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Research ArticleOriginal Research

The Balanced Budget Act of 1997 and the Financial Health of Teaching Hospitals

Robert L. Phillips, George E. Fryer, Frederick M. Chen, Sarah E. Morgan, Larry A. Green, Ernest Valente and Thomas J. Miyoshi
The Annals of Family Medicine January 2004, 2 (1) 71-78; DOI: https://doi.org/10.1370/afm.17
Robert L. Phillips Jr
MD, MSPH
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George E. Fryer
PhD
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Frederick M. Chen
MD, MPH
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Sarah E. Morgan
MD
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Larry A. Green
MD
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Ernest Valente
MA, PhD
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Thomas J. Miyoshi
MSW
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Tables

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    Table 1.

    Comparisons of Hospitals Excluded from Analysis With Those Included

    Hospital CharacteristicExcluded Hospitals (%)Included Hospitals (%)
    * P <.001.
    Type of hospital
        General short term82.998.6*
        General long term2.00.7
        Cancer1.30.1
        Psychiatric5.90.1
        Rehabilitation3.90
        Childrens’4.00
    Referral center6.65.7
    Medicare-dependent hospital?1.31.4
    Type of hospital control*
        Nonprofit77.468.2
        For profit8.016.3
        Government14.615.5
    Total hospital beds, mean No.*262.1 (SD 192.2)327.5 (SD 209.7)
    • View popup
    Table 2.

    Hospital Cohort Sample Sizes and Comparisons

    Hospital TypeCOTHNon-COTHTotal
    COTH = Council of Teaching Hospitals and Health Systems.
    Family practice single-residency hospital4104108
    Multiple-residency hospital188417605
    Total192521713
    • View popup
    Table 3.

    Total Hospital Margins and Financial Reserves by Cohort

    Financial CharacteristicCOTH (n = 192)Non-COTH (n = 521)Family Practice Single Residency (n = 108)Multiple Residency (n = 605)All Hospitals (n = 713)
    COTH = Council of Teaching Hospitals and Health Systems.
    1996 total margin, %4.55.56.25.05.2
    1998 total margin, %2.82.94.72.52.9
    1999 total margin, %2.12.64.92.12.5
    1996 vs 1999 total profit margin difference, % (relative change %)−2.4 (−53.3)2.9 (−52.7)−1.3 (−21.0)−2.9 (−58.0)−2.72
    1996 hospitals with negative total margins, %30 (15.6)89 (17.l)12 (11.1)107 (17.7)119 (16.7)
    1998 hospitals with negative total margins, %58 (30.2)158 (30.3)23 (21.3)193 (31.9)216 (30.3)
    1999 hospitals with negative total margins, %67 (34.9)181 (34.7)30 (27.8)218 (36.0)248 (34.8)
    Financial reserves, mean $30,025,52417,882,66724,913,42420,480,33021,151,822
    • View popup
    Table 4.

    Medicare Hospital Margins by Cohort

    Financial CharacteristicCOTH (n = 192)Non-COTH (n = 521)Family Practice Single Residency (n = 108)Multiple Residency (n = 605)All Hospitals (n = 713)
    COTH = Council of Teaching Hospitals and Health Systems, GME = graduate medical education, PPS = prospective payment system.
    Medicare margin, %
        1996, mean (median)7.4 (11.1)14.6 (20.4)18.9 (20.3)11.8 (18.6)12.9 (18.9)
        1998, mean (median)8.6 (13.1)16.5 (21.6)20.2 (21.7)13.3 (18.9)14.3 (19.7)
        1999, mean (median)8.2 (13.0)17.7 (23.1)16.3 (17.9)10.7 (15.9)11.5 (16.2)
    GME margin, %
        1996, mean (median)−27.8 (−1.7)−76.4 (−5.7)−58.7 (−15.3)−64.0 (−2.8)−63.2 (−4.0)
        1998, mean (median)−55.7 (−19.0)−101.3 (−24.4)−60.8 (−28.0)−93.8 (−20.3)−88.8 (−21.6)
        1999, mean (median)−55.3 (−19.2)−118.2 (−24.1)−84.5 (−30.5)−103.9 (−21.8)−100.9 (−23.8)
    GME margin, dollar adjusted, %
        1996−9.8−19.8−14.5−12.4−13
        1998−31.2−38.3−33.1−33.1−33
        1999−31.9−44.7−38.5−35.2−35
    PPS margin, %
        1996, mean (median)16.8 (17.4)20.3 (20.2)20.1 (20.1)19.2 (20.1)19.4 (19.2)
        1998, mean (median)23.8 (23.8)25.8 (25.9)25.2 (25.1)25.3 (25.2)25.3 (25.2)
        1999, mean (median)23.7 (24.3)25.1 (25.2)24.3 (23.9)24.8 (24.8)24.7 (24.8)
    PPS margin, dollar adjusted, %
        199615.019.419.817.217.5
        199822.525.125.223.824.0
        199922.324.223.723.523.5
    • View popup
    Table 5.

