Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Year-to-year stability of the indicators of financial vulnerability

09/01/2002

We found that the indicators of financial vulnerability are fairly stable across the three fiscal years. We summarize in Table 5.4 the correlation across fiscal years for each of the indicators. The current ratio and fixed asset turnover rate are somewhat more stable than the margin and cash flow to debt ratio.

Table 5.4
Financial Indicators: Correlation Across Fiscal Years
  FY1997 to FY 1998 FY 1998 to FY 1999
Simple correlation Spearman rank correlation Simple correlation Spearman rank correlation
Total margin .62 .70 .70 .74
Total margin net of DSH .65 .72 .70 .75
Current ratio .78 .81 .81 .83
Cash flow to total debt .65 .70 .67 .74
Fixed asset turnover rate .83 .84 .83 .84

To further explore the cross-year dynamics, we also divided each series of indicators into 10 equal parts (deciles), following the ranking for that series from hospitals with the weakest values to hospitals with the strongest values for the indicator. Thus, the first deciles always contain hospitals with the weakest values for the indicator. We then constructed transition matrices for each year-to-year pair within the series. These matrices show in detail by deciles how the hospitals from the first year become redistributed in the second year. The decile redistributions mirror the statistical relationships described above, but provide more precise and detailed pictures of these relationships.

To illustrate, we show in Table 5.5 the matrix comparing hospital deciles for FY 1997 and FY 1998 for total margin net of DSH payments. Each row represents a decile (498 hospitals) of rankings in FY1997 while each column represents a decile (494 hospitals) of rankings in FY1998. Only 240 of the 498 hospitals (48%) that ranked in the first decile in FY1997 also ranked in the first decile in FY 1998. The percent of hospitals moving to the second and third deciles were 19% and 8 %, respectively. The remainder were either dispersed across the remaining deciles (12%) or were not reported in the FY 1998 data (13%). Of the 494 hospitals in the first decile in FY 1998, 16 % had been in the second decile in FY1997 and 12% had been in the third. Nine percent were not reported in the FY 1997 data. Thirty-nine percent of the hospitals that were reported in both years fell below the 50th percentile in both years (1904 out of 4855).

Table 5.5
Comparison of Hospital Year-to Year Placement in Deciles
Total Margin Net of DSH: 1997 to 1998 
1997-1998 transition matrix (hospitals); first decile has the lowest margins 1998

1997 Decile 1 2 3 4 5 6 7 8 9 10 Discontinued
1 240 95 38 16 10 8 6 7 4 11 63
2 79 151 116 57 29 19 13 5 8 8 14
3 58 96 107 93 59 27 12 17 9 10 10
4 24 38 88 102 119 62 35 9 8 7 7
5 13 39 51 91 95 91 55 28 21 11 3
6 4 30 25 61 76 113 97 48 27 10 7
7 9 13 18 33 56 85 100 113 51 18 3
8 7 6 19 15 16 49 104 141 98 36 7
9 8 14 16 16 11 28 44 88 181 89 4
10 10 4 10 9 19 6 25 36 84 284 11
New 42 8 6 1 4 6 3 2 3 10  
 1997-1998 transition matrix (percentages), first decile has the lowest margins 1998
1997 Decile 1 2 3 4 5 6 7 8 9 10 Discontinued
1 48% 19% 8%               13%
2 16% 30% 23% 11% 6% 4%          
3 12% 19% 21% 19% 12% 5%          
4 5% 8% 18% 20% 24% 12% 7%        
5   8% 10% 18% 19% 18% 11% 6% 4%    
6   6% 5% 12% 15% 23% 19% 10% 5%    
7     4% 7% 11% 17% 20% 23% 10% 4%  
8     4%     10% 21% 28% 20% 7%  
9           6% 9% 18% 36% 18%  
10         4%   5% 7% 17% 57%  
New 49% 9% 7%   5% 7% 4%   4% 12%  
Note: Only values greater than 3% are shown; 3% discontinued facilities in old total; 2% new facilities in new total

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