HFHI Methodology

Every formula, weight, threshold, and cohort definition behind the Hospital Financial Health Index. This page is the authoritative specification — not a summary.

54 active metrics8 scored reports3-layer composite score3,000–4,500 hospital peer cohort

Overview

Architecture of the HFHI composite score

The Hospital Financial Health Index (HFHI) condenses 54 financial metrics into a single 0–100 score measuring how a hospital performs relative to its national peer cohort — not in absolute dollar terms, but relative to what comparable hospitals actually achieve.

The score is computed in four sequential steps:

Step 1

Metric Score

Each KPI ranked against all national peers → tier points × ideal factor

Step 2

Ideal Factor

Absolute-performance penalty (0.5–1.0×) applied on top of tier score

Step 3

Report Score

Metric points summed and normalized 0–100 per report area (8 reports)

Step 4

Overall HFHI

Weighted average of 8 report scores → final 0–100 composite

Source data: HCRIS (Medicare Cost Reports), the federal dataset submitted annually by all Medicare-participating hospitals. Peer comparisons use the full national dataset for the same fiscal year.

Data Source

HCRIS — Medicare Cost Report database

All metrics are derived from the Healthcare Cost Report Information System (HCRIS), administered by the Centers for Medicare & Medicaid Services (CMS). Hospitals participating in Medicare are required to submit an annual cost report (Form CMS-2552) containing detailed financial statements, utilization data, and payor-mix information.

Coverage

~3,000–4,500 hospitals per fiscal year

Refresh cadence

Annual; new fiscal year data added as CMS publishes

Known limitations

Self-reported; subject to restatements and outliers

HCRIS data is self-reported and subject to restatements. Extreme outlier values on any metric may reflect a reporting error rather than true operating performance. The peer count displayed on each scorecard reflects only hospitals with valid, non-null data for that metric in that fiscal year.

Peer Cohort Definition

Who your hospital is compared against

Primary scoring cohort: All hospitals in the national HCRIS dataset for the same fiscal year. This is the cohort used for percentile ranks and the HFHI score. The peer count is shown on every scorecard (typically 3,000–4,500 hospitals).

Supplemental medians are displayed for context but do not affect the score:

Same State median

Hospitals reporting the same state in HCRIS

Hospital type median

Same CMS provider type classification (e.g. short-term acute care, CAH)

Bed-size band median

<100 beds · 100–249 beds · 250+ beds (aligned with CMS/MedPAC segmentation)

Percentile ranks used for scoring are always calculated against the full national cohort. The HFHI does not apply case-mix index (CMI) adjustment or urban/rural stratification in the primary score — this is an intentional design choice documented in our Limitations section.

Medicare Dependence by Hospital Type — National Context

These ranges, drawn from BVR/AHLA healthcare valuation benchmarks, inform how the Medicare Dependence report weight was set.

Hospital Type	Medicare % Range	Risk Level
Critical Access Hospital (CAH)	55–80%	Very High
Small Rural (<100 beds)	45–75%	High
Mid-Size Rural (100–250 beds)	42–72%	High
Specialty Hospital	40–70%	Moderate–High
Urban (100–250 beds)	35–62%	Moderate
Large Teaching (>250 beds)	30–55%	Moderate

Source: BVR/AHLA Guide to Healthcare Industry Finance & Valuation, Ch. 38. These benchmarks established the ideal (25%) and poor (80%) thresholds for the Medicare Revenue % ideal factor.

Scoring Pipeline

End-to-end data flow from HCRIS to grade

HCRIS

Raw cost report lines

→

54 KPIs

Derived from HCRIS fields

→

Percentile Ranks

vs. national cohort

→

Tier Points

P-rank → pts fraction

→

Ideal Factor

0.5–1.0× multiplier

→

8 Report Scores

0–100 per report

→

Overall HFHI

Weighted avg → grade

Step 1: Metric Scoring

Percentile rank → tier points

Each metric has a maximum point value. The hospital earns a fraction of those points based on where its value falls in the national percentile distribution.

For metrics where lower is better (e.g. Cost per Discharge), the percentile rank is inverted before tier lookup: a hospital at the 20th percentile of cost is treated as being at the 80th percentile of performance.

