Read Chapter on Davis Plus: Finance
1-Mention the types of budgets that you know and give examples of then?
2- What is budgeting?
3- What is directed and indirect cost?
4- Give examples of productive and non-productive hours?
5- What does HMO, PPO, POS means?
A) Mention one example of each of then in your city, or state?
6- What is DRGs.?
7- Give some examples of strategies for Cost-conscious nursing practice that your Nursing unit use to lower medical care cost?
FINANCE
Health care is becoming more and more like other industries as technology expands and this country spends
more and more of its gross national product (GNP) on health care. It is because of this great expenditure that
the health care industry must behave more like a business then ever before. Having a business mindset will
assist health care institutions to survive in a highly competitive market.
An institution’s administration cannot be solely responsible for assuring profitability in health care. Each
member of the institution has a responsibility to assist in generating enough money not only to stay in
business but to help the organization gener- ate an excess amount of money so it can grow and prosper. Now
that resources are limited and compe- tition is growing among health care organizations, all resources need
to be used wisely and efficiently; the business-savvy nurse will be the leader in this cost-savings movement.
This chapter will intro- duce the nurse to concepts of business and finance to instill an understanding of how
a health care agency or institution operates as a business.
Box 1-1
Strategies for Cost-Conscious
Nursing Practice
1. Understanding what is required to remain financially sound
2. Knowing costs and reimbursement practices
3. Capturing all possible charges in a timely fashion
4. Using time efficiently
5. Discussing the costs of care with patients
6. Meeting patient, rather than provider, needs
7. Evaluating cost-effectiveness of new technology
8. Predicting and using nursing resources efficiently
9. Using research to evaluate standard nursing practice
Nurses and Budget Knowledge
The role of nurses in health care today is not what it was just 10 short years ago. Nurses were educated to
care exclusively for patients’ health issues and were not part of the day-to-day operations of the units or
departments in which they worked. They did not want to be involved in the financial activi- ties of their work
environment because they believed that these activities had nothing to do with caring for patients. But today,
nurses must recognize that hospitals and other health care organizations are businesses and that the way
they provide care to the patients influences how profitable that business can be (see Box 1). For businesses to
be successful, they must make a profit on the goods and services that they offer or sell.
All health care agencies, whether they are for- profit or not-for-profit, are in the business of mak- ing money.
If expenses exceed revenues, then they experience a loss. If expenses equal revenues, then they break even. In
both cases, there is no money to hire nurses, replace facilities and equipment, expand services, or
accommodate costs due to infla- tion. Some organizations survive only because they use interest from
investments and income from grants, endowments, profits, sale of properties, and so forth to supplement
revenues. However, since the decline in the stock market in late 2008, income from investments cannot be
counted on. Therefore, nurses must provide care with the knowledge of how to do so cost-effectively; only
then will they help their institutions prosper.
Nurses, to be valued care providers, need to be thinking about income and expenses and what is needed for
their institution to make a profit. The cost of doing business is determined by many fac- tors, and every choice
a nurse makes while caring for a patient contributes to the profit or loss experi- enced by the institution. The
cost of doing business is determined by direct and indirect costs plus a profit margin. Direct costs are such
things as salaries, benefits, and supplies. Indirect costs include electricity, housekeeping, the medical records
department, administration, bad debts, and uncol- lectibles. More information on direct and indirect costs is
provided later in this chapter (see Table 1).
Table 1-1
Number of Nonelderly Uninsured
Americans, 2004–2007
Year
Number of Uninsured (in millions)
2004
43.0
2005
44.4
2006
47.0
2007
45.7
The state of the economy plays a large role in health care costs. During tough economic times, many people
begin making the hard decisions between putting food on the table or paying for health care, and so people
enter the health care sys- tem sicker, requiring more money to return them to a healthy state. In 2006, 47
million people were without health insurance coverage (U.S. Census Bureau, 2007); in 2007, the Census
Bureau reported the number of people without health insurance decreased to 45.7 million, an improve- ment
likely due to an increased enrollment in pub- lic programs—notably Medicare and Medicaid. But in November
2008, unemployment hit an all- time high of 6.7%, most likely erasing any further decreases in the number of
uninsured (U.S. Department of Labor, 2008). Recent analysis pre- dicts that each 1 percentage point increase
in unemployment will lead to 1.1 million more unin- sured adults (Kaiser Family Foundation and Health
Research and Education Trust, 2008). When people make a choice between food on the table and going to a
doctor, the food wins out, therefore delaying care for fear of medical bills. This begins the downward spiral
that leads ulti- mately to higher health care costs for all of us. It has never been more important for nurses to
understand the cost of health care and what their part is in keeping down those costs.
In today’s market of competition and limited resources, understanding how human and material resources
are allocated and utilized in providing patient care will help nurses to help their health care organization
maintain and even improve prof- itability. Such an understanding will also help increase the amount and
quality of nursing serv- ices. These depend on the budgetary plan, so nurses must become skillful in
budgetary procedures.
The costs of nursing services historically have been lumped in with the patient’s room and board charges. The
nursing profession has been unable to charge independently for the skill, knowledge, and care it provides. To
achieve reimbursement for nursing services requires a change in government regulations and third-party
payer policies. When nurses can demonstrate their financial value and savvy in the health care setting, then
the possibility of charging for their knowledge and experience in caring for patients will become more of a
reality.
Nurses must be able to determine the resources they will need to manage patient care and articulate those
needs to ensure they receive their share of limited resources. And they must be able to accu- rately project
the resources needed to maintain efficiency and provide quality care. Each year, the pressure to control costs
increases, requiring nurses to understand more sophisticated information about
the financial aspects of their job. Nurses are expected to use financial tools to develop and justify budgets and
to minimize the cost of staff and supplies. Because the budget is an annual plan that guides the effective use of
human and material resources, of goods and services, and of the management of the environment to improve
productivity, it is one of the most important tools of financial management. This chapter is an introduction to
how the health care sys- tem arrived at the business it is today and provides knowledge and skills to develop
and articulate the budgetary needs of nursing.
The History of Health Insurance
in the United States
The health care industry is a service industry rather than a production industry. Its essential business is the
delivery of quality health care services, for which it receives payment. Traditionally, health care was paid for
from private funding sources, meaning either individuals paid for themselves or money was made available
through various charitable institutions.
