Michael J McCue1, Jon M Thompson. 1. Department of Health Administration, Virginia Commonwealth University, Medical College of Virginia Campus, Richmond, 23298-0203, USA. mccue@vcu.edu
Abstract
PURPOSE: To examine cash flow margins in academic medical centers (AMCs; i.e., teaching hospitals) in an effort both to determine any significant differences in a set of operational and financial factors known to influence cash flow for high- and low-cash-flow AMCs and to discuss how these findings affect AMC operations. METHOD: The authors sampled the Medicare cost report data of 103 AMCs for fiscal years 2005, 2006, and 2007, and then they applied the t test to test for significant mean differences between the two cash flow groups across operational and financial variables (e.g., case mix, operating margin). RESULTS: Compared with low-cash-flow AMCs, high-cash-flow AMCs were larger-bed-size facilities, treated cases of greater complexity, generated higher net patient revenue per adjusted discharge, served a significantly lower percentage of Medicaid patients, had significantly higher average operating profit margins and cash flow margin ratios, possessed a higher number of days of cash on hand, and collected their receivables more quickly. CONCLUSIONS: Study findings imply that high-cash-flow AMCs were earning higher cash flow returns than low-cash-flow AMCs, which may be because high-cash-flow AMCs generate higher patient revenues while serving fewer lower-paying Medicaid patients.
PURPOSE: To examine cash flow margins in academic medical centers (AMCs; i.e., teaching hospitals) in an effort both to determine any significant differences in a set of operational and financial factors known to influence cash flow for high- and low-cash-flow AMCs and to discuss how these findings affect AMC operations. METHOD: The authors sampled the Medicare cost report data of 103 AMCs for fiscal years 2005, 2006, and 2007, and then they applied the t test to test for significant mean differences between the two cash flow groups across operational and financial variables (e.g., case mix, operating margin). RESULTS: Compared with low-cash-flow AMCs, high-cash-flow AMCs were larger-bed-size facilities, treated cases of greater complexity, generated higher net patient revenue per adjusted discharge, served a significantly lower percentage of Medicaid patients, had significantly higher average operating profit margins and cash flow margin ratios, possessed a higher number of days of cash on hand, and collected their receivables more quickly. CONCLUSIONS: Study findings imply that high-cash-flow AMCs were earning higher cash flow returns than low-cash-flow AMCs, which may be because high-cash-flow AMCs generate higher patient revenues while serving fewer lower-paying Medicaid patients.