// For higher-is-better metrics:

performanceRank = percentileRank(value, nationalCohort)

// For lower-is-better metrics:

performanceRank = 100 − percentileRank(value, nationalCohort)

// Percentile rank formula (mid-point interpolation):

percentileRank = ((count_below + count_equal × 0.5) / cohortSize) × 100

Tier table — Percentile → Points fraction

Performance percentile	Points earned	Tier label	Rationale
≥ P75	100%	Top quartile	outstanding performance
P50–P74	75%	Above median	solid performance
P25–P49	50%	Below median	improvement opportunity
P10–P24	25%	Bottom quartile	significant lag
< P10	0%	Lowest decile	critical underperformance

The five-tier structure requires P75+ for full points to reward genuine outperformance. Simply being above average (P50–74) earns only 75% — the gap between B and A performance.

Step 2: Ideal Factor Penalty

Absolute-performance floor applied on top of tier score

Peer rank alone is insufficient: a hospital can rank in the top quartile among peers that are all performing poorly and still have dangerous absolute financials. The ideal factorapplies an absolute-performance multiplier (0.5–1.0×) on top of the tier points.

Ideal and poor thresholds are derived from three sources: (1) HFMA and MedPAC published benchmarks, (2) BVR/AHLA healthcare valuation standards (Ch. 38), and (3) Moody's/S&P hospital credit-rating criteria.

// Ideal factor formula:

idealFactor = 0.5 + 0.5 × clamp((value − poor) / (ideal − poor), 0, 1)

// Applied to tier points:

earnedPoints = tierPoints × idealFactor

Range: [0.5, 1.0]. The 50% floor ensures a high-ranking hospital is never penalized to zero on a single metric. At the ideal value, idealFactor = 1.0 (no penalty). At the poor threshold, idealFactor = 0.5 (maximum 50% penalty).

At industry ideal

idealFactor = 1.0. No penalty; hospital earns full tier points.

Between ideal and poor

idealFactor = 0.5 + 0.5 × (distance from poor / total range). Linear interpolation.

At or below poor

idealFactor = 0.5. Maximum penalty. Applies regardless of peer rank.

Worked example — Operating Margin %

Ideal = 4.0%, Poor = −10.0%, range = 14.0 percentage points.

Hospital at 0% margin: idealFactor = 0.5 + 0.5 × (0 − (−10)) / (4 − (−10)) = 0.5 + 0.5 × (10/14) ≈ 0.857

If that hospital is in the top quartile nationally (tier = 100% of 25 max pts = 25 pts), it earns 25 × 0.857 = 21.4 pts instead of 25. The 3.6-point deduction reflects the absolute-performance shortfall relative to the 4% ideal.

Step 3: Report Scores

Metric points aggregated 0–100 per report

Each of the 8 report areas contains metrics whose max points sum to 100. The report score is:

reportScore = (Σ earnedPoints / Σ maxPoints) × 100

This produces a 0–100 score per report, directly comparable across reports and hospitals. Both earned and max points include the ideal-factor adjustment.

Missing data penalty: Metrics where the hospital has no data contribute 0 earned points but their max points are still included in the denominator. Missing data is therefore penalized — an incomplete cost report submission will depress the score.

Step 4: Overall HFHI

Weighted average of 8 report scores

The Overall HFHI is the weighted average of the 8 report scores. Reports for which the hospital has no data at all are excluded from both numerator and denominator — their weight is dropped rather than counted as zero.

// Only reports with at least one non-null metric are included:

overallHSI = Σ (reportScore × weight) / Σ weight

If a hospital has data for only 6 of 8 reports, the denominator is the sum of those 6 report weights, not 1.0. This prevents missing entire report categories from artificially collapsing the score to zero.

Report weights — rationale and design choices

Report	Weight	Design rationale
Financial Highlights	22%	Core solvency & profitability — primary valuation drivers. Most directly maps to enterprise value and debt-service capacity.
Cost Efficiency	18%	Operating cost structure; direct EBITDA margin impact. Second-highest weight because cost is the most controllable near-term lever.
Labor Costs	13%	Labor = 50–60% of total hospital costs; largest single controllable expense category.
Revenue & Allowances	12%	Revenue quality, realization, and growth trajectory. Separates rate improvement from volume growth.
Medicare Dependence	10%	Government rate risk; 1% CMS rate cut = −0.45% to −1.05% valuation impact (low to high dependence).
Overhead & Capital	10%	Capital structure and reinvestment burden. Includes bond-rating metrics (Avg Age of Plant, CapEx/Depreciation).
IP/OP Mix & Utilization	8%	Fixed-cost absorption and service-mix diversification. Throughput efficiency signals.
Uncompensated Care	7%	Community burden; adds valuation risk premium at >5% of expenses. Lowest weight — partially offset by DSH/Charity reimbursements.
Total	100%

Grades & Labels

Score bands, what each grade means, and the path forward

Each grade card below shows: the score range, peer context, how the score is calculated, what the grade typically indicates, and actionable next steps. Click Show detail to expand, or hover How is this calculated? for scoring specifics.

