Measuring the Association of the Medicare and Medicaid Revenue Proportions with the Profitability of Washington Hospitals

Hospitals in the United States are reimbursed for services
delivered to patients by third-party payors that can be classified
broadly into four payor groups...


Introduction
Hospitals in the United States are reimbursed for services delivered to patients by third-party payors that can be classified broadly into four payor groups (i.e., Medicare, Medicaid, private insurance, or uninsured). According to the reimbursement policy of each third-party payor, there is the likelihood of a more or less "generous" payment pertinent to costs of hospitals' services actually used [1]. The underpayments of the Medicare and Medicaid programs combined with highly leveraged managed care organizations play a heavy role in explaining a hospital's diminished profitability, declining net worth, and increased liabilities over the market value of assets (i.e., hospital insolvencies) [2]. Since the degree of profitability of a hospital may vary by the generosity in payment of diverse payors, it has been the center of interest whether admission policies or intensity of service for patients from hospitals differ in payment policies of different payors. U.S. hospitals' various payment policy strategies are a levels deliberate on curtailed payment rates for the Medicare and Medicaid registrants in 2001 [1].
U.S. hospitals deliver medical care to Medicaid and Medicare patients for less than cost and provide medical service to the uninsured, often for free. Hospitals have been able to provide cost-free and other under-cost services to Medicare and Medicaid registrants by shifting losses from those programs to mostly private patients [3]; these authors criticize that Medicare and Medicaid programs should provide sufficient payments for delivered services in order to prevent hospitals from shifting losses in Medicare and Medicaid services to the privately insured, and also enable hospitals to keep delivering services for the vulnerable U.S. population. Medicare and Medicaid programs, as public health insurance programs, play a role in improving access to medical care for vulnerable persons by offsetting gaps in the private health insurance market [4]. However, at the same time, they deteriorate the hospital's ability to provide services for Medicare and Medicaid registrants because these programs' inherent underpayment does not fully cover the cost of caring for the enrollees [3].
Numerous studies have attempted to identify determinants of a hospital's profitability, and it has been widely believed that a hospital's proportions of Medicare and Medicaid services are inversely associated with the profitability due to their low reimbursement rate. This belief is well supported by the majority of studies: a negative association between Medicare program and hospital profitability [5][6][7][8]; and a negative association between Medicaid program and hospital profitability [5,[7][8][9][10][11]. However, some studies have reported mixed results for the relationship between government health programs and their effects on a hospital's profitability or cost-efficiency [8,11].
The purpose of this study is to test the association of the Medicare and Medicaid revenue proportion with hospital profitability in Washington State. This study is unique because it also measures the association between the government health programs and hospital profitability by stratifying WA hospitals based on the degree of the Medicare and Medicaid revenue proportion as well as profitability status.

Methods
This study is designed as cross-sectional analytic research using secondary data analysis. Since this study employs a cross-sectional study design, it may only measure the association of the   Table 1.     profitability [12][13][14]. Although this result was not supported by the abovementioned studies, the positive correlation of the dependent variables with the case mix index was also guided by suggestions of two studies [15,16].    (Table 4).
This study also examined the association of Medicare and  (Table 5).

Discussion
Although the majority of studies revealed evidence of the