During World War II (WWII), the government initiated employee wage and price freezes to pre- vent wartime
inflation. The 1942 Stabilization Act was designed to curb inflation, control wage levels, and ration essential
consumer goods, thereby help- ing to stabilize the cost of living. Because it was illegal to raise wages,
employers began offering benefits packages, including health insurance. A 1943 administrative ruling
determined that the monetary value of a health insurance plan was not subject to the wartime wage controls,
was tax- deductible to the employer, and was not considered taxable income for employees. This ruling
allowed employers to use fringe benefits, especially health insurance, to compete for workers, and the system
gave rise to the employer-based health insurance system in place today. From the end of WWII to the late
1960s, employer-sponsored health insur- ance expanded greatly because of the tax benefit, the expanding
economy, and the need to attract good workers. Private corporations became the pri- mary providers of
health insurance for most Americans. By the 1960s, 90% of the population was covered by health insurance
(Dobbin, 1992).
The 1960s was a period of remarkable prosperity in the United States, as measured by such statistics as the
GNP and the unemployment rate, which was below 4%. It was easy for businesses to continue to pay for
health insurance and other fringe benefits. Most plans were paid for by the employer, and employees were
reimbursed 100% of the fee for serv- ices rendered. But during the 1970s, unemployment increased and so
did the number of the uninsured. Employers could no longer bear the burden of pay- ing for employee health
insurance, so they began shifting more and more of the burden to employees.
Who pays for the rising costs of health insurance and ultimately health care today? Everybody does:
employees, consumers, and taxpayers. Businesses pass along a portion of the rising premiums to their
workforces in the form of lower wage increases. Companies add the cost of the fringe benefits, including
health insurance, to the price of their products and services. The federal government spends about 21% of the
federal budget—our taxes—on health care. In 2007, expenditures on health care rose to nearly $2.3 trillion—
or over eight times the $255 billion spent in 1980—amounting to over $7600 per person (National Coalition
on Health Care, 2008). So today, more than ever, it is important for nurses to understand that with more and
more of the financial burden falling on the indi- vidual, they must be cost-conscious.
The Cost Of Health Care
The cost of health care is at an all-time high and continues to increase. When calculating the cost of doing
business, businesses consider both direct and indirect costs and then add a profit margin. Direct costs involve
salaries and supplies, and indirect costs include administrative fees and electricity. What is collected above
these costs is the profit margin, and that amount is what enables any busi- ness to grow and account for
future inflation and expenses. In terms of health care, the more the patient is treated and services provided,
the more profit the institution makes. This fact is the origin of the runaway costs of health care.
By the 1960s, the federal government had devel- oped Medicare and the concept of average pricing had been
established. Medicare set the standard for what it would pay for services rendered, and providers began to
compete at that price or lose money. Nevertheless, prior to 1983, the health care industry experienced
expansion in volume, inten- sity, dollars, and personnel. The cost of growth was borne by insurance
companies and by patients, which helped hospitals develop healthy financial
statements. Patients were clamoring for the best technology and the best treatments and wanted more
elective surgeries, which increased payouts f rom insurance companies. Hospitals saw record profits.
In 1983, as a means of controlling spiraling costs, Medicare instituted diagnosis-related groups (DRGs), which
forever changed how hospitals and providers charged for their services (see later in this chapter for more
information on DRGs). DRGs created billing categories and a prospective payment system (PPS). This system
categorizes patients based on primary and secondary procedures, age, and length of stay. DRGs set a
maximum amount that would be paid for the care of Medicare patients with certain diagnoses. Hospitals and
health care providers were given an incentive to keep costs down because they would experience a profit
only if their costs were less than the amount to be reim- bursed by the DRG category. Thus, control of the cost
of health care shifted from the insurance com- panies to the hospitals. The hospital now had to control costs
by reducing many nonessential serv- ices and the time patients spent as inpatients.
Until DRGs, hospitals looked at nonessential services as a cost of providing health care. Whatever the patient
wanted the patient received, because the hospital expected reimbursement. Now that hospitals were
receiving a flat rate for a diag- nosis, reigning in the cost of caring for a patient became paramount. It was
imperative for the care provided to represent only what the patient needed, nothing more. Much unnecessary
spending had arisen from administrative costs, nosocomial infec- tions, and unnecessary medical tests.
Patients had wanted every test and procedure done to help determine a diagnosis. Now hospitals and physicians needed to be cost-conscious about what care they provided and how, for the consequences of providing
unnecessary patient care could create a financial deficit for the hospital.
The shift of financial responsibility from the insurance company to the hospital created a burden for
hospitals, especially if something happened to a patient that kept him or her hospitalized beyond the DRG
guideline. The hospital would not get reimbursed for the cost of treating the patient if the initial diagnosis
was incorrect or if the patient had a secondary diagnosis unrelated to the initial admission. Patients who have
an extended admis- sion because a nurse or other health care provider did not wash their hands between
patients, causing a nosocomial infection, are not responsible for the added costs of their stay. The hospital is
financially responsible for all extra costs. What impact did this have on providing quality patient care?
Because of the shift in reimbursement practices, hospitals began providing patients with the lowest level of
care possible to control costs. Hospitals increased scrutiny of length of stays, encouraging early dis- charges.
Then the concern became whether patients were being discharged too quickly. Hospitals also began to
discourage admissions of patients who might require expensive services. If the DRG reimbursement rate did
not cover those expensive services, the hospital would lose money.
DRGs were slow to change. New pharmaceuti- cals and technological advancements were typically assigned
to an existing DRG, and so it took several years for the increased costs related to the new technology or
pharmaceutical to be included in the DRG payment. Finally, in 2003, Medicare imple- mented its New
Technology Add-On Payment System to account for the use of innovative technologies in inpatient care
settings. Following strict guidelines, Medicare will provide, for technologies that qualify, additional payment
above and beyond the standard DRG payment. This is why it is important for every nurse to understand what
services provided will be reimbursed. Remember, if a patient’s length of stay increases due to a nosocomial
infection, the hospital bears the cost of that increased stay with- out reimbursement. Also, if a DRG does not
include the cost of new technology, the hospital will not be able to cover the cost of both caring for the patient
and acquiring the equipment.
Medicare DRGs became the standard by which all insurance companies paid for hospital and provider
services. In place of the traditional fee-for-service pay- ment system, insurance companies adopted a reimbursement system similar to Medicare’s based on negotiated rates, contracts, and outcomes. So today, there is
typically no significant difference in benefits or reimbursement over and above Medicare’s DRG from one
insurance plan to another. Using the Medicare DRG reimbursement rate, a nurse can determine what most
insurance companies will pay for any given admission (see Box 2).
