Hospital Financial Distress and
Patient Outcome: A Panel Study
Mei Zhao, MHA
Virginia Commonwealth University
Gloria J. Bazzoli, Ph.D.
Virginia Commonwealth University
Henry J. Carretta, MPH
Virginia Commonwealth University
Agency for Healthcare Research
and Quality,Grant # R01 HS13094
Rationale for the Study



About 1/3 US hospitals have negative total margins
Medical mistakes result in the deaths of 44,000 to
98,000 hospitalized Americans a year (IOM, 1999)
Some Patient safety indicators are deteriorating
– Respiratory failure ↑ 31%
– Infection due to medical care ↑ 14%
– Decubitus ulcer ↑ 19%
– Septicemia ↑ 41% (Romano et al., 2003)
Research Questions

What differences exist in the quality of care and
patient safety between financially distressed and
non-distressed hospitals?

What differences exist in the structural and
organizational characteristics between these two
groups?
Method



Design
– A panel study design is applied to data from 19952000
Sampling
– Nonfederal short term general hosps from 11
states (AZ, CA, CO, FL, IA, MD, MA, NJ, NY,WA,
and WI), about 1,300 per year
Data collection
– AHA, MCR, HCUP (SID) 1995-2000
Key Variables


Financial Distress
– Average negative operating margin 93-95
Patient Outcome
– IQIs (5): AMI, CHF, Stroke, GI hemorrhage, and
Pneumonia
– PSIs (9): Complications of anesthesia, Death in low
mortality DRGs, Decubitus ulcer, Failure to rescue,
infections due to medical care, post-op
hemorrhage, post-op PE, sepsis, and accidental
puncture
Analytic Strategies

Descriptive statistics and cross-tabulations
– Adjusted Least Square Means (ALSM)
– Patient age, gender, acuity, and case-mix
Results: Comparison of Hospital Structure and
Organizational Characteristics
Distressed
Non-distressed
Mean
SD
Mean
201.7
212.1
184.78
148.2 4.93 ***
Publicly Owned (%)
0.29
0.45
0.10
0.30 7.40 ***
Major Teaching (%)
0.11
0.31
0.03
0.18 7.71 ***
Medicaid Payer (%)
0.22
0.19
0.16
0.15 4.69 ***
FTEs/1000 Case-Mix APDs
9.44
4.36
9.54
3.26 -. 94
RN FTEs/1000 Case-Mix APDs
2.24
1.08
2.43
0.92 -3.22 **
LPN FTEs/1000 Case-Mix APDs
0.41
0.4
0.39
0.37 -. 34
Bed Size
SD
Note: * Significant at the .05 level; ** significant at the .01 level; *** significant at the .001 level.
t-statistics
Results

No significant difference between distressed
and nondistressed hospitals
–
IQIs

–
AMI
PSIs





Complications of anesthesia
infections due to medical care
post-op PE
sepsis
accidental puncture
Results
Comparison between Distressed and Non-distressed
Hosps for IQIs: 1995-2000
IQI Rates (Adjusted Least Square Means)
0.12
0.1
0.08
CHF-nondis
CHF-distress
Pneumonia-nondis
Pneumonia-distress
0.06
0.04
0.02
0
1995
1996
1997
1998
Year
1999
2000
Results
IQI Rate (ALSM)
Comparison between Distressed and Non-distressed
Hosps for IQIs: 1995-2000
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
Stroke-nondis
Stroke-distress
GI hemo-nondis
GI hemo-distress
1995
1996
1997
1998
Y ear
1999
2000
Results
PSI Comparison:1995-2000
PSI Rate (ALSM)
0.025
Decubitus-nondis
0.02
0.015
Decubitus-distress
0.01
0.005
0
1995 1996 1997 1998 1999 2000
Ye a r
Post hemorrhagenondis
Post hemorrhagedistress
Results
PSI Comparison:1995-2000
0.18
0.16
PSI Rate (ALSM)
0.14
0.12
0.1
Failure to rescue-nondis
0.08
Failure to rescue-distress
0.06
0.04
0.02
0
1995
1996
1997
1998
Y ear
1999
2000
Summary

Distressed hospitals are more likely to be
–



Publicly owned, major teaching, and larger proportion
Medicaid patients
Distressed hospitals have smaller RN ratio
Better financial performance, better patient
outcomes: CHF, Pneumonia, and Decubitus
The gap narrowed for the mortality indicators
beginning in 1998: Stroke and Pneumonia
Significance to Policy and Future
Research




Cost control policies may have had unintended
negative effects on patient outcomes
Hospitals experiencing financial distress may have
fewer resources to invest in the quality of their
services
BBA may have had an immediate adverse effect on
patient outcomes for both distressed and nondistressed hospitals
Examine how financial condition influences process
and resource investments related to quality of care