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Original Scientific Articles

Financial Vulnerability of American College of Surgeons-Verified Trauma Centers: A Statewide Analysis

Benham, Derek A MD; Calvo, Richard Y PhD; Checchi, Kyle MSC, MD; Carr, Matthew J MD; Diaz, Joseph MD; Krzyzaniak, Andrea MA; Bansal, Vishal MD, FACS; Martin, Matthew J MD, FACS

Author Information
Journal of the American College of Surgeons: September 2022 - Volume 235 - Issue 3 - p 430-435
doi: 10.1097/XCS.0000000000000254
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The optimal care of patients experiencing major traumatic injury in the US is based on the establishment of multiple trauma centers working within a state or regional trauma system. Although the clinical benefit of trauma systems has been well characterized, it also entails significant investments of money, resources, and personnel. These financial challenges of maintaining an American College of Surgeons (ACS)–verified trauma center are well described, and may include essential infrastructure,1,2 and the costs associated with maintaining this infrastructure, which has been shown to be more than $10 million annually for an average Level I trauma center.3 Despite the challenges, the value of a trauma center on patient outcomes and quality of life has been shown, indicating the integral role trauma centers have in a health system.4,5

However, there has been a rising number of closures of trauma centers, as well as nontrauma center hospitals, over the past 2 decades.6,7 Risk factors associated with a trauma center closure include increased rates of uninsured or underinsured populations, changing reimbursement rates, declines in patient volume, and a negative profit margin.8,9 Rural hospitals have also faced an increased risk of closure.10 This has a potential negative effect on patient outcomes by increasing inpatient mortality and may disproportionately effect patients in marginalized groups and those who are uninsured or underinsured.11

The coronavirus disease 2019 (COVID-19) pandemic increased financial strain on the entire health system of the US, including both trauma centers and nontrauma hospitals.12 Owing to the complicated nature and wide variability in financial metrics between centers, it is difficult to readily establish a center’s financial health and to compare these factors between centers or systems. Recently, Khullar and colleagues12 developed a hospital financial composite score that reflects the financial vulnerability of U.S. hospitals using 4 metrics of financial liquidity and 2 measures of revenue sources. They demonstrated wide variability in financial metrics and a high degree of financial vulnerability among multiple subgroups based on revenue and liquidity. However, this newly developed tool has not been used to evaluate the financial vulnerability of ACS-verified trauma centers or identify key hospital-specific variables that most influence financial health or vulnerability. This study aimed to characterize the financial metrics and vulnerability of California ACS-verified trauma centers using the newly developed financial vulnerability score (FVS). It also sought to compare vulnerability among groups by ACS designation level and to identify factors that were associated with high and low vulnerability. We hypothesized that Level 1 trauma centers would have higher FVS scores and have less overall financial vulnerability.

METHODS

The RAND Hospital Data Set is a dataset that utilizes the Centers for Medicare and Medicaid Services Healthcare Cost Report Information System (HCRIS) and combines it with key metrics to evaluate the financial aspects of hospitals that submit reports to HCRIS.13

A FVS was designed using 6 key financial metrics, following the model of Khullar and colleagues.12 Four were measures of financial liquidity, to include operating margin (the difference between operating revenue and costs as a proportion of operating revenue), current asset-to-liability ratio (ability of the hospital to meet current liabilities with current assets), days cash on hand (number of days a hospital can continue to pay its operating expenses with current cash it has available), and days in net accounts receivable (time between patient discharge and when the payment is made). Two were measures of revenue, to include percentage of outpatient share of revenue (percentage of revenue coming from outpatient sources compared with inpatient sources) and percentage of unreimbursed and uncompensated care share of operating expenses (percentage of financial billing for which no payment was made). The measures of financial liquidity were considered to indicate low financial vulnerability when they were higher, whereas the measures of revenue were considered to indicate low financial vulnerability when they were lower.

Using the ACS list of currently verified trauma centers, all California Level I, II, and III trauma centers were identified. Using the RAND Hospital Data financial dataset, the 6 key metrics were collected for each California trauma center. The metrics were analyzed for the time period of January 1, 2019, to December 31, 2019. This time range was specifically considered to exclude data collected during the coronavirus pandemic and to provide a snapshot of financial vulnerability at the onset of the pandemic. A hospital was excluded from the analysis if they did not have values for all 6 metrics for the time period of the study.

