Degree Granting Department
Health Policy and Management
Alan M. Sear, Ph.D.
Barbara Langland-Orban, Ph.D.
Etienne E. Pracht, Ph.D.
Yiliang Zhu, Ph.D.
DRG, investor owned hospital, discretionary procedure, marginal effects, reciprocal of the debt ratio, gaming
The healthcare literature sometimes cites Medicare as a negative determinant of hospital profitability. However, a review of Florida acute care short-term general hospital data revealed a subset of profitable hospitals with high percentages of their revenue structure comprised of Medicare reimbursements. Some investigators might contend that these hospitals are just better managed; that hospital profitability is not related to patient mix or payer source. Although good management enhances financial health, there are perhaps other reasons why certain hospitals can become profitable with Medicare as their primary revenue source.
Research findings indicate there is wide geographic variability shown for per-capita volumes of discretionary procedures reimbursed by Medicare, and broad variations in Medicare spending per enrollee for general acute care short-term hospitalizations. It was also found that many of the hospitals performing higher rates of discretionary procedures and showing the ability to make a profit with Medicare are investor owned.
The focus of this study, covering years 2000-2005, was to examine two strategies using discretionary procedures under Medicare that Florida investor owned hospitals may employ to increase profitability and maintain long-term financial health.
Part 1 of the study examined the association between long-term financial viability, measured by the total assets divided by total liabilities (TATL) ratio (the reciprocal of the debt ratio) and percentages per hospital of two discretionary cardiac and orthopedic procedure variables, reimbursed by conventional Medicare. A positive association was found between the TATL ratio and these variables, as well as significant marginal effects in the association between the TATL ratio and interaction terms for hospital ownership (where investor owned = 1 and not-for-profit = 0) and the discretionary cardiac procedure variable and ownership and the discretionary orthopedic procedure variable.
Part 2 used total charges as the dependent variable for patient discharges reimbursed by Medicare HMO. It was found that investor owned hospitals generally assess significantly higher charges than not-for-profits for discretionary CABG and valve replacement procedures for patients with equivalent levels of medical services and hospitalization. It was also found that charges significantly increase for both investor-owned and not-for-profit hospitals located in the southern region of Florida.
Scholar Commons Citation
Barrington, James D., "Analysis of Two Strategies for Structuring Medicare Reimbursement to Maximize Profitability in Acute Care General Hospitals" (2010). Graduate Theses and Dissertations.