Box 1–2
DRGs
DRGs classify hospital admissions by grouping patients with similar ICD-10 codes, thereby providing a means
of relating the types of patients that a hospital treats to the costs that the hospital incurred. The first
application of DRGs occurred in New Jersey (NJ). The NJ State Department of Health used DRGs as the basis of
a prospective payment system (PPS) in which hospitals were paid a fixed DRG specific amount for each
patient. Under PPS, hospitals cannot charge for all costs incurred for patient care. Reimbursement relies on a
predetermined price set by the DRG. Hospitals are paid a flat-rate reimbursement on the discharge diagnosis
regardless of the patient’s length of stay, tests, procedures, or the supplies used.
To maximize profit, nurses need to think continually about providing care that achieves optimal outcomes
with minimal costs. Nursing services are billed as a flat rate, lumped into the “room rate” of a hospital stay;
nursing services, along with supplies and procedures, should be used with an eye on cost containment,
efficiency, and positive patient out- comes. Nurses have the power, knowledge, and skill to increase
reimbursement by reducing unnecessary expenses.
Types Of Health Insurance
It is important to understand the various forms of insurance available to patients. It is also important to
understand how the insurance may affect the decision a nurse makes when caring for patients. The following
sections discuss the major providers of insurance: Medicare, Medicaid, and the various managed health care
options.
Medicare
Founded in 1965, Medicare is an insurance pro- gram that was signed into law by President Lyndon B.
Johnson and administered by the Centers for Medicare and Medicaid Services (CMS), an agency of the U.S.
government. Medicare is our country’s health insurance program for people aged 65 or older. Certain people
younger than age 65 can qualify for Medicare, such as those who have dis- abilities and those who have
permanent kidney failure or amyotrophic lateral sclerosis (Lou Gehrig’s disease). The program helps with the
cost of health care, but it does not cover all medical expenses or the cost of most long-term care. Medicare is
financed by a portion of the payroll taxes paid by workers and their employers and by monthly premiums
deducted from individuals’ Social Security.
There are three parts to Medicare insurance. Medicare Part A insurance is the hospital insurance for members. Most people do not pay a pre- mium for Part A because they or a spouse
already paid for it through their payroll taxes while work- ing. Medicare Part A helps cover
inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities. It also
helps cover hospice care and some home health care. Beneficiaries must be 65 years of age, have
worked (or have a spouse who worked) in a Medicare-covered job for at least 10 years, be a legal
resident or citizen, be disabled, or have end-stage renal disease.
Medicare Part B is the medical insurance for members. Most people pay a monthly premium for
Part B. Medicare Part B helps cover doctors’ serv- ices, outpatient care, and supplies when they
are medically necessary. It also covers some other medical services that Part A doesn’t cover,
such as physical and occupational therapy and some home health care.
Beginning in January 1, 2006, the new Medicare Part D, Prescription Drug Coverage, made prescription drug coverage available to everyone with Medicare and those entitled to receive
Medicare. Most people pay a monthly premium for this cover- age. It is intended to lower
prescription drug costs and help protect against higher costs of drugs in the future. This insurance
program is provided by pri- vate companies. Beneficiaries choose the drug plan and pay a
monthly premium to the plan provider. If a beneficiary decides not to enroll in a drug plan when
first eligible, then the beneficiary pays a penalty for choosing to join later. At least an extra 1
percent of the national average premium will be added to a beneficiary’s premium for each
month that is delayed and they are without creditable drug coverage. The beneficiary will pay the
penalty (which increases each year along with the average premium) for as long as they have
Medicare drug coverage. In other words, if one delays for 20 months, the Part D premiums will
always be at least 20 percent more than other people pay, so late enrollment in the Medicare Part
D program can be very costly to late enrollees. In 2008, the national average premium for
Medicare Part D was $29.89, in 2009 it will range from $10.30 to $136.80 per month with an
average premium of $37.29. Medicare pays for covered products and services in 15 different
settings, including hospitals, ambulatory
care centers, nursing facilities, and physician and therapist offices. Provider payments are based
on predetermined rates and are unaffected by their billed charges, or actual expenditures on the
patient. Physicians and hospitals or any health care provider can bill their posted rates to
Medicare, but Medicare pays only the predetermined rate. Medicare’s Prospective Payment
System (PPS) for medical services is based on an estimate of what an efficiently run operation
that delivers quality patient care should cost. The reimbursements are updated annually,
consistent with changes in provider input costs, technology, practice patterns, market conditions, and other factors that may affect efficient providers’ costs over time. Thus, Medicare sets a
national base payment rate. However, adjustments are made for local market conditions because
input prices differ among markets across the United States, and these differences generally affect
efficient providers’ costs.
Medigap (also known as medical supplemental insurance) or Medicare Gap insurance refers to
an individual insurance policy that can be purchased to cover certain health care services and
costs that are not covered by Medicare. Medigap insur- ance is available in 12 standardized
plans, A through L (except in Massachusetts, Minnesota, and Wisconsin). Medigap insurance is
becoming very important to people covered under the Medicare program because reductions in
levels of benefits and curtailment in availability of services have become reality as a result of the
need to con- trol Medicare costs.
The health maintenance organization (HMO) forms of Medigap differ from the standardized
plans in that they typically require small or no pre- miums. Insurance companies accept
Medicare assignment from the government in exchange for a monthly government-paid
monetary allotment. HMOs require consumers to sacrifice the freedom to choose doctors
because all benefits must be received only through the plan-approved and dis- counted
contracted providers, but in return the HMOs generally offer enhanced benefits.
Medicaid
Medicaid is a medical assistance program for low- income individuals jointly financed by the
state and federal governments. It was enacted in 1965 as an amendment to the Social Security
Act of 1935.
Today, Medicaid is a major social welfare program. The federal government, through CMS,
provides partial funding to the states for their Medicaid programs. Medicaid expenditures for
services are paid out of state funds (referred to as state share) and from federal matching dollars.
Even though the federal government provides each state with money for Medicaid, the individual
states decide how the money is spent, so no two states’ Medicaid programs are alike, yet there
are certain federally mandated standards common to all state pro- grams. To receive federal
matching funds, each state must provide a certain core set of services and cover specific groups
of individuals. Beyond these requirements, there are other services and eligible groups that states
may cover at their option. Each state has its own rules about who is eligible and what is covered.
Some states have chosen to extend eligibility to additional groups that are not eligible for federal
financial participation. Some people qualify for both Medicare and Medicaid. People with
Medicare who have limited income and resources may receive help paying for their out-ofpocket medical expenses from their state Medicaid program. These individuals are called dual
eligibles.
