GEOGRAPHIC INDEX

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GEOGRAPHIC INDEX

• Ryan Fitch
• Economic Analyst
• AHCA CON/Financial Analysis

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What is the Geographic Index?

• The Geographic Index is a tool to measure the
  variation in cost and services attributed to the
  market conditions in a particular region.

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How is the Geographic Index Used by CON/Financial
Analysis Section?

• It is one of several factors used in grouping
  acute care hospitals.
• It is used (along with case mix) to Standardize
  gross revenues, net revenues, and cost per
  adjusted patient day.

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How is the Geographic Index Calculated?

• Expense categories are identified
• Each expense category is assigned a weight
• An index value is calculated for each expense
  category
• The weighted average index value for each expense
  category is added together to determine the
  geographic index

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Expense Categories

• Salaries and Benefits
• Professional Fees
• Interest
• Depreciation

• Fuel Other Utilities
• Dietary Cafeteria
• Insurance Insurance
• All Other

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Expense Weights Based on 2003 Hospital Data.
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Salaries Wages and Benefits Index Calculation

• Determine salary per FTE for all acute care
  hospitals in the State
• Determine salary per FTE for each County in the
  State
• Divide County salary per FTE by State salary per
  FTE

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Insurance Index Calculation

• Determine malpractice insurance per bed for all
  acute care hospitals in the State
• Determine malpractice insurance per bed for each
  County in the State
• Divide County malpractice insurance per bed by
  State malpractice insurance per bed

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Dietary Cafeteria, Fuel Other Utilities,
Professional Fees and Other Expense Index
Calculation

• We use the Florida Price Level Index (FPLI) as a
  proxy for these categories

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Interest and Depreciation Expense Index

• We determined that these items do not have a
  measurable geographic difference within the
  state.
• A index value of 100 is assigned to these two
  categories.

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Duval County Geographic Index Example

• The indexes for each category are multiplied by
  the weights for each category and added together.

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How Might the Geographic Index be Used to Compare
Average Charges by Region?

• Dividing the average charge by the geographic
  index will remove the difference in charges
  attributed to geographic market conditions.
• Example Assume Hospital A in Duval County
  charges 1,550 for service X
• Assume Hospital B in Miami-Dade County charges
  1,750 for the same service X

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Geographic Index Example

• The difference in charges prior to the adjustment
  for the geographic index is 12.9
• The difference in charges adjusted by the
  geographic index is significantly less

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QUESTIONS???