Reassessing Financial Peer Groups for CAHs (FMT Policy Brief #44)

Publication Date: Nov 2016
Author(s): Hawkins WL, Reiter KL, Pink GH
Research Center(s): North Carolina
Project: Development of Quality Peer Groups and Refinement of Financial Peer Groups
Topic(s): Finance

Since 2004, the Flex Monitoring Team has produced the Critical Access Hospital Financial Indicators Report (CAHFIR) that provides CAH administrators with comparative financial indicators. In 2006, peer groups for CAHs were created by a survey of CAH executives, literature review, advice from technical advisors, and statistical analysis. Net patient revenue, government ownership, operation of a rural health clinic (RHC), and provision of long-term care (LTC) were identified as factors that significantly influenced CAH financial performance and condition and were thus used as the basis of CAH peer groups. Establishing relevant peer groups enhanced the utility of the CAHFIR by facilitating “apple-to-apple” comparisons.

In the past ten years, significant changes have occurred in the U.S. health system and economy, suggesting that factors influencing CAH financial performance may also have changed. The purpose of this study was to assess whether the factors used in the current CAH financial peer groups are still important influences on CAH financial performance, and whether new hospital, geographic or community factors should be considered for peer groups.

Key Findings:

  • The current financial peer group factors of net patient revenue, government ownership, provision of long-term care, and operation of a rural health clinic should be retained.
  • Adding a surgical revenue indicator to the financial peer group factors may improve comparability with regard to measures of outpatient revenue and cost, salaries, and utilization.
  • Location in a non-core based statistical area is associated with measures of revenue, cost and utilization. Results also suggest regional differences in CAH financial performance and condition. However, users of peer groups should be cognizant of the fact that these factors are not under the control of hospital managers.

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