The basic eligibility criteria established by CMS to qualify for Medicaid benefits include being a
resi- dent of the respective state, a U.S. national, citizen, permanent resident, or legal alien; being
in need of health care/insurance assistance; and having a finan- cial situation that could be
characterized as low income or very low income. One must also be either pregnant, a parent or
relative caretaker of a depend- ent child or children under age 19 years; blind; have a disability
or a family member in the household with a disability; be 65 years of age or older; or receive or
be eligible to receive Supplemental Security Income (SSI). Beyond this, the individual must
contact their respective state to determine if additional eligibility requirements must be met.
States have some discretion in setting limits on the amount of services available to their beneficiaries and in setting reimbursement rates paid to most of the providers of Medicaid covered services. Among the services that Medicaid covers are: inpatient hospital services, outpatient hospital
services, laboratory and x-ray services, skilled nurs- ing home services, physicians’ services,
physical therapy, hospice care, and rehabilitative services.
Patients select their health care provider from a list of preapproved physicians and other
providers of medical care. Because physicians are not fully reimbursed for services provided to
Medicaid patients, many limit the number of Medicaid patients they see.
Medicaid managed care organizations (MCO) have become large providers of Medicaid services.
In 1991, 2.7 million beneficiaries were enrolled in some form of managed care; by June 2007,
that number had grown to 28.5 million, an increase of over 1000%. Of all Medicaid enrollees in
the United States in 2007, approximately 64% were receiving Medicaid benefits through
managed care. All states except Alaska, New Hampshire, and Wyoming, have all or a portion of
their Medicaid population enrolled in a MCO.
Private Managed Health Care Plans
Managed care is a type of system that controls the financing and delivery of health services to
mem- bers who are enrolled in a specific type of health care plan. The goals of managed health
care are to ensure that providers deliver high-quality care in an environment that manages or
controls costs. The managed care provider thus is the decision maker about both costs and the
health care services to be provided. Managed care systems strive to ensure that the care delivered
is medically necessary and appropriate for the patient’s condition and that service is rendered by
the most appropriate provider in the least restrictive setting.
By the mid-1980s, managed care had become such a force that hospitals found themselves adopting new reimbursement methods. Managed care programs control health care costs by
monitoring resource utilization. That is done because the Medicare prospective payment system
(PPS) pays hospitals the same amount for every patient at a standard diagnosis-related group
(DRG) rate, and many managed care plans use the DRG payment method for setting payment
rates and selecting providers. By controlling the use of resources, hos- pitals can maximize
reimbursement.
The major types of managed care plans include Health Maintenance Organizations (HMO),
Preferred Provider Organizations (PPO), and Point-of-Service (POS) plans. Each of these systems has distinctive features or characteristics.
Health Maintenance Organizations (HMO)
An HMO enters into contractual arrangements with health care providers (e.g., physicians, hospitals) who together form a “provider network.” In simple terms, a contracted provider is one
who provides services to health plan members at dis- counted rates in exchange for receiving
health plan referrals. HMO members are required to see only providers within this network in
order to have their health care paid for by the HMO. If a member receives care from a provider
who is not in the network, the HMO won’t pay for care unless it was preauthorized by the HMO
or deemed an emergency. Members select a primary care physician (PCP), often called a
“gatekeeper,” who provides, arranges, coordinates, and author- izes all aspects of the member’s
health care. PCPs are usually family doctors, internal medicine doc- tors, general practitioners,
and obstetricians/ gynecologists but can also be advanced nurse practitioners. Members can see a
specialist (e.g., cardiologist, dermatologist, rheumatologist) only if such a visit is authorized as
necessary by the PCP. If the member sees a specialist without a referral, the HMO won’t pay for
the care. HMOs are the most restrictive type of health plan because they give members the least
choice in selecting a health care provider. However, HMOs typically provide members with a
great range of health benefits for the lowest out-of-pocket expenses. HMOs often charge either
no or a very low co-payment.
One type of HMO is the HMO capitation pro- gram, which is a contractual agreement providing
a flat payment per covered member regardless of how much care the member consumes. Most
capitation contracts are between managed care organizations (MCOs) and physicians or
hospitals, but some are between nurse-run organizations and MCOs. When deciding about
patient care and profits, it is necessary to consider the total of the capitation payments received
for the month for all members instead of the total amount of services provided to all covered
members that month. Some patients will require no care for the amount the practice receives,
whereas others may require more care then the practice receives. Either way, the organization
takes in the same amount of money. Practices make a profit when the costs for providing care to
their patients are less than they receive from the MCO.
Preferred Provider Organizations (PPO)
PPOs are similar to HMOs in that they enter into contractual arrangements with health care
providers. In a PPO, unlike an HMO, members don’t have a PCP (“gatekeeper”), nor do they
have to use an in-network provider for their care. PPOs offer members “richer” benefits as
financial incen- tives to use network providers. The incentives may include lower deductibles,
lower co-payments and higher reimbursements. For example, if members see an in-network
family physician for a routine visit, they may have only a small co-payment or deductible. If they
see a non-network family physician for a routine visit, they may have to pay as much as 50% of
the total bill. PPO members typically do not have to get a referral to see a spe- cialist. But there
is a financial incentive to use a specialist in the PPO’s provider network. Although PPOs tend to
be less restrictive than HMOs in the choice of health care provider, they tend to require greater
out-of-pocket payments f rom the members.
Point-of-Service Plans (POS)
A POS plan is often called an HMO/PPO hybrid or an “open-ended” HMO. The reason it’s
called “point-of-service” is that members choose which option—HMO or PPO—they will use
each time they seek health care. Like an HMO and a PPO, a POS plan has a contracted provider
network. POS plans encourage, but do not require, members to choose a primary care physi- cian
(PCP). As in a traditional HMO, the PCP acts as a “gatekeeper” when making referrals.
Members who choose not to use their PCPs for referrals (but still seek care from an in-network
provider) still receive benefits but will pay a higher co-payment and/or deductible than members who use their PCPs. POS members also may opt to visit an out-of-network provider at their
dis- cretion. If they do, the co-payment, co-insurance, and deductible will be substantially higher.
POS plans are becoming more popular because they offer more flexibility and freedom of choice
than standard HMOs.
From here on, we will look at the business of health care—the terminology, budgets, and staffing
needs, and how the various departments together create the business side of our health care
system.
Financial Terminology
Revenues and Expenses
Revenues are monies that are taken in. You receive a paycheck; that is considered revenue
because it is monies you receive in return for providing a good or service. Hospitals receive
revenues from the services they provide. Revenues are also generated from interest on
investments. Expenses are monies that are paid for the goods and services provided to an
organization. The electricity you use or the gro- ceries you buy are expenses because you must
pay for those goods in order to use them. Nursing and housekeeping salaries, tape, and alcohol
pads are examples of some hospital expenses.
