Financial performance of hospitals that care for disproportionately high volumes of black and Hispanic patients

BACKGROUND: Recent studies suggest that the site of care is closely related to disparities in health care. The characteristics and performances of hospitals where people receive care are found to be important in the quality of care that patients receive. Hospitals that care for a high proportion of black or Hispanic patients appear to provide a modestly lower quality of care for common medical conditions. The financial status was mentioned as one of the reasons why hospitals that care for large minority populations often provide worse care. However, empirical evidence on the financial performance of those facilities is surprisingly sparse.

PURPOSE: This study aims to determine the proportion and volume of black vs. white or Hispanic vs. white patients treated at hospitals and to examine whether hospitals that care for disproportionately high volumes of black or Hispanic patients have worse financial condition. The finding of this study is expected to provide an opportunity for more targeted efforts to improve hospital care for minorities.

METHODS: A retrospective, cross-sectional study of hospitals with disproportionately high volume of black or Hispanic patients is conducted using the 2004 Medicare data and Healthcare Cost Report Information System (HCRIS) datasets. These datasets are merged by using the unique Medicare provider identifiers. This study uses 2004 Medicare data to calculate, for each hospital in this study, the volume and proportion of black and Hispanic patients discharged. The dependent variables are financial ratios, such as liquidity, capital structure, efficiency, and profitability. In addition, operating cash flow and capital investment rate are examined for the following two reasons: 1) hospitals typically have a high proportion of non cash revenues or expenses, such as accounts receivable and depreciation expense, and thus, cash based measure is often a more valid measure of financial performance, 2) capital investment may help improve the quality of care of hospitals. Statistical analyses focus on comparisons of median values for each measure between comparison hospital groups.

PRELIMINARY RESULTS: Hospitals that care for a high proportion of minority patients appear to have liquidity issues, demonstrated by significantly lower days cash on hand. Those facilities also appear to have a lower capital investment rate, suggesting that they may not accomodate the need of physicians and patients in the area of technology equipment purchases and facility upgrades.