A85–100

Financially Strong

Significantly outperforming peers across the majority of metrics.

How is this calculated?

B70–84

Stable

Above-average performance; outperforming most peer hospitals.

How is this calculated?

C55–69

Vulnerable

Near national benchmarks; some areas of concern requiring attention.

How is this calculated?

D40–54

High Risk

Lagging peers on multiple metrics; financial stress indicators present.

How is this calculated?

F< 40

Distressed

Among the weakest performers nationally; critical intervention indicators present.

How is this calculated?

2024 Threshold Calibration

How ideal/poor values were validated against actual HCRIS data for 5,900+ hospitals

All ideal and poor thresholds are calibrated against the 2024 HCRIS national distribution (~5,900 hospitals). The calibration principle: ideal ≈ P75 for higher-is-better metrics; ≈ P25 for lower-is-better. Poor ≈ P10 for higher-is-better; ≈ P75–P85 for lower-is-better. This ensures the ideal factor penalizes absolute underperformance without making the penalty inescapable for average hospitals.

Key calibration findings — 2024 HCRIS data

Labor & Cost Efficiency

Ideal thresholds recalibrated from P10 → P25 to restore scoring range

Original ideals for cost metrics (Salary/Discharge, NonLabor/Discharge, Salary % ratios) were anchored to P10, meaning only the cheapest 10% of hospitals could earn a high ideal factor. Analysis showed P75 hospitals (above-average performers) scoring IF≈0.51 — indistinguishable from the worst. Ideals moved to P25; poor thresholds widened to P90. A P25 hospital now scores IF=1.00; P50 ≈ IF=0.85–0.95; P75 ≈ IF=0.67–0.83.

2024 median: P10→P25 for all cost ideals

Labor Costs

Salary/Discharge and NonLabor/Discharge: wider scoring range after P90 poor threshold

2024 data: Salary/Discharge P25=$19,515, P50=$33,075, P90=$149,938; NonLabor/Discharge P25=$33,646, P50=$56,318, P90=$211,342. Prior poor thresholds were P75 ($69K / $105K), which compressed the scoring range so that P75 hospitals were already at the floor. Poor moved to P90 to allow meaningful differentiation.

2024 median: $33,075 / $56,318

Labor Costs

Benefits Load Ratio: median is 0.086; P95 is 0.18

2024 data: P25≈0, P50=0.086, P95=0.18. Formula: Employee Benefits / Total Salaries. Ideal set near zero (best practice); poor set at P95 (0.18) to capture the genuinely distressed tail.

2024 median: 0.086

Labor Costs

Salary % of Operating and Revenue: ideals raised from P10 to P25

2024 data: Salary % of Operating P25=61.8%, P50=73.8%, P90=101.2%; Salary % of Revenue P25=60.4%, P50=75.9%, P90=113.9%. Lower-is-better. Ideal moved from P10 to P25 (62%/60%); poor extended to P90 to prevent scoring collapse for above-average hospitals.

2024 median: 73.8% / 75.9%

Medicare Dependence

Medicare Revenue % and Day Share %: national medians are 10.0% and 4.3%

2024 data: Medicare Revenue % P50=10.0%, P75=16.7%; Medicare Day Share % P50=4.3%, P90=26.9%. Both are lower-is-better (higher government dependence = more rate risk). Ideals set near P25; poors set near P90.

2024 median: 10.0% / 4.3%

Medicare Dependence

Govt Payor Dependency %: national median is 22.1%

2024 data: P25=13.0%, P50=22.1%, P75=29.4%, P90=37.7%. Lower-is-better. Ideal at P25=13%; poor at P90=38%.

2024 median: 22.1%

Medicare Dependence

IP Cost Coverage and VBP Net Impact: stored in non-percentage units

IP Cost Coverage 2024: P50=857, P10=393, P75=1,219 — values appear stored as percentage × 10 (e.g. 857 ≈ 85.7% coverage). VBP Net Impact 2024: P10=−$176,611, median=$0, P90=+$105,089 — stored as raw dollar adjustments. Thresholds calibrated to match actual data scale; formula normalization is in progress.