Controllable and Noncontrollable Costs
Many expenses are broken down into controllable and noncontrollable costs. Controllable costs
are discretionary costs taken on in the course of run- ning a business, whereas uncontrollable
costs are costs that must be paid in order to run a business. Electricity, for example, is an
uncontrollable cost because it must be paid to run any equipment or even to turn on the lights,
although it can be man- aged to be used efficiently. For instance, putting in motion sensors can
turn off lights in a room when no one is there. And organizations can do certain things, such as
run a sterilization apparatus during the night when negotiated electric costs are lower. The costs
of caring for patients with high acuity levels are also uncontrollable expenses. No one can predict
the types of patients admitted and those with higher acuity are more expensive to treat.
Controllable costs are things such as kitchen supplies for employees. Does your employer need
to supply its employees with a refrigerator or cof- fee? Salaries are uncontrollable costs that are
also controllable. Why? No hospital can run the institu- tion without employees, so salaries are
an expense that must be paid (hence uncontrollable). But the number and types of employees
scheduled makes this aspect of the salary expense controllable.
Fixed and Variable Expenses
Fixed expenses or fixed costs are expenses that cost the same month-to-month or year-to-year.
Fixed expenses are costs that need to be paid regardless of the increase or decrease in the volume
of services provided. Examples of fixed expenses are mortgage
payments, rent, and some salaries. Variable expenses or variable costs are expenses that will
change as the number of persons using the services changes. Examples of variable expenses are
electricity and other utilities, consultant fees, and per diem staff salaries. Combined with fixed
costs, variable costs make up the total cost of doing business.
Direct and Indirect Costs
Direct costs are those cost that are associated with the delivery of patient care. Some direct costs
include salaries for nursing, monitor technicians, supplies, and administrative fees. Indirect costs
are costs that are necessary for the delivery of patient care but that are not directly attributable to
patient care. These indirect costs are created by depart- ments that are typically not revenuegenerating.
Examples of indirect costs are services provided by the biomedical engineering department. The
department needs to repair broken equipment but cannot bill for those services. Its time and
expenses are part of the overall expenses of running the organization. Housekeeping is another
typical indirect cost to a unit. The cost of cleaning an oper- ating room (OR) between patients
and general upkeep of the unit is part of the OR charge to the patient.
Productive and Nonproductive Hours
Productive hours are hours during which employ- ees are actively engaged in their jobs or
working. In the hospital, nursing productive hours are consid- ered direct patient-care hours.
Nonproductive hours are hours paid but during which no direct patient care takes place. For
example, orientation, vacation, sick time, and holidays are nonproductive expenses. The
institution pays the employees but they are not actively engaged in their work. In learning to
calculate staffing, it is important to con- sider productive and nonproductive time. If a nurse
makes $50,000 per year, this salary includes vaca- tion and sick time and therefore includes both
productive and nonproductive hours.
Financial Management
Financial reports and financial statements inform the reader of an organization’s financial health
and stability. It is important that nurses understand financial reports so that they can
communicate the needs of their department to the administration. Remember that each
organization may have a vari- ation of the basic form, so it is important that the nurse become
familiar with the individual institu- tion’s financial statements.
Financial Statements
A balance sheet is a snapshot of a business’s financial condition at a specific moment in time.
The balance sheet shows the company’s financial position, what it owns (assets) and what it
owes (liabilities and net worth). The “bottom line” of a balance sheet must always balance (i.e.,
assets = liabilities + net worth). The contents can change daily, which is why it is typically
compiled at spe- cific time periods, maybe quarterly or annually. It allows administrators to get a
handle on the financial strength and capabilities of the business to help determine whether the
organization is ready to grow and expand or not. Balance sheets, along with income statements,
are the most basic elements in providing financial reporting to potential lenders such as banks,
investors, and vendors who are considering how much credit to grant the organization. Table 2
is an example of a balance sheet.
Assets are subdivided into long-term and cur- rent assets to reflect the ease of liquidating each
asset. Assets such as real estate or machinery are considered long-term because they are less
likely to sell overnight or have the capability of being easily converted into a current asset.
Current assets are any assets that can be easily converted into cash within one calendar year.
Examples of current assets are checking and money market accounts, accounts receivable, and
notes receivable that are due within 1 year’s time. Cash is money available immediately, such as
a checking or savings account. Cash is the most liquid of all short-term assets and is always
listed first. Accounts receivable (AR) are assets that are owed to the organization for purchases
made by or serv- ices provided to patients or insurers, customers, suppliers, and other vendors.
Invoices are sent to the patient or insurer for services rendered, proce- dures performed, and
supplies used and payment is expected typically within 30 days. The longer it takes to receive
the payment for the invoice, the more likely the AR will become a bad debt and the
organization will write off the asset.
Charitable allowances are the monies the hospi- tal budgets for free or reduced care. All
hospitals must provide services to patients for which they know they will never receive
reimbursement. No patient can be turned away from an emergency room. No matter what the
ability to pay is, all hos- pitals must provide care. Before 1969, the Internal Revenue Service
(IRS) required hospitals to pro- vide charity care to qualify for tax-exempt status. Since then,
however, the IRS has not specifically required such care as long as the hospital provides benefits
to the community in other ways.
In 1986, Congress passed the Emergency Medical Treatment and Labor Act (EMTALA), part of
the Consolidated Omnibus Budget Reconciliation Act (COBRA). Under EMTALA, no patient
who arrives at a hospital with an emer- gency condition will be turned away or transferred
unnecessarily. The patient will be screened to determine the severity of the condition. If the condition is deemed an emergency, the hospital is obli- gated to stabilize the patient. The hospital
can transfer patients only when it lacks the ability to stabilize the patient beyond a certain limit.
Avoiding treatment of the patient is a violation for which EMTALA imposes financial penalties
on physicians and hospitals. Additionally, the hospital, if found guilty of violating EMTALA
regulations, can be excluded from participating in the Medicare program.
Contractual allowances are the difference between the costs a hospital incurs and what the
hospital received in reimbursement. Third-party insurers, Medicaid, and Medicare contract with
providers a fee for services or a diagnosis provided for a patient. In 2003, the typical U.S.
hospital col- lected less than 60 cents for every dollar of charges (Ingenix, 2003). Much of the
increase in the con- tractual allowance percentage has resulted f rom inadequate increases in
Medicare and Medicaid payments and to larger and larger discounts granted to managed care
payers.
