WORTHINGTON, OH – A popular measure of the value that hospitals pour back into their communities suggests that organizations have been able to provide more benefit as profitability increases.
Conversely, poor margins and high costs per discharge can inhibit hospitals’ ability to make a positive impact on its community, according to the creators of an index measuring that statistic.
Overall, hospitals’ profitability has increased since 2002, rising 56 percent to $5.7 billion in 2004, according to estimates from Cleverley & Associates, a Worthington, Ohio-based financial consulting firm.
The company, which gathers data to produce benchmarking reports and provides consulting services, started measuring the community value provided by hospitals three years ago, said James Cleverley, a principal of the firm.
The Community Value Index takes into account three factors – financial viability and plant reinvestment; hospital cost structure; and hospital charge structure.
Financial viability is essential because a hospital needs to support the growth of services to the community, Cleverley said. Keeping costs low is achieved by operating efficiently to maintain margins. And charges should be reasonable and competitive.
The firm uses a variety of measures in the three categories to calculate a CVI number, then creates two lists. One charts the top 100 hospitals, consisting of 20 from five categories based on size, intensity and teaching status.
It also designates “5-Star” hospitals, which are within the top 20 percent of their respective categories.
Hospitals performing well in the CVI are more likely to be in states with good margins, Cleverley said. For example, Utah hospitals have the highest total margin in Cleverley’s survey of profitability, and also have the highest ratio of 5-star CVI ranks.
Conversely, hospitals in both the District of Columbia and Hawaii have negative operating margins, and neither have any 5-star hospitals.