Efficiency and profitability in US not-for-profit hospitals

Evaluating private hospital performance before and during COVID-19 in China

The coronavirus disease 2019 (COVID-19) pandemic had a tremendous impact on the global medical system. The development of private hospitals is an important measure to deepen the reform of China's medical and health system, and an important driving force to improve the effective supply of medical services. This study aims to compare the performance of China's private hospitals before and during COVID-19 and determine the factors that affect hospital profitability between the 2 periods. Data are collected from 10 private listed hospitals from 2017 to 2022, and ratio analysis is used to measure hospital performance in 5 aspects, namely profitability, liquidity, leverage, activity (efficiency), and cost coverage. Multiple regression analysis is used to determine the influencing factors of hospital profitability. The results show a negative impact of COVID-19 on private hospital performance. Specifically, regardless of region, hospital profitability, liquidity, and cost coverage were reduced due to COVID-19, while hospital leverage was increased. COVID-19 had also an impact on hospital efficiency. In addition, before COVID-19, current ratio and cost coverage ratio were the determinants of hospital profitability, while only cost coverage ratio affected hospital profitability during the COVID-19 outbreak. We provide evidence that COVID-19 had an impact on China private hospitals, and the findings will aid private hospitals in improving their performance in the post-COVID-19 era.

Early Financial Impact of the COVID-19 Pandemic on U.S. Hospitals

GOAL

The COVID-19 pandemic has left a significant impact on hospitals' operations, expenses, and revenues. However, little is known about the pandemic's financial impact on rural and urban hospitals. Our main objective was to analyze how hospital profitability changed during the first year of the pandemic. We specifically studied the association between COVID-19 infections and hospitalizations and county-level variables with operating margins (OMs) and total margins (TMs).

METHODS

We obtained data from Medicare Cost Reports, the American Hospital Association Annual Survey Database, and the Centers for Disease Control and Prevention/Agency for Toxic Substances and Disease Registry (CDC/ATSDR) for 2012-2020. Our final dataset consisted of an unbalanced panel with 17,510 observations for urban hospitals and 17,876 observations for rural hospitals. We estimated separate hospital fixed-effects models for urban and rural hospitals' OMs and TMs. The fixed-effects models controlled for time-invariant differences across hospitals.

PRINCIPAL FINDINGS

In our review of the early impact of the COVID-19 pandemic on rural and urban hospitals' profits as well as trends in OMs and TMs from 2012 to 2020, we found that OMs were inversely related to the duration of hospitals' exposure to infections in urban and rural locations. In contrast, TMs and hospitals' exposures had a positive relationship. Government relief funds, a source of nonoperating revenue, apparently allowed most hospitals to avoid financial distress from the pandemic. We also found a positive relationship between the magnitude of weekly adult hospitalizations and OMs in urban and rural hospitals. Size, participation in group purchasing organizations (GPOs), and occupancy rates were positively related to OMs, with size and participation in GPOs relating to scale economies and occupancy rates reflecting capital efficiencies.

PRACTICAL APPLICATIONS

Hospitals' OMs have been declining since 2014. The pandemic made this decline worse, especially for rural hospitals. Federal relief funds, along with investment income, helped hospitals remain financially solvent during the pandemic. However, investment income and temporary federal aid are insufficient to sustain financial well-being. Executives need to explore cost-saving opportunities such as joining a GPO. Small rural hospitals with low occupancy and low community COVID-19 hospitalization rates have been particularly vulnerable to the financial impact of the pandemic. Although federal relief funds have limited hospital financial distress induced by the pandemic, we maintain that the funds should have been more effectively targeted, as the mean TM increased to its highest level in a decade. The disparate results of our analysis of OMs and TMs illustrate the utility of using multiple measures of profitability.