Fixed assets are long-term assets, which include land, buildings, machinery, and vehicles. Land
is property owned by the organization. Buildings include the hospital itself or medical office
build- ings, pharmacies, or nursing homes owned by the
institution. The total fixed assets are the total dollar value of all fixed assets in a business, less
any accumulated depreciation. Depreciation is a non- cash expense that reduces the value of an
asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time.
Total assets repre- sent the total dollar value of both the short-term and long-term assets of the
business. This number should exceed or equal the total liabilities, which will be discussed next.
Liabilities and net worth (or owners’ equity) include all debts and obligations owed by the
busi- ness to outside creditors, vendors, or banks that are payable within 1 year, plus the owners’
equity. Often, this side of the balance sheet is simply referred to as liabilities. Liabilities include
accounts payable, which comprise all short-term obligations owed by a business to creditors,
suppliers, and other vendors. Accounts payable can include supplies and materials acquired on
credit. Accrued payroll and withholding includes any earned wages or with- holdings that are
owed to or for employees but have not yet been paid. There are also deferred revenues,
payments for services for which a hospital has not yet performed. For example, if an institution is
paid to provide a service to the community, such as flu shots, this is deferred revenue because the
institu- tion has been paid for the service but has yet to administer the shots. Only after the flu
shots are given can the revenue be moved to assets. Together, the sum of these current liabilities
(less than 1 year) represents liabilities owed to creditors.
Long-term liabilities are any debts or obliga- tions owed by the business that are due more than
1 year out from the current date. For example, a mortgage note payable is the balance of a
mortgage that extends out beyond the current year. The insti- tution may have paid off 3 years of
a 15-year mort- gage note, of which the remaining 11 years, not counting the current year, are
considered long-term. Owners’ equity, sometimes referred to as stockhold- ers’ equity, is made
up of the initial investment in the business as well as any retained earnings that are reinvested in
the business. Owners’ equity is only relevant to for-profit organizations. Retained earn- ings are
earnings the organization sets aside for future construction or expansion projects. Retained
earnings are profits that are reinvested in the busi- ness, not allocated to pay off liabilities. In the
end, total liabilities and owners’ equity comprise all debts and monies that are owed to outside
creditors, vendors, or banks and the remaining monies owed to shareholders, including retained earnings,
that are reinvested in the business.
The balance sheet gives a snapshot of how an organization looks financially. What the organiza- tion owns
and is expected to receive should equal what it owes and what it expects to owe; therefore, total assets should
equal total liabilities.
Income Statement
The income statement is the second most impor- tant financial statement for any organization. The income
statement is also known as the profit and loss statement, or P&L. It is a summary of how the business incurred
its revenues and expenses due to both operating and nonoperating activities. The income statement is
divided into two parts: the operating and nonoperating sections (see Table 3).
Income statements are used to track revenues and expenses so that the operating performance of the
business can be tracked over time. Organizations use this statement to find out what areas of the business are
over budget or under budget. Specific items that are causing unexpected expenditures can be pinpointed,
such as salaries and phone, fax, mail, or supply expenses.
Patient revenue is the largest source of monies for a hospital. This represents all services provided to a
customer of the institution. Routine services include room charges, medications, and food. Inpatient
ancillary services are such things as res- piratory therapy, x-rays, and physical therapy; out- patient
ancillary services include 23-hour admis- sion. Outpatient services are limited to patient admissions that do
not exceed 24 hours, so if patients are admitted and released in less than 24 hours, they are considered
outpatients. Other revenues include cafeteria and gift shop sales as well as interest on investments. All these
make up gross patient revenues. A deduction from revenue can be made on the basis of some of the liabilities
and write-offs mentioned earlier. Bad debts, chari- table allowances, and contractual and government
allowances are all allowable deductions from rev- enue. Recall that Medicaid and third-party payers contract
a fee for a specific diagnosis with hospi- tals. If the diagnosis and treatment cost the hospi- tal more than the
contracted fee, the excess cost becomes a contract allowance. The net revenue is the difference between
gross revenue less the deductions. In Table 3, the net revenue is total patient revenue of $1,834,475,441
minus discounts and allowances of $1,110,361,713, which equals a net patient revenue of $724,113,728.
Operating expenses are all the costs required to run an organization. Salary and wages, benefits, supplies,
maintenance, medical fees, etc. are all expenses necessary to run a business. Salaries tend
to be the largest expense for any hospital. Benefits, such as medical and dental insurance,
vacation pay, and sick pay, are also operating expenses. Benefits can amount to about 30% of
wages or more, depending on the organization.
Additional Financial Terminology
Specific to Health Care
The financial concepts discussed so far are univer- sal to most businesses. Unique to health care
are the average daily census, average length of stay, and hours per patient day.
Average Daily Census
Average daily census (ADC) is the average num- ber of admitted patients (inpatients) on any
given day. A particular unit or department is expected to have a certain number of admissions
over a given year. Without admissions, the unit cannot exist, so the administration sets a goal of
how many patients are needed on an annual basis to keep the unit open. That number is divided
by 365 (the number of days per year), which yields the average number of patients per day the
unit is expected to have. For example, if a department is expected to have 7500 inpatients
annually, 7500 is divided by 365, which equals 20.55, the ADC. The budget is created to cover
all expenses for handling these 21 (rounded up) patients per day. It is also created to project the
income that those 21 patients will generate. If the unit does not meet its ADC, then cutbacks
must occur. More information on budgets follows.
Average Length of Stay
The average length of stay (ALOS) in hospitals is a statistical calculation often used for
planning pur- poses. A current belief is that the type of reim- bursement system or health
insurance plan now plays a more significant role in the patient length of stay in hospitals.
Therefore, given this increased interest in the average length of a hospital stay, a brief
introduction to this calculation seems very appropriate. Each unit or department is created to
handle a certain level of patient acuity. This is important to staffing the unit so that patients are
being cared for by the most qualified nurses possi- ble. The number of patients in a given time
period divided by the number of discharges in that period yields the ALOS.
bonus chapter 1 | Finance 13 Hours per Patient Day
Hours per patient day (HPPD) refers to the num- ber of hours a nurse has direct-care contact
with a patient. Just because a patient is on a particular unit, does not mean the nurse is in that
room every minute of every day. Every diagnosis corresponds to nursing care hours. Calculating
the HPPD takes into account the number of minutes and hours nursing staff members directly
interact with patients (i.e., the time it takes to administer treat- ments and medications, monitor
patients, and pro- vide teaching). It also reflects the time required for staff to document care,
order supplies, prepare medication, and direct other caregivers. HPPD equals the sum of all
direct-care time provided by all staff members (RNs and ancillary staff) who care for one patient
in a 24-hour period.
