The uneven distribution of COVID-19 relief funds to hospitals demonstrates the need for a standardized database of key financial metrics that lawmakers can use to guide future decisions, according to the authors of a new article.
Researchers from the Urban Institute and Harvard University joined in a article in the Journal of Health Care Finance which draws attention to the imprecise methods HHS used to distribute more than $ 130 billion in grants from the Provider Assistance Fund. The federal government provided most of that money based on the size of health systems without considering other factors, such as liquidity, solvency, capital investments, or overall financial health. As a consequence, a lot of money ended up going to systems based on billions of dollars in cash and investments, while some government-owned systems got proportionally less.
That may not have happened if lawmakers in Congress had access to reliable national data that allowed them to quickly assess critical health system finances and make accurate peer-to-peer comparisons, the report concludes.
“Health systems are in a competitive market, but he’s also trying to make sure that the entire country has access to high-quality health care,” said Nancy Kane, lead author of the paper and adjunct professor of health policy and management. at Harvard. TH Chan School of Public Health. “But when assets are so unevenly distributed, you are actually hurting access, affordability and quality of care.”
At this time, there are several ways to collect the financial conditions of individual health systems, but there is no national database where they are required to enter data from their audited financial statements in a standardized way. The study authors would like that to change.
Policy researchers and analysts often rely on CMS Medicare cost reports, which contain a large amount of volume and financial data. However, there is a big problem: It is only reported at the individual hospital level, not at the health system level, the report notes. Some important measures of financial health are often not reported on individual facilities, such as investment earnings or long-term debt, Kane said.
People who study hospitals also use the Internal Revenue Service Form 990 to gather information on health system finances, but they are limited to nonprofits and the information is not timely or complete, the report notes.
California, Florida and some other states already require hospital-level audited financial statement reports, according to the report. “Not that this is radical,” said Robert Berenson, study author and fellow at the Urban Institute.
A database like this would also be useful for researchers and even hospital executives who want to compare their companies with the competition, Berenson said.
Audited financial statements are the “gold standard” of financial data because they include detailed information about the company’s finances, they are certified by external auditors, and creditors can sue companies that report misleading information, the report says.
However, financial disclosures have their own shortcomings. For one thing, they are based on generally accepted accounting principles, which leave a lot of discretion to management, Kane said. For example, unrealized gains and losses can be reported anywhere in the financial statement and cash can be reported as restricted or limited without details on what the restriction is.
Those answers will be in the footnotes, but lawmakers won’t take the time to dig that deep into individual systems, Kane said.
The study identifies a dozen key financial metrics that the authors argue could better inform policy, including total margin, cash and investments, debt service coverage, and uncompensated care burden.
Lawmakers focused on getting aid grants as quickly as possible early in the pandemic, but later tranches were better targeted at rural hospitals and facilities in COVID-19 hot spots, said Rick Gundling, vice president of the Association of Financial Management of Medical Care.
“The first round was just to get a cash injection for these healthcare systems that we as a nation had stopped all elective surgeries and all that kind of thing,” Gundling said. More consistent financial data in line with what the Urban Institute and Harvard recommend would be helpful to lawmakers, he said.
Such a database would not require significant resources from the federal agency charged with maintaining it, Kane said. Calculations of the mean and median could be automated, although someone would have to compare the financial statements of the health systems with the information they presented to ensure consistency, he said.
Americans have access to a great deal of data on hospital quality on the CMS Hospital Compare website, but comparatively little on hospital finances, Kane said.
“We need financial data as much or more than we need quality data to make policy at the federal level,” Kane said. “However, it lags far behind the quality data.”