1. Agency for Healthcare Research and Quality,Grant # R01 HS13094 Hospital Financial Distress and Patient Outcome: A Panel Study Mei Zhao, MHA Virginia Commonwealth University Gloria J. Bazzoli, Ph.D. Virginia Commonwealth University Henry J. Carretta, MPH Virginia Commonwealth University

2. Rationale for the Study About 1/3 US hospitals have negative total margins Medical mistakes result in the deaths of 44,000 to 98,000 hospitalized Americans a year (IOM, 1999) Some Patient safety indicators are deteriorating – Respiratory failure ↑ 31% – Infection due to medical care ↑ 14% – Decubitus ulcer ↑ 19% – Septicemia ↑ 41% (Romano et al., 2003)

3. Research Questions What differences exist in the quality of care and patient safety between financially distressed and non-distressed hospitals? What differences exist in the structural and organizational characteristics between these two groups?

4. Method Design – A panel study design is applied to data from 1995-2000 Sampling – Nonfederal short term general hosps from 11 states (AZ, CA, CO, FL, IA, MD, MA, NJ, NY,WA, and WI), about 1,300 per year Data collection – AHA, MCR, HCUP (SID) 1995-2000

5. Key Variables Financial Distress – Average negative operating margin 93-95 Patient Outcome – IQIs (5): AMI, CHF, Stroke, GI hemorrhage, and Pneumonia – PSIs (9): Complications of anesthesia, Death in low mortality DRGs, Decubitus ulcer, Failure to rescue, infections due to medical care, post-op hemorrhage, post-op PE, sepsis, and accidental puncture

6. Analytic Strategies Descriptive statistics and cross-tabulations – Adjusted Least Square Means (ALSM) – Patient age, gender, acuity, and case-mix

7. Results: Comparison of Hospital Structure and Organizational Characteristics DistressedNon-distressed MeanSDMeanSDt-statistics Bed Size201.7212.1184.78148.24.93 *** Publicly Owned (%)0.290.450.100.307.40 *** Major Teaching (%)0.110.310.030.187.71 *** Medicaid Payer (%)0.220.190.160.154.69 *** FTEs/1000 Case-Mix APDs9.444.369.543.26-. 94 RN FTEs/1000 Case-Mix APDs2.241.082.430.92-3.22 ** LPN FTEs/1000 Case-Mix APDs0.410.40.390.37 -. 34 Note: * Significant at the.05 level; ** significant at the.01 level; *** significant at the.001 level.

8. Results No significant difference between distressed and nondistressed hospitals – IQIs AMI – PSIs Complications of anesthesia infections due to medical care post-op PE sepsis accidental puncture

9. Results

13. Summary Distressed hospitals are more likely to be – Publicly owned, major teaching, and larger proportion Medicaid patients Distressed hospitals have smaller RN ratio Better financial performance, better patient outcomes: CHF, Pneumonia, and Decubitus The gap narrowed for the mortality indicators beginning in 1998: Stroke and Pneumonia

14. Significance to Policy and Future Research Cost control policies may have had unintended negative effects on patient outcomes Hospitals experiencing financial distress may have fewer resources to invest in the quality of their services BBA may have had an immediate adverse effect on patient outcomes for both distressed and non- distressed hospitals Examine how financial condition influences process and resource investments related to quality of care