What Is the Bottom Line. Exploration of Alternative Measures of HospitalFinancial Health for Policy Research

摘要

The project provides a conceptual framework for the interpretation of profit andcash flow-based measures of nonprofit hospital financial performance and analyzes a data set of standardized, audited financial statements for hospitals in five states. The report concludes that total profit margins may be a misleading measure of financial health because total margins combine patient care income with philanthropic, political, and investment income and do not reflect the largest source of operating cash, cash flow from depreciation. Instead, operating income, which averaged only 13 percent of total income for this data set, was a better measure of hospital financial strength, because nonoperating revenues may mask negative operating margins. The report recommends the Health Care Financing Administration review the quality of hospital financial data it receives and develop a central repository of audited hospital financial statements as a resource for public policy researchers seeking to understand and explain hospital financial behavior.