The Quality of Information on Hospital Performance: Comparison between Audited Financial Statements and Medicare Cost Reports

• In Event: XBRL and Auditing

Abstract

The quality of financial data is of interest to all stakeholders because it influences the evaluation of business performance and their decision making process. The financial information in the healthcare industry is not an exception, though the lack of available sources of hospital financial statements restrict users (e.g., stakeholders and researchers) to either state data repositories or HCRIS, the federal database with Medicare Cost Reports. Although prior research addressed data inconsistencies between the two sources of hospital financial data, the most recent study (Ozmeral et al., 2012) covers a type of hospitals that are not the most common in USA, and the most cited study (Kane and Magnus, 2001) covered samples of hospital-reports from mid-1980s and 1995. Our study fills the gap left by these studies by examining a contemporaneous and comprehensive sample of hospitals’ filings of Medicare Cost Reports and corresponding financial statements filings from state data repositories filed within 2007 and 2011 by 655 hospitals located in six states. In particular, we compare twelve balance sheet and income statement items that are often used in accounting research to investigate the similarities and differences between the two data sources. We find that the frequency of differences are pervasive among state data repositories (58.6% to 82.0%) and among financial items (23.8% to 95.7%). Contrary to previous studies, we find that the frequency of the differences are associated with hospital characteristics (i.e., size and ownership type) and the format of the cost reports.

Authors

• Melvin Arnaldo Lamboy Ruiz, Iowa State University

• Won Gyun No, Rutgers, The State University of New Jersey