of-illness methods to quantify the economic cost of SA for Washington State for 2005. The cost of SA was estimated at $5.21 billion, $832 per non-institutionalized person in the state...

Not-for-profit hospitals are under increased public scrutiny for providing what some view as insufficient levels of community benefit compared to their tax-exempt benefits. One potential driver of community benefit is financial surplus, which arises from both patient care (operating) activities and non-patient care (non-operating) activities. This study addresses the effect of hospitals' non-operating income on not-for-profit hospitals' provision of community benefit. The study sample includes 217 unique not-for-profit, non-governmental, general, acute care hospitals in California between 1997 and 2010 that filed annual reports with the California Office of Statewide Health Planning and Development (OSHPD)...

It remains an open question whether hospital spending on fundraising efforts to garner philanthropy is a good use of funds. Research and industry reports provide conflicting results. We describe the accounting and data challenges in analysis of hospital philanthropy, which include measurement of donations, measurement of fundraising expenses, and finding the relationships among organizations where these cash flows occur. With these challenges, finding conflicting results is not a surprise.

BACKGROUND: For decades, not-for-profit hospitals have been required to provide community benefit in exchange for tax exemption. To fulfill this requirement, hospitals engage in a variety of activities ranging from free and reduced cost care provided to individual patients to services aimed at improving the health of the community at large. Limited financial resources may restrict hospitals' ability to provide the full range of community benefits and force them to engage in trade-offs...

Assessing the adequacy of the community benefits that not-for-profit hospitals provide in exchange for tax exemption remains a challenge. While recent changes to Internal Revenue Service (IRS) reporting requirements have improved transparency, the lack of clearly defined charitable expectations has resulted in critical scrutiny of not-for-profit hospitals' community benefits and numerous challenges to their tax exempt status. Using data from the revised IRS Form 990 Schedule H for 2009, this article documents the wide range of community benefit activities that not-for-profit hospitals in California engage in and compares them to a set of minimum spending thresholds...

Competing financial theories have been offered to understand hospitals' cash holding with scant recent evidence. Using data from a national sample of 608 not-for-profit hospitals, we find support for the trade-off theory which posits targeted cash balances. We do not find support for the financial hierarchy theory which posits a preference for use of cash to pay for capital investments. Findings apply to holdings of cash and marketable securities, but not board-designated funds where no model provided meaningful explanatory power...

The Patient Protection and Affordable Care Act (PPACA), signed into law in 2010, is transforming the health care marketplace. This transformation requires health system leaders and health finance scholars to re-examine hospital capital budgeting practices in the context of new delivery models. Within the context of accountable care organizations (ACOs), this article discusses the components of the hospital capital budgeting process, identifies current practices that may require new methods or approaches, and suggests areas where existing or future research can inform capital budgeting going forward...

Measuring financial performance in acute care hospitals is a challenge for those who work daily with financial information. Because of the many ways to measure financial performance, financial managers and researchers must decide which measures are most appropriate. The difficulty is compounded for the non-finance person. The purpose of this article is to clarify key financial concepts and describe the most common measures of financial performance so that researchers and managers alike may understand what is being measured by various financial ratios...

This article examines predictors of the future market value of microcap pharmaceutical companies. This is problematic since the large majority of these firms seldom report positive net income. Their value comes from the potential of a liquidity event such as occurs when a key drug is approved by the FDA. The typical scenario is one in which the company is either acquired by a larger pharmaceutical firm or enters into a joint venture with another pharmaceutical firm. Binary logistic regression is used to determine the impact of the firm's drug treatment pipeline and its investment in research and development on the firm's market cap...

Managers work to achieve the greatest output for the least input effort, better balancing all factors of delivery to achieve the most with the smallest resource effort. Documentation of actual health information technology (HIT) cost savings has been elusive. Information technology and linear programming help to control hospital costs without harming service quality or staff morale. This study presents production function results from a study of hospital output during the period 2008-2011. The results suggest that productivity varies widely among the 58 hospitals as a function of staffing patterns, methods of organization, and the degree of reliance on information support systems...

The double taxation of C corporation income from operations and from the ultimate sale of its assets makes the C corporation an inefficient tax status for many health care entities. At the time of this writing, the changes in the federal tax law that are scheduled to take effect in 2013 will increase this level of double-taxation inefficiency. The owners of a C corporation practice can avoid the C corporation status tax inefficiency by converting the practice to either (1) S corporation status or (2) LLC status...