Principles of Budgeting
Now that we have covered the basic financial terminology necessary to run a business along with
terms that are specific to health care, it is time to put everything together and look at the
budgeting process. As mentioned earlier, a budget is the basic financial document in most health
care organiza- tions. It is the financial plan that outlines the resources needed to run the
organization.
Budgeting is an ongoing activity in which rev- enues and expenses are overseen to help maintain
fiscal responsibility and economic health. It is a plan for the allocation of resources, so it serves
as a means to control how much money is spent. Budgets do not have to be based simply on revenues and expenses, however. Budgets can be cre- ated to help coordinate the efforts of different
departments. If one unit can expect a certain num- ber of inpatients, then ancillary departments,
such as housekeeping, can expect a certain amount of collateral work, so their budgets may be
based on what is expected to happen elsewhere.
Planning for a budget occurs during a specific time period, typically during a fiscal year. The
cycle begins with an assessment of the environment, look- ing at trends within and outside the
organization. If the area is building a retirement community, then the institution needs to
consider the increase in the geriatric population and all the services that popula- tion utilizes.
Changes in third-party payer contracts will also affect the potential revenues for a hospital.
Institutions must also consider their competition. If a competing hospital is adding a
rehabilitation unit, for example, then the potential decrease in that spe- cialty needs to be
addressed. A unit that may see a decrease in patients would not want an increased number of
employees. Most important, however, the hospital needs to have clear goals and objectives. The
vision or strategic plan for the hospital will affect where the money needs to be allocated or
readjusted. If the hospital is adding bariatric services, then other departments—cardiology, for
example—may see a decrease in some admissions as the program pro- gresses. Hospital
admissions for complications of dia- betes or hypertension may decrease as patients lose weight.
Those affected departments need to account for those possibilities in their budget projections.
Once the goals and objectives are established and competition and community environments
have been evaluated, each nursing unit will begin to see a draft budget proposal. This is where
each nurse and employee of a department or unit needs to be involved, where it becomes
important to understand patient mix and patient ALOS.
Types of Budgets
There are several different kinds of budgets— including operating budgets, capital budgets, cash
budgets, and personnel budgets—and each plays a different role in decision making. Each of
these budgets creates a foundation for a plan for man- agers to achieve their goals for their unit,
depart- ment, and institution during a specific time period.
Operating Budget
The operating budget is also known as the revenue and expense budget. It tracks common
expenses and costs associated with operating a business. An operating budget is for all outlays
other than capi- tal outlays (see “Capital Budgets” below). An oper- ating budget includes such
expenses as supplies, minor equipment, linen, food, wages, salaries, and overtime. It also
includes revenues generated from hospital admissions, the gift shop, the cafeteria, clinics, and
any other area that generates money.
An operating budget must take into account what is happening in the community. An expanding retirement community may affect the operating budget by an increase in supplies, salaries,
food, overtime, etc. If the community assessment reveals a potential for increasing use of these
resources,
then revenues will go up along with the expenses. The difficult part of understanding an
operating budget is knowing that no one can account for sea- sonal changes or unforeseen events.
The operating budget is based on historic data and potential changes that can be predicted.
Between world events and natural disasters, the revenues and expenses for any organization are
not guaranteed. When unemployment rises in a community, for example, so will charitable and
operating expenses, thereby reducing potential profits.
Capital Budget
The capital budget is for “large-ticket” items in excess of a specific or designated amount of
money. It is used for long-range planning. Each institution determines the dollar amount that
would designate an item as a capital expenditure. For some organi- zations, anything over $500
is part of the capital budget; others consider $1000 or $5000 a capital expense. The capital
budget also includes projects such as new construction, major renovations, and acquisition of
physical property. The capital budget is different from the operating budget, which cov- ers most
other general expenses.
Cash Budget
Even in large organizations cash always needs to be available for unexpected expenses. A cash
budget assures that adequate funding is available in case income does not meet expenditures.
During unex- pected events, like 9/11, New York hospitals had to utilize their cash on hand to
pay the vendors and employees for services and supplies. An event such as 9/11 could never be
planned for in the budget process, but with adequate cash on hand, hospitals can help ensure
services continue in the short term.
It is important to recognize that not having enough cash on hand can prevent the purchase of
needed resources, but that too much cash can decrease potential earnings or interest the money
could generate. Administrators and managers need to watch the cash budget and maintain a
balance that benefits their institution.
Personnel Budget and Requirements
The personnel budget is used to estimate the direct labor costs necessary to meet the needs of a
unit, department, and/or entire hospital. It determines how much staff is needed to operate a unit
or depart- ment 24 hours a day, 365 days a year. Staffing is the largest expense for hospitals,
comprising in some cases as much as 75% of the total operating budget.
The personnel budget includes the cost of employing the nurse manager and any assistant
mangers in the unit. The budget will account for a charge nurse and for each of the licensed staff
members, along with monitor technicians, secre- taries, nursing assistants, and any other person
that generates a salary through a particular department. This budget is typically a variable
budget because it will change based on patient census (volume) and acuity (intensity of care).
The more acute the patients, the more nurses and others needed to care for them. The more
patients admitted to a unit, the more help is needed. These are factors that cannot be predicted
with total accuracy but can be esti- mated based on historical data. There are standards for
staffing provided by many professional organi- zations and by accrediting bodies like the Joint
Commission on Accreditation of Healthcare Organizations ( JCAHO). Additionally, there have
been legislative mandates in some states for nurse–patient ratios; these laws dictate how many
nurses are needed to care for certain types and numbers of patients.
There are typically two types of personnel: bud- geted positions and hourly, or per diem,
positions. A budgeted position usually has an annual salary that will include fringe benefits. The
person who fills this position is expected to work full time or some specified percentage of full
time. One bud- geted employee working full time is one full-time equivalent (F TE). Two halftime employees together equal one FTE, and one full-time and one quarter-time person equal
1.25 FTEs. A full-time employee may have an hourly rate assigned, to which overtime is added
or undertime is deducted. An FTE salary is based on the standard 2080 hours of work per year
(or 40 hours per week for 52 weeks). Many budgeted nursing positions, how- ever, are based on
36 hours per week or three 12-hour shifts. Using 40 hours as the standard for one F TE, a 36hour employee is a 0.9 F TE (36 hours divided by 40 hours). The salary desig- nated for this
position generally does not include the cost of fringe benefits, which will be discussed next.