The Core of Healthcare Efficiency: A Comprehensive Bibliometric Review on Frontier Analysis of Hospitals

Parametric and non-parametric frontier applications are typical for measuring the efficiency and productivity of many healthcare units. Due to the current COVID-19 pandemic, hospital efficiency is the center of academic discussions and the most desired target for many public authorities under limited resources. Investigating the state of the art of such applications and methodologies in the healthcare sector, besides uncovering strategical managerial prospects, can expand the scientific knowledge on the fundamental differences among efficiency models, variables and applications, drag research attention to the most attractive and recurrent concepts, and broaden a discussion on the specific theoretical and empirical gaps still to be addressed in future research agendas. This work offers a systematic bibliometric review to explore this complex panorama. Hospital efficiency applications from 1996 to 2022 were investigated from the Web of Science base. We selected 65 from the 203 most prominent works based on the Core Publication methodology. We provide core and general classifications according to the clinical outcome, bibliographic coupling of concepts and keywords highlighting the most relevant perspectives and literature gaps, and a comprehensive discussion of the most attractive literature and insights for building a research agenda in the field.

The Efficiency Evaluation of Municipal-Level Traditional Chinese Medicine Hospitals Using Data Envelopment Analysis After the Implementation of Hierarchical Medical Treatment Policy in Gansu Province, China

Background: Efficiency evaluation is an integral part of new medical reform and is necessary to solve the problem of limited and unbalanced medical resources. This study evaluated the efficiency of municipal-level Traditional Chinese Medicine hospitals by Data Envelopment Analysis application after a hierarchical medical treatment policy was implemented. We propose solutions to the problems existing in hospital operations and promote the utilization efficiency of medical resources in those hospitals. Methods: The sample included all municipal-level TCM hospitals in Gansu province from 2017 to 2019. The DEA-BCC model was employed to evaluate the relative efficiency of hospital operations, and the Manny-Whitney test was used to compare the input and output variables of technical efficiency efficient and inefficient hospitals. Results: From 2017 to 2019, the growth in the number of staff in secondary hospitals (25.88%) was lower than that in tertiary hospitals (31.98%). However, the increase in the number of beds (16.52%) in secondary hospitals was higher than that in tertiary hospitals (−0.30%). 5 (38.46%) achieved DEA efficient in secondary hospitals and 2 (40.00%) in tertiary hospitals. The means of technical efficiency, pure technical efficiency, and scale efficiency in secondary hospitals were 0.812, 0.887, and 0.908, respectively. The means in tertiary hospitals were 0.868, 0.926, and 0.935, respectively. The hospital areas were statistically different between the TE efficient and inefficient hospitals (P<0.05) in secondary hospitals. However, the number of outpatients between the two groups was statistically different (P<0.05) in tertiary hospitals. Conclusion: In this study, the medical and health services of municipal TCM hospitals in Gansu Province have made great progress. Due to the backward economy of Gansu Province, the classification of diagnosis and treatment of diseases was still based on Western medicine, resulting in the slow medical development of some municipal TCM hospitals. TCM hospitals should improve management efficiency, optimize hospital operation scale, improve the utilization efficiency of medical resources and promote efficient hospital development.

No mission? No motivation. On hospitals' organizational form and charity care provision

A healthcare provider faces two decision problems. On the one hand, it chooses its organizational form: a hospital can be a for-profit institution providing compensated care only, or it can be a nonprofit organization whose mission is enhancing access to care for uninsured, low-income patients. On the other hand, the provider chooses which health professionals to hire, without observing their heterogeneous skills and their pro-social motivation. These decisions are related because an increase in the percentage of revenues, that the nonprofit hospital sacrifices for charity care, might enhance the motivation of its workers and induce some of them to donate their labor, that is, to volunteer. Accordingly, this article analyzes the provider's optimal screening contracts, which are contingent on workers' ability and satisfy limited liability, and relates them to the optimal choice of its mission-orientation. The results provide a new rationale for: a the emergence of different organizational forms for hospitals, such as for-profits and nonprofits, which complement public hospitals in the provision of health care, b the heterogeneity in the degree of charity care chosen by different nonprofit hospitals.