What data sources can state officials use to understand hospital and health system financial health?

Various federal laws and some state laws require hospitals or health systems to report financial and operational performance information. Some of this reporting is available through public reporting sites. Commonly used and publicly available resources for states to assess data and reports related to financial performance include:

• Medicare Cost Reports
• Audited Financial Statements
• IRS Form 990
• Centers for Medicare and Medicaid Services (CMS) provider and service data

Additionally, the RAND Corporation conducts an annual Hospital Price Transparency Study, which provides detailed information on hospitals, health systems, and professional services pricing.

What entities are captured in each data source?

Data are reported at either the hospital (individual entity), combined entities, or health system (collection of hospitals and other entities with common ownership) level. For instance:

• Medicare Cost Reports and CMS provider and service data capture data by hospital.
• Audited Financial Statements capture data by health system (if multiple entities are owned by the system), cover a single entity, and may include supplemental information reporting unconsolidated data by separate entities.
• IRS Form 990 filings are required for not-for-profit entities, and may be filed by individual hospitals, a related group of hospitals, or a health system, and may include subsidiary entities.
• CMS provider and service data website provides Medicare provider and payment data sets.
• The RAND Hospital Price Transparency Study includes hospital and professional pricing data from participating payer claims data and is reported by state, facility, system, and hospital.

How can state officials access this information?

States officials can access some reports in the format in which they were filed by hospitals and health systems. IRS Form 990s are available via public reporting sites such as ProPublica. Documents filed by not-for-profit entities with municipal debt instruments are accessible via the Electronic Municipal Market Access (EMMA) website, which includes Audited Financial Statements and other financial and operation reports. Audited Financial Statements for for-profit entities that are publicly traded are available via the federal Security and Exchange Commission (SEC) Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database. Some states also require health systems to share Audited Financial Statements directly with the state.

State officials can also explore data metrics through publicly accessible tools or portals. NASHP’s Hospital Cost Tool (HCT) allows users to explore data for individual hospitals, health systems, state hospitals, and national benchmarks from Medicare Cost Reports filed from 2011 through 2022 (health system data information in the HCT is tied to the Agency for Healthcare Research and Quality compendium). The CMS data sets include Medicare payments by provider and service and are searchable at the state level. The RAND Hospital Price Transparency report and data set are available online with metrics calculated from payer claims data as submitted by employer self-funded plans and state all-payer claims databases when available.

What kinds of data metrics are available through each data source?

Each source of data captures different metrics of hospital and health system financial performance. The table below, an excerpt from a NASHP chart that compares these resources, summarizes the metrics available in each data source.

How can state officials use hospital and health system financial data to evaluate an entity’s financial health?

This checklist offers initial steps for state officials approaching hospital and health system data:

1. Identify key question(s).

Given the breadth and depth of data available, it is most effective to approach these resources with a specific question. State officials can more easily identify which data sources to explore based on which metrics each source includes when they have discrete objectives guiding their analysis.

2. Explore and analyze data.

The following list provides examples of several data points that states can review to understand an entity’s financial health and/or other factors affecting its operations:

• Overall profitability (e.g., operating margin, net income (or loss), net profit margin, etc.)
  • Note that the definition of operating margin may vary based on which tool is used because of the data that are included in the measurement of the margin. For instance, in the NASHP Hospital Cost Tool, operating margin reflects only those revenues and expenses explicitly tied to patient care, while an audited financial statement may include in its measure of operating margin other operating income and expenses such as the cost of physicians or other Medicare disallowed costs.
• Hospital or health system expense categories (e.g., labor expenses, capital expenses)
• Hospital or health system income categories (e.g., revenue from reimbursements from payers, investment income)
• Payer mix (i.e., distribution of charges and revenues by Medicare, Medicaid, commercial coverage, etc.)
• Charity care/uncompensated care/community benefit expenses
• Executive compensation
• Organizational structure, joint ventures, affiliates, and subsidiaries
• Strategic direction

Based on the scope of their question(s), officials may consider engaging multiple sources of data. Hospitals and health systems are financially complex entities, with many streams of revenues and expenses; individual data metrics and tools can capture specific elements of an entity’s financial health, but, depending on the objective of an analysis, using multiple sources may offer a more comprehensive picture.

3. Identify additional data needs.

State officials may also find that these sources do not contain all the data relevant to their question(s). States may consider creating additional reporting pathways through which entities submit financial information to the state; some states, for example, require that entities report their audited financial statements directly to the state. NASHP has published a model bill and model reporting template for states looking to increase hospital transparency, both of which are available with accompanying resources through NASHP’s toolkit to address rising health care costs.

4. Recognize data considerations.

Because of the timing of financial data reporting cycles, these sources typically comprise information from at least one year prior to their publication. Entities may change their affiliations, ownership, or organizational structures and, due to the fluidity of the health care market, may engage in asset transfers, all of which may have immediate impacts on their financial status that are not visible to state officials via data until the following year.

NASHP is developing resources to support state officials in conducting detailed analyses and will be publishing more resources with examples of and guidance for answering specific questions.