2024 median: 857 (IP Coverage) / $0 (VBP)

2024 National Distribution — Key Metrics (n ≈ 5,900 hospitals)

Metric	n	P10	P25	Median	P75	P90
Operating Margin %	5,803	-34.4%	-14.0%	-1.9%	8.7%	19.0%
Net Margin %	5,801	-12.4%	-2.3%	5.1%	13.6%	22.4%
Days Cash on Hand	5,800	0 days	0 days	9 days	59 days	152 days
Operating CF Margin %	4,545	-7.8%	2.7%	10.7%	20.2%	30.1%
Cost per Adj. Discharge	5,760	$7,596	$10,591	$15,620	$25,063	$54,396
Cost-to-Revenue Ratio	5,803	81%	91%	102%	114%	134%
Salary per Discharge	5,911	$13,635	$19,515	$33,075	$69,244	$149,938
NonLabor Cost/Discharge	5,910	$18,582	$33,646	$56,318	$105,274	$211,342
Salary % of Operating	5,957	52.3%	61.8%	73.8%	87.9%	101.2%
Benefits Load Ratio	5,381	0.005	0.025	0.086	0.120	0.154
Revenue Realization %	5,772	15.4%	22.6%	33.0%	50.1%	67.8%
Equity Ratio %	5,657	23.0%	51.0%	74.5%	89.8%	100.0%
Asset Turnover Ratio	5,643	0.16	0.24	0.37	0.57	0.85
CapEx to Depreciation	4,206	0.25	0.92	2.34	5.53	14.89
Medicare Bad Debt Recovery %	3,985	76.0%	91.1%	99.6%	100.0%	100.0%
ALOS (days)	5,908	2.4	2.95	3.68	5.56	15.3
Occupancy Rate %	5,911	16.3%	31.0%	55.2%	74.2%	85.9%
Medicaid Mix %	4,896	0.7%	1.8%	4.4%	10.7%	23.2%
Medicare Revenue %	5,233	0.0%	0.0%	10.0%	16.7%	22.2%
Medicare Day Share %	3,909	1.3%	2.4%	4.3%	8.6%	26.9%
Govt Payor Dependency %	4,281	5.7%	13.0%	22.1%	29.4%	37.7%

Source: hsi_hospital_percentiles table, Fiscal_Year=2024. Full distribution table with all 50 metrics available in the internal calibration report (threshold-calibration-2024.md).

All Ideal Factor Thresholds

Every benchmark value used in the absolute-performance penalty

For every metric that has an ideal factor, the table below shows the ideal target, poor floor, direction, and the rationale for those thresholds. These benchmarks come from HFMA, MedPAC, BVR/AHLA (Ch. 38), and Moody's/S&P hospital credit criteria.

