A financial ratio analysis of for-profit and non-profit rural referral centers.
BACKGROUND
National financial data show that rural referral center (RRC) hospitals have performed well financially. RRC hospitals' median cash flow margin ratio was 10.04% in 2002 and grew to 11.04% in 2004.


OBJECTIVE
The aim of this study is to compare the ratio analysis of key operational and financial performance measures of for-profit RRCs to those of private, non-profit RRCs.


METHODS
To control for accounting aberrations within a given year, we selected RRCs that reported 3 consecutive fiscal years of Centers for Medicare and Medicaid Services (CMS) cost report data, starting with fiscal year 2004 and ending with fiscal year 2006. Given a limited sample size of 28 for-profit RRCs and 127 non-profits, we used the non-parametric median test to assess median differences in operational and key financial measures between the 2 groups.


RESULTS
For-profit RRCs treated less complex cases and reported fewer discharges per bed and fewer occupied beds than did non-profits. However, for-profit RRCs staffed their beds with fewer full-time-equivalent (FTE) personnel and served a higher proportion of Medicaid patients. For-profit RRCs generated operating cash flow margins in excess of 19%, compared to only 8.1% for non-profits, and maintained newer plant and equipment.


CONCLUSIONS
For-profit RRCs generated a substantially higher cash flow margin by controlling their operating costs.
McCue
Michael J
MJ
Department of Health Administration, Virginia Commonwealth University, Richmond, VA, USA.
Nayar
Preethy
P
D000066:Accounting; D003953:Diagnosis-Related Groups; D005377:Financial Management, Hospital / Q000592:standards* / Q000706:statistics & numerical data; D016304:Hospitals, Private / Q000191:economics* / Q000458:organization & administration; D006780:Hospitals, Rural / Q000191:economics* / Q000458:organization & administration; D006788:Hospitals, Voluntary / Q000191:economics* / Q000458:organization & administration