The Financial Health of Teaching Hospitals - Case Study Example

Two key hypotheses of the study: (1) COTH hospitals because they comprise the largest part of teaching hospitals would have better financial margins and realize less impact on full-time equivalent residents, while family practice single-residency hospitals would fare worse than COTH hospitals; (2) citing little evidence of direct medical education payments from managed Medicare, which was implemented starting 1998, the authors hypothesized that there would be lower than expected actual payments.

Using a sample of 713 hospitals, from among a lot of 1241 hospitals that received Medicare payments - the included samples were described to be general short-stay hospitals, to be more for profit, and had a significantly higher mean number of beds. Findings and Conclusions: Overall, the average margin of teaching hospitals in 1999 was just 2.5% and that 35% of the sample size had negative operating margins. Medicare margins were stable, on the average of 13% for all teaching hospitals - while the PPS margin (the major component of Medicare margin) rose on the average from 17.5% to 23.5% from 1996 to 1999.

While COTH hospitals had the best median GME margins compared to family practice single-residency hospitals which had the worst, when dollar-adjusted both had substantial GME reductions. Direct GME payments actually increased for all groups except for family practice single-residency hospitals while indirect payments declined (while teaching costs increased). Actual managed Medicare payments were lower than expected and projected in the years 1998 to 1999. The aggregate change for approved full-time resident positions remained unchanged from 1996 to 1999, with an average addition of one full time primary care position for each hospital.

With the findings, the authors had to reject the first hypothesis, as COTH hospitals Medicare margins are 50% less than non-COTH hospital margins and COTH hospital margins overall are "nearly" 25% lower; moreover, family practice single-residency hospitals have better Medicare margins and their total margins are more than double than those of multiple residency hospitals. Yet, the authors noted that despite their better margins, single-residency hospitals with negative margins increased threefold in three years.

The second hypothesis is supported by the results of the study but the authors noted that they were only 10 to 15% of what was expected from managed Medicare payments. Noting that overall Medicare margins appear to be relatively stable, in the face of declining overall margins, GME, and bad debt margins, the authors found support that BBA97 had an effect on the financial health of teaching hospitals - yet concluded that other factors may have contributed so much more. The authors raised some possibility in questioning the validity of the cost variables measured and non-measurement of Medicare payment adjustments in the years prior to research that could have affected the findings and concluded, that non-Medicare, both regulatory and market-driven factors could account for the worsening financial health situation of teaching hospitals.