Metric	Ideal	Poor	Dir.	Benchmark rationale & 2024 calibration
Operating Margin %	9.0%	−35.0%	higher	2024: P75=8.7%, P25=−14.0%, median=−1.9%. Below −35% is the distressed floor (P10=−34.4%).
Net Margin %	12.0%	−12.0%	higher	2024: P75=13.6%, P10=−12.4%, median=5.1%. Ideal at P75; poor at P10.
Days Cash on Hand	150 days	0 days	higher	2024: P75=59 days, P90=152 days, median=9.1 days. Median hospital has near-zero cash — poor=0 is the correct floor.
Current Ratio	3.5×	0.5×	higher	2024: P75=3.59; poor unchanged. <1.0 signals immediate liquidity risk.
Quick Ratio	1.0×	0.0×	higher	2024: P75=1.08, P25=0.00, median=0.15. Acid-test liquidity.
Debt-to-Equity	0.15×	2.5×	lower	2024: P25=0.15, P75=1.12, P88≈2.5. Lower = better; ideal at best quartile.
A/R Days	52 days	200 days	lower	2024: P25=52 days, P50=86 days, P88≈200 days. Benchmark: >150 days adds valuation discount.
Return on Equity %	20.0%	−23.0%	higher	2024: P75=22.5%, P10=−22.9%.
Return on Assets %	12.0%	−15.0%	higher	2024: P75=13.7%, P10=−15.4%.
Cash Flow to Debt	0.55×	−0.12×	higher	2024: P75=0.57, P10=−0.12. Moody's/S&P credit ratio: (Net Income + Depreciation) / Total Liabilities.
Operating CF Margin %	18.0%	−8.0%	higher	2024: P75=20.2%, P10=−7.8%, median=10.7%. Formula: (NI + Depr) / Net Patient Revenue.
Cost per Adj. Discharge	$10,500	$54,000	lower	2024: P25=$10,591, P50=$15,620, P90=$54,396. Ideal at P25 (bottom-quartile cost); poor at P90.
Cost-to-Revenue Ratio	91%	134%	lower	2024: values in 0–200 range. P25=91.3, P50=101.9, P90=134.4. Ideal=P25, poor=P90 for full scoring range. >100 means operating at a loss.
Overhead % of Expenses	13.0%	30.0%	lower	2024: P25=13.3%, P50=18.5%, P90=30.4%. Ideal=P25, poor=P90. High overhead reduces EBITDA and valuation multiples.
Non-Labor Cost per Discharge	$34,000	$211,000	lower	2024: P25=$33,646, P50=$56,318, P90=$211,342. Ideal=P25, poor=P90 (prior poor=P75 compressed the scoring range).
Salary per Discharge	$19,500	$150,000	lower	2024: P25=$19,515, P50=$33,075, P90=$149,938. Ideal=P25, poor=P90 (prior thresholds used P10/P75 which collapsed scoring for most hospitals).
Contract Labor %	0%	15.0%	lower	2024: P25=0%, P50=7.3%, P90=15.0%. Best practice is zero; poor at P90.
Salary % of Operating	62.0%	101.0%	lower	2024: P25=61.8%, P50=73.8%, P90=101.2%. Ideal=P25, poor=P90 (prior ideal at P10 was too restrictive).
Salary % of Revenue	60.0%	114.0%	lower	2024: P25=60.4%, P50=75.9%, P90=113.9%. Ideal=P25, poor=P90 (prior ideal at P10 was too restrictive).
Benefits Load Ratio	0.025×	0.18×	lower	2024: P25≈0, P50=0.086, P95=0.18. Formula: Employee Benefits / Total Salaries. Ideal near zero; poor at P95.
Revenue Realization %	50.0%	12.0%	higher	2024: P75=50.1%, P10=15.4%, median=33%. Net Revenue / Gross Charges.
% Outpatient Revenue	80.0%	0%	higher	2024: P75=80.4%, P10=0%, median=61.3%. Diversification away from inpatient concentration.
Revenue Growth %	14.0%	−7.0%	higher	2024: P75=14.0%, P10=−7.1%, median=7.7%. Trajectory indicator.
Net Rev per Adj. Disch. Growth %	12.0%	−14.0%	higher	2024: P75=12.1%, P10=−13.5%. Rate/yield growth separate from volume.
Depreciation % of Expenses	3.0%	10.0%	lower	2024: P25=0.28%, P50=3.4%, P90=9.4%. Lower-is-better; ideal near P25.
Asset Turnover Ratio	0.55×	0.16×	higher	2024: P75=0.57, P95=1.19, P10=0.16. Ideal at P75; poor at P10.
Equity Ratio %	74.0%	20.0%	higher	2024: P50=74.5%, P10=23%. Ideal at median; poor at P10.
Fixed Asset Turnover	2.5×	0.6×	higher	2024: P75=2.70, P10=0.62. Capital productivity benchmark.
Capital Intensity Ratio	0.2×	0.7×	lower	2024: P25=0.20, P85=0.70, P90=0.90. Ideal=P25, poor=P85 (prior P90 caused scoring collapse at P75).
LT Debt to Net Assets	0.05×	1.6×	lower	2024: P25=0.0, P50=0.076, P90=1.57. Lower-is-better; ideal near P25.
Avg Age of Plant (yrs)	12 yrs	90 yrs	lower	2024 (n=498): P25=11.5 yrs, P50=26 yrs, P85=90.3 yrs. Ideal=P25, poor=P85 for wider scoring range. Note: only 498 of 5,900 hospitals report this field.
CapEx to Depreciation Ratio	2.3×	0.25×	higher	2024: P50=2.34, P10=0.25. <1.0 = hospital consuming assets faster than replacing (disinvestment signal).
UC Cost % of Expenses	1.0%	15.0%	lower	2024: P25=1.6%, P75=5.0%, P95=11.4%. Well-calibrated against 2024 distribution.
Charity Care % of Revenue	0.5%	10.0%	lower	2024: P25=0.35%, P75=2.4%, P95+=7.3%. Community benefit burden.
Bad Debt % of Revenue	1.0%	10.0%	lower	2024: P25=2.1%, P75=7.1%, P90=12.2%. Collection effectiveness.
Medicare Bad Debt Recovery %	99.0%	76.