    Mean Graduate Medical Education Payments and Education Costs by Cohort for 1996, 1998, and 1999 (Dollars)

    Payments and Costs by YearCOTH (n = 192)Non-COTH (n = 521)Family Practice Single Residency (n = 108)Multiple Residency (n = 605)All Hospitals (n = 713)
    COTH = Council of Teaching Hospitals and Health Systems.
    Indirect medical education, $
        199613,691,1331,755,6341,249,0265,633,8653,543,382,898
        199812,060,4941,557,2351,126,5524,967,3823,126,934,074
        199912,110,1661,517,8571,137,3924,947,3013,115,955,490
        Change (%)−1,580,967 (−11.5)−237,777 (−13.5)−111,634 (−8.9)−686,564 (−12.2)−12.1
    Direct medical education, $
        19965,461,634823,278647,6332,326,6401,477,561,405−
        19985,505,803873,858701,1562,374,6601,512,394,341
        19995,690,298888,583691,9152,447,5401,555,488,746
        Change (%)228,664 (4.2)65,305 (7.9)−44,282 (−6.8)120,900 (5.2)5.3
    Education costs, $
        199621,035,9673,089,9532,171,4258,949,1865,648,771,242
        199823,043,2383,361,4822,455,4119,773,2666,175,634,084
        199923,482,6023,482,8202,532,8879,999,4336,323,208,632
        Change (%)2,446,635 (11.6)392,867 (12.7)361,462 (16.6)1,050,247 (11.7)11.9
    • View popup
    Table 6.

    Actual Reported Managed Medicare Graduate Medical Education Funds

    Managed Medicare GME Payment
    Hospital Type1998 Total Payments to All Hospitals $ (Mean $)1999 Total Payments to All Hospitals $ (Mean $)
    GME = general medical education, COTH = Council of Teaching Hospitals and Health Systems.
    COTH (n = 192)22,515,903 (117,270)50,635,504 (263,727)
    Non-COTH (n = 521)8,703,370 (16,705)18,661,695 (35,819)
    Family practice single residency (n = 108)1,491,959 (13,814)3,219,338 (29,809)
    Multiple residency(n = 605)29,727,314 (49,136)66,077,861 (109,220)
    • View popup
    Table 7.

    Changes in Resident Full-time-Equivalent (FTE) by Cohort

    Resident FTECOTH (n = 192)Non-COTH (n = 521)Family Practice Single Residency (n = 108)Multiple Residency (n = 605)
    Primary care FTE
        199692.618.417.442.1
        199894.920.019.143.9
        199993.719.318.543.0
        Relative change1996 vs 19991.30.91.10.9
    Other FTE
        1996115.89.11.944.2
        1998116.510.12.145.3
        1999112.88.71.843.0
        Change 1996–1999−3−0.4−0.1−1.2

Additional Files

  • Tables
  • Supplemental Appendix. Variables from Hospital Cost Reports and Formulas Used for Calculations

    Files in this Data Supplement:

    • Supplemental Appendix - PDF file, 2 pages, 1.71 MB.
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The Annals of Family Medicine: 2 (1)
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The Balanced Budget Act of 1997 and the Financial Health of Teaching Hospitals
Robert L. Phillips, George E. Fryer, Frederick M. Chen, Sarah E. Morgan, Larry A. Green, Ernest Valente, Thomas J. Miyoshi
The Annals of Family Medicine Jan 2004, 2 (1) 71-78; DOI: 10.1370/afm.17

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The Balanced Budget Act of 1997 and the Financial Health of Teaching Hospitals
Robert L. Phillips, George E. Fryer, Frederick M. Chen, Sarah E. Morgan, Larry A. Green, Ernest Valente, Thomas J. Miyoshi
The Annals of Family Medicine Jan 2004, 2 (1) 71-78; DOI: 10.1370/afm.17
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