Methods for "Reimbursement Changes' Impact on Hospitals," Currents (6:4, Spring 2002)
Winners and Losers in Health Center Reimbursement Changes
Data source: Health center cost reports (AHCF-1), 1997-1999. The advantages of using this data source are its availability under the Freedom of Information Act, the requirement that all health centers submit this report to the state, the data is publicly audited, and its electronic format. The primary disadvantages pertain to the financial section; health centers are not required to use a standardized format, and the financial data does not include the financial notes, which can be very important in understanding financial activity.
Universe: All free-standing comprehensive care diagnostic and treatment centers licensed under New York State Public Health Law Article 28 that provide primary care services for the general population except those that:
- serve specific populations, e.g., elderly, American Indian;
- are owned by a managed care organization; or
- serve primarily a commercial managed care population; or
- derive less than half of their patient revenue was from comprehensive care services.
The health center 1999 financial condition analysis further excludes following centers that:
- did not have a AHC-1 cost report available from the NY DOH in any of the three years of the analysis (1997-1999) due to e.g., failure to file, recently opened center; or
- are hospital owned, publicly owned or public benefit corporations, due to the difficulty in extricating the finances of the health center from that of the larger entity; or
- are proprietary centers, due to differences in their funding mechanism and mission.
Average payment period = current liabilities / ((total expenses – depreciation expense) / 365). Measures the average number of days used to meet short-term (due within one year) obligations.
Cash flow to total debt = (excess revenues over expenses + depreciation expense) / total liabilities. Measures total debt obligations that can be met with cash flow generated in one year.
Current ratio = current assets / current liabilities. Measures the ability to meet all short-term (due within one year) obligations.
Days cash on hand (short-term sources) = (cash + short term investments) /((total expenses – depreciation expense) / 365). Measures the average number of days of expenses that can be covered with assets that can easily be converted to cash.
Days in patient accounts receivable = accounts receivable / (net patient revenue / 365). Measures the average number of days used to collect patient revenue.
Days in reserve = net assets / ((total expenses – depreciation expense) / 365). Measures the average number of days of expenses that can be covered with all available resources.
Net assets = total assets minus total liabilities.
Total margin = excess revenues over expenses / total revenues. Measures overall profitability.
Working capital = current assets minus current liabilities.
Resources for family caregivers and health care providers are available at our Next Step in Care website.