With not-for-profit hospitals increasingly being called on to account for their community benefits, two separate initiatives are afoot to weigh hospitals against each other based on the value they provide.
In what is believed to be the first such national comparison, healthcare financial guru William Cleverley has published a Top 100 list based on a "Community Value Index" that uses eight financial benchmarks to score hospitals on financial viability and reinvestment of capital, costs and charges. The index is included in the 2004 edition of Cleverley's annual State of the Hospital Industry report.
Separately, the Catholic Health Association is urging its 617 member hospitals to agree to standardized reporting of their community benefits to a central reposi-tory, which would be used to provide benchmarks and convey the public benefits of Catholic facilities to policymakers.
Cleverley's Top 100 list supports not-for-profits' claims that they add more value than their investor-owned competitors. Although investor-owned hospitals constituted 18% of 3,549 hospitals evaluated by his firm, Cleverley & Associates, Worthington, Ohio, only three for-profit hospitals made the list. Eighty-two are not-for-profits and 15 are governmental.
"Not-for-profits should score well, and indeed that's what we found," said Cleverley, who counts both not-for-profit and investor-owned hospitals among his clients. "Not-for-profits do better in terms of low cost, low charges and reinvestment back into the community."
He added, "What we've attempted to do is say that from a community's perspective, you want relatively strong, financially viable hospitals that are reinvesting back into their facilities. You want a reasonable cost structure because it makes healthcare more affordable."
But the index, which is based on data reported to Medicare, doesn't determine whether hospitals provide sufficient benefits to justify their tax exemptions-a question highlighted at hearings in the U.S. Senate Finance and House Ways and Means committees last month (June 28, p. 6).
Moreover, it ignores a host of factors that are difficult to measure including charity care, bad debt, health screenings, unreimbursed costs from Medicare and Medicaid-items that hospitals often count when tabulating their community benefits. Cleverley said he did not include those items because standardized data are not available. Likewise, the index neglects the complex question of quality.
Rosemary Blackmon, a spokeswomen for the Alabama Hospital Association, which had few high-scoring hospitals among its membership, took issue with the index. "I think if you were to ask most people how they were to measure the value of a hospital, their first answer would not be the financial strength but the healthcare that it provides to the community," Blackmon said, citing quality and customer service.
Richard Coorsh, a spokesman for the Federation of American Hospitals, criticized the index for failing to include uncompensated care and taxes. "As such we have to question the overall value of the report," Coorsh said.
Cleverley said uncompensated care and tax data are not only unavailable, but probably would lower the for-profit scores. He said not-for-profits have higher uncompensated-care costs and inclusion of income taxes would increase the cost side of the equation.
Yet others commended Cleverley for at least taking a stab at community benefit measurement-an area that is begging for transparency.
Allowing that the index "isn't the entire picture," Dan Bourque, a group senior vice president at VHA, which represents not-for-profits, said, "it provides a window on an important aspect of community benefit, and that has to do with a hospital's financial strength and its ability to reinvest, which are clearly important benefits."
The index shows wide variation among states in the number of high-value hospitals, with Maine having the fewest and Maryland the most. Cleverley said Maine hospitals are hampered by low profitability and high debt, while states such as Florida and South Carolina have disproportionate numbers of investor-owned hospitals that score low on the index.
Some state hospital associations with few high-scoring hospitals blamed low reimbursements from certain payers and said it's unfair to compare hospitals in one state with a national benchmark. But Cleverley said the data used in the analysis provide an "apples-to-apples comparison."
The Rev. Michael Place, president and chief executive officer of the Catholic Health Association, acknowledged the report for encouraging efficiency and competitive pricing, saying that it "could contribute to a discussion of what constitutes appropriate stewardship of investor-owned or not-for-profit hospital resources."
Most CHA hospitals already produce annual community benefit reports under a CHA program begun in 1989, and many of them use the same software. At its meeting in June, the association's board approved a set of task force recommendations that included asking members to support a "ministry-wide" community benefit.
Place said consideration of the move was initiated before recent controversies over hospital tax exemptions. He said quantifying community benefits "would provide a benchmark for members and it would put us in a position with policymakers to show how our members contribute to the health status of the nation."
But hospital-to-hospital comparisons are always controversial. Place said it has yet to be seen how such a program can be implemented. "How could it be done to have objective credibility yet maintain confidentiality? Those are details that must be addressed," he said.