Fringe Benef its
Fringe benefits are paid by the employer to the employee and include vacation time, sick time,
retire- ment, health insurance, unemployment insurance, and life insurance. Institutions that find
recruitment of staff difficult tend to offer more benefits as induce- ments to potential
employees. Sign-on bonuses, sub- sidized housing and child care are just a few of the creative
fringe benefits offered to attract and retain employees.
Traditional benefits include paid vacation leave, paid sick leave, paid holiday leave, health
insurance, retirement plans, and tuition reimbursement. Each of the benefits has a cost to the
organization. From a fiscal perspective, the organization’s decision to allow the staff to take a
leave can have a negative or positive influence on the budget. If an employee chooses not to use
all or part of vacation or sick leave during the current fiscal year, the savings are reflected in the
budget; however, if the employee is allowed to carry over leave time and gets a pay raise before
using the time, the organization will pay more for the time taken off (see Box 3).
Most hospitals offer a premium for working a holiday to ensure that the institution is staffed sufficiently at all times. Premium pay may provide the employee with as much as double the hourly
rate for working on the holiday plus a paid day off at another time. These additional costs need to
be considered when determining an annual personnel budget.
FTEs
When staffing a unit, the number of FTEs required to provide a specific level of care must be
considered. It is important to calculate the actual number of hours worked by the average
employee. Although the standard for calculating FTEs is based on working 2080 hours per year,
most employees will take sick time, vacation time, holi- day, and other leave time, making it
unreasonable to think that everyone will work the 2080 hours. For example, an employer offers
the following paid leave: 12 days sick time, 10 days vacation time, 8 days holiday time, and 2
days personal time per year, totaling 32 days. For ease of calculation, assume that an employee
works 8-hour shifts, 5 days per week. This employee has a total 256 hours of paid leave (8 hours
32 total days/year). One FTE actually works 1824 hours (2080 – 256) per year and gets paid
for 2080.
Staff ing
As mentioned previously, staffing changes are based on patient census or acuity. It is impossible
to pre- dict exactly the number and acuity of patients who will come into an acute-care setting, so
it is impor- tant to have an effective patient classification system (PCS). A PCS provides the data
needed to calculate the number of FTEs required to staff a nursing unit sufficiently. It helps
determine how many staff members are needed at any given time for specific patient types and
numbers. More acute patients require an increase in the number of hours one nurse needs to care
for them. Patients who perform their own activities of daily living or who need minimal
assistance require less nursing-care hours.
Box 1–3
Employees
When considering the types and numbers of employees, hospitals must weigh whether the
change in controllable costs will affect patient outcomes. It may be less expensive to have
nonlicensed assistive personnel to care for some patients, but if the outcomes are poor, it will
cost the hospital more money. Sometimes the best choice is to provide the more expensive option
to reduce other expenses.
A good PCS should provide a valid and reliable rating of patient-care requirements. Knowing the
average daily census and the average hours of care per patient per day, the staff required to care
for those patients can be determined. Using the preced- ing example to determine staffing for a
unit that has an average daily census of 20 patients, each of those patients require 5.5 hours of
care per day; this sug- gests that 18 FTEs are capable of providing all the nursing care needed
and accounts for paid leave. If the PCS breaks down the patient acuity so that a particular patient
type or level requires different hours of care, staffing requirements may be different from those
calculated. In the example, all the patients required the same number of nursing-care hours.
Another PCS may have different patient types in a particular unit. In this example, based on the
various hours of nursing care needed for differ- ent acuity levels, staffing requirements may be
17 FTEs to fully care for the needs of these patients.
It is important to understand that one FTE can mean more than one employee. The staff can be
made up of all full-time personnel, which means 17 FTEs, as in our second example, or 34 parttime employees, where each is a 0.5 FTE. With today’s hospitals utilizing 36 hours or a 0.9 FTE,
what would be the correct number of employees? If all employees were full-time at a 0.9 FTE,
18.8, or 19, employees (17 F TEs/0.9 F TE equivalents) would be needed. (The rounding
becomes difficult and some may opt for the 18 employees because of sea- sonal issues.) If allRN care is not needed and unli- censed assistive personnel (UAP) or a licensed prac- tical nurse
(LPN) can be used, then costs can be adjusted, but the required hours of care do not change. As
long as all patient care is provided in a safe environment, other factors will go into the decision to increase or decrease FTEs and determine what kind of skill is needed to provide the
care.
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Example Hospital Company Balance Sheet
Balance Sheet
Sept. 08
Sept. 07
Sept. 06
Assets
Current Assets
Cash
Net Receivables
Inventories
Other Current Assets
63.6
151.4
9.2
27.5
74.4
136.9
8.8
22.3
65.5
148.2
7.3
27.4
Total Current Assets
Net Fixed Assets
Other Noncurrent Assets
Total Assets
251.7
421.3
249.9
922.8
242.4
392.4
279.2
914.0
248.4
338.8
188.7
775.9
Liabilities and Shareholders'
Equity
Current Liabilities
Sept. 07
Sept. 06
Sept. 05
25.1
8.1
91.2
18.0
7.8
94.6
23.3
9.4
118.0
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Noncurrent Liabilities
Total Liabilities
Shareholders' Equity
Preferred Stock Equity
Common Stock Equity
Total Equity
124.4
429.1
0.0
553.5
120.5
436.4
0.0
556.9
150.8
319.5
0.0
470.3
0.0
369.3
0.0
357.1
0.0
305.6
369.3
357.1
305.6
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Table 1-3
Sample Income Statement
12/31/2002
$1,012,382,911
Period ending date (12 months prior)
Inpatient Revenue
Outpatient Revenue
Total Patient Revenue
Contractual Allowance/Discounts
Net Patient Revenues
Total Operating Expense
Operating Income
Other Income (contributions, bequests, etc.)
Income from Investments
Governmental Appropriations
Miscellaneous Nonpatient Revenue
Total Nonpatient Revenue
Total Other Expenses
Net Income or (Loss)
Income Statement
12/31/2003
$1,202,929,694
$631,545,747
$1,834,475,441
$1,110,361,713
$724,113,728
$728,986,071
$-4,872,343
$5,150,504
$500,742,346
$1,513,125,257
$894,923,799
$618,201,458
$643,411,027
$-25,209,569
$7,511,235
12/31/2001
$896,081,656
$373,561,873
$1,269,643,529
$713,610,549
$556,032,980
$580,679,940
$-24,646,960
$3,456,722
$9,113,887
$0
$9,207,123
$21,777,732
$2,751,525
$-5,620,753
$0
$2,738
$0
$0
$5,638,400
$10,788,904
$137,644,813
$-131,728,252
$9,589,272
$17,103,245
$5,978,969
$-14,085,293
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