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J Rural Health. 1991 Fall;7(5):526-41.

The WAMI Rural Hospital Project. Part 4: Improving the financial health of rural hospitals.


Sound financial management has been identified as a critical component of effective hospital administration. Inadequate financial practices are a leading factor in the failure of hospitals. As part of the Rural Hospital Project (RHP), which operated in six rural Northwest communities from 1985 to 1988, detailed and extensive analyses of financial practices were conducted to identify strengths and weaknesses of the hospitals' financial management. In addition, 15 hours of formal education covering a variety of financial topics were presented to project participants. Results of the evaluation demonstrated that the greatest degree of change occurred in the financial management leadership capacity of the hospitals. All five hospitals, which either had no chief financial officer initially or subsequently experienced a turnover in the position, recruited individuals with strong qualifications. Vacancies in the administrator position in three of the four hospitals were filled by individuals with stronger financial management qualifications than their predecessors. Hospital board finance committees were formed in three of the four communities which previously did not have them. The biggest changes in financial practices occurred in the budgeting processes, which by 1989 better reflected the goals and strategies of the hospital's strategic plans. The financial performance of the six hospitals varied considerably over the study period. As a group, the RHP hospitals continued to require substantial nonoperating subsidies to remain solvent, despite improved financial practices. Despite the methodological limitations of this evaluation, we conclude that the intervention improved the capacity of the hospital administrations' financial leadership, as well as that of the governing boards, and led to substantial improvement in selected financial practices at all sites. Rural hospitals continue to operate in a hostile and precarious financial environment that limits their ability to sustain themselves on the basis of operating revenue alone.

[Indexed for MEDLINE]

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