The values of the 6 metrics were standardized, and the FVS was calculated using the z-score means. The FVS represents the mean of the different z-scores of the 6 metrics for each individual hospital. Using the FVS, the hospitals were grouped into tertiles, classified as high, medium, and low financial vulnerability.

Characteristics of the hospitals were analyzed as well. This included nonprofit status, whether it was a government hospital, teaching hospital, member of a larger healthcare system, critical access hospital, safety net hospital, and whether it was considered a rural hospital. Size of the hospital (based on bed capacity) was then analyzed, with hospitals being grouped into small (1–50 beds), medium (50–200 beds), or large (more than 200 beds). Trends of these characteristics were compared between the FVS tertiles.

The study was evaluated in accordance with the Equator Network guidelines, specifically with the Consolidated Health Economic Evaluation Reporting Standards (CHEERS) checklist.2

RESULTS

A total of 58 ACS-verified trauma centers were identified in the state of California. Fourteen had incomplete data in the Rand Hospital Data financial dataset for January 1, 2019, through December 31, 2019. Forty-four trauma centers were included in the analysis, and this included 9 (21%) Level I, 27 (61%) Level II, and 8 (18%) Level III trauma centers (shown in Table 1). Of this set, 75% of trauma centers were identified as members of a larger hospital system, 61% operated as a nonprofit, and just more than half (57%) were designated as teaching hospitals. One was a designated critical access hospital, one was designated as a rural hospital, and none was designated as a safety net hospital. A majority (73%) were large hospitals, with more than 200 beds, whereas the rest were mostly medium-sized hospitals, with only 2 small hospitals (consisting of fewer than 50 beds).

Table 1. - Characteristics of Trauma Centers Included in the Analysis
Characteristic No. of hospitals (%)
Trauma center level
 Level I 9 (21)
 Level II 27 (61)
 Level III 8 (18)
Hospital type
 Larger hospital system 33 (75)
 Nonprofit 27 (61)
 Government operated 11 (25)
 Teaching hospital 25 (57)
Hospital bed size
 Small (1–50 beds) 2 (5)
 Medium (50–200 beds) 10 (23)
 Large (>200 beds) 32 (73)

The FVS was calculated and ranged from –10.1 (most vulnerable) to 7.4 (least vulnerable). Centers were then divided into tertiles based on their FVS. Fourteen hospitals were placed in the top tertile, designated as the low FVS tier or lowest financial vulnerability, 15 hospitals in the middle tertile (medium FVS tier, moderate financial vulnerability), and 15 in the bottom tertile (high FVS tier, highest financial vulnerability). The low FVS tier had FVS scores greater than 1.0, whereas the high FVS tier had scores less than –0.35.

Makeup and distribution of the FVS tiers by level of trauma center is shown in Figure 1. Level I trauma centers were more likely to be in the low FVS tier, whereas Level II and III trauma centers were more likely to be in the medium and higher FVS tiers, respectively. Table 2 shows the characteristics of trauma centers based on their vulnerability. It is important to note that the single critical access hospital is in the high FVS tier, whereas the single rural hospital is in the moderate FVS tier. Low FVS centers were more likely to be a member of a healthcare system and to be a teaching hospital.

Table 2. - Characteristics of Trauma Centers by Financial Vulnerability Score Tertiles
Characteristic High FVS Medium FVS Low FVS
Hospital system membership
 Member of a system 10 (30.3) 11 (33.3) 12 (36.4)
 Nonmember 5 (45.5) 4 (36.4) 2 (18.1)
Hospital type
 Nonprofit 9 (33.3) 9 (33.3) 9 (33.3)
 Government 5 (45.5) 4 (36.4) 2 (18.1)
 Teaching 7 (28) 8 (32) 10 (40)
 Critical access 1 (100) 0 (0) 0 (0)
 Rural 0 (0) 1 (100) 0 (0)
Trauma center level
 I 3 (33.3) 2 (22.2) 4 (44.4)
 II 7 (25.9) 12 (44.4) 8 (29.6)
 III 5 (62.5) 1 (12.5) 2 (25)
Bed size
 Small (<50) 1 (50) 0 (0) 1 (50)
 Medium (50–200) 6 (60) 3 (30) 1 (10)
 Large (>200) 8 (25) 12 (37.5) 12 (37.5)
Data presented as n (%).
FVS, financial vulnerability score.

F1
Figure 1.:
Trauma center distribution by financial vulnerability score (FVS) category.

Table 3 shows the mean z-scores between the metrics included in the FVS and compares them between tertiles. Trauma centers with higher financial vulnerability had significantly higher rates of uncompensated care as a share of operating expenses and a higher rate of outpatient share of revenue. Lower financial vulnerability trauma centers had significantly greater asset-to-liability ratio and operating margins.

Table 3. - Mean z-Scores of the Metrics of the Financial Vulnerability Score Components and the Differences in the Financial Vulnerability Score Tertiles
FVS component High FVS Medium FVS Low FVS p Value
Asset to liability ratio -0.32 (0.20) -0.44 (0.16) 0.90 (1.53) 0.0003
Operating margin -0.65 (1.52) 0.16 (0.40) 0.49 (0.48) 0.0082
Days cash on hand -0.21 (0.76) -0.23 (0.67) 0.46 (1.47) 0.1314
Days in net accounts receivable 0.40 (1.78) -0.19 (0.08) -0.16 (0.07) 0.2231
Outpatient share 0.60 (1.21) -0.23 (0.78) -0.30 (0.92) 0.0293
Uncompensated care 0.61 (0.87) -0.57 (0.31) -0.49 (0.52) < 0.001
Data presented as z-scores.
FVS, financial vulnerability score.

DISCUSSION

This study is the first to characterize the financial vulnerability of a statewide sample of ACS verified trauma centers using a similar hospital financial composite as originally described by Khullar and colleagues.12 We demonstrated a high degree of variability in the key financial income and liquidity metrics among these centers, as well as a wide range of financial vulnerability as characterized by the FVS. We found that although California ACS-verified Level I trauma centers were more likely to have low financial vulnerability compared with Level 2 or 3 centers, up to a third of the Level I trauma centers are still categorized as having high financial vulnerability. We also found that the center-specific variables of hospital bed capacity and being a member of a larger hospital system were strongly correlated with overall financial health or vulnerability.

Statistical analysis showed 4 of the metrics of FVS were statistically different across the FVS tertiles: Asset-to-liability ratio, operating margin, outpatient share of revenue, and percentage unreimbursed or uncompensated care share of operating expenses. These measures could serve as actionable areas for individual trauma centers to focus on to improve financial vulnerability.

The association with increased percentage of unreimbursed or uncompensated care as a share of operating expenses with high financial vulnerability repeats previous studies that have shown an increased risk for trauma center closures as Medicaid or uninsured populations increase.6,8,11 Since the expansion of Medicaid with the Affordable Care Act in 2009, it has been shown there has been a decrease in rates of self-pay and a concomitant increase in rates of Medicaid use in trauma centers. However, during this time, there has been a decrease in average Medicaid reimbursements and a decrease in Medicaid Disproportionate Share (DSH) Payments.9 These financial challenges have led the trauma community to study the financial impact of patient care in multiple ways,14 from length of stay metrics15-17 to the financial impact of the transfer of minimally injured patients to a higher level of care.18 However, the majority of these analyses involving trauma centers have been single-center or single-system and have focused on one specific aspect of revenue or resultant profits or losses.

Past analyses of trauma centers have demonstrated an increased financial cost to ensure the readiness of trauma centers. Multiple studies by Ashley and colleagues3,19 showed that costs of maintaining a trauma center are in the millions of dollars a year, and were increased for Level I centers versus Level III centers. Shen and colleagues6,8 demonstrated an increased risk of closures of trauma centers that had a negative profit margin, which puts trauma centers in populations centers of uninsured or underinsured populations at high risk of closure, owing to the reduction of reimbursement. In addition to these challenges, previous studies have shown an inflection point with length of stay and profitability for trauma care;15 however, other studies have indicated that Level I centers have increased length of stay, days in intensive care, and ventilator days, significantly increasing costs.17

In an effort to reduce costs, a study by Hemmila and colleagues20 showed that there are fewer complications and their associated costs when trauma centers participated in a regional quality improvement program. In a follow-up study it was found that patient outcomes improved after the implementation of the regional quality improvement program.21

Understanding the financial metrics and the most important characteristics that are associated with financial health or vulnerability is critical to maintaining high-quality trauma care both in California and nationwide. This is particularly important for maintaining access to and quality of care in areas served by smaller rural hospitals, as these centers demonstrated a much higher rate of high financial vulnerability in our analysis. The FVS also provides an easily calculated metric that can provide a rapid assessment of any center’s financial health and to objectively compare centers at the local, regional, or national level. This information could be used in a variety of ways, including distribution of resources or financial assistance, assessing the impact of actions that would change a center’s patient and/or payor mix, and evaluating the need for fewer or more trauma centers within a given system.

Similar to the original publication establishing the FVS metric by Khullar and colleagues,12 we found a high degree of variability in these financial metrics among centers. However, our analysis and FVS calculation does differ somewhat from the financial composite modeled in that original publication. In the dataset, a number of the trauma centers did not have values for “surgical procedures per 100 discharges.”13 Because of this, the metric was modified to incorporate percentage of unreimbursed or uncompensated care, because previous publications from Shen and colleagues8 identified increased rates of uninsured/underinsured populations as risk factors for the closure of trauma centers. The authors believe this strengthens the application of the FVS to trauma centers, owing to the increased rate of uninsured and underinsured in the nationwide trauma population. The authors also intentionally chose a time period based on “standard operations” for most trauma centers, before the onset of the COVID-19 pandemic and the disruption of the healthcare system that was associated with the pandemic, in an effort to minimize confounding factors.

This study does have several important limitations that should be considered in interpreting and applying the results. This was an analysis of trauma centers from a single state, and there may be multiple unique financial aspects that would not apply in other states or nationwide. Although the RAND financial dataset has been demonstrated to be highly accurate and reliable, this work does involve retrospective analysis of financial data that are self-reported to the HCRIS. This may result in the lack of inclusion of other variables that could be significant confounders, and there may be variability in the self-reporting between centers. The analysis and comparison of data from centers that are within a larger health system may also be affected by higher-level complex finance practices within that system which would not be present in stand-alone hospitals. By using data collected by Centers for Medicare and Medicaid Services HCRIS, a central government reporting system, we attempted to standardize these potential differences and mitigate bias. This study also does not separate the trauma centers from the overall medical center, which is a potential area of bias. Some hospitals may be more financially reliant on the nontrauma aspects of care. We believe we have mitigated some of these concerns by taking the financial data for the entire hospital and not just analyzing the financial data that stem from trauma care.

Future studies are planned to use the FVS in analysis of ACS-verified trauma centers nationwide as well as a comparison with nontrauma centers. The use of FVS in the assessment of the impact of major events on the financial vulnerability of trauma centers is one such use of the score. This could be used to evaluate the financial vulnerability of trauma centers after mass casualty events, natural disasters, or a pandemic such as the COVID-19 pandemic.

In conclusion, we have demonstrated a wide variability in financial vulnerability among California trauma centers as assessed by the novel FVS metric. Of most concern, up to one-third of Level 1 centers and a majority of lower-level centers were in the high financial vulnerability category. The authors believe the FVS is an important metric for evaluation of trauma centers’ risk of financial stress, assessment of the potential impact of any local/regional changes that may impact revenue or liquidity, and their individual financial vulnerability. Additional study of the FVS and its relationship to potentially modifiable center or system risk factors is needed to validate its ultimate applicability and value to trauma care in the US. Finally, the FVS could potentially be used to determine the best utility of assets to target specific trauma centers which are at risk of closure, which has been shown to have a disparate impact on minority communities,6 and how to direct government funding to maximize benefit for the health system.

Author Contributions

Literature Search: Benham, Calvo, Martin

Study Design: Benham, Calvo, Checchi, Carr, Diaz, Krzyzaniak, Bansal, Martin

Data Collection: Benham, Calvo, Martin

Data Interpretation: Benham, Calvo, Bansal, Martin

Writing: Benham, Calvo, Krzyzaniak, Martin

Critical Revisions: Benham, Calvo, Checchi, Carr, Diaz, Krzyzaniak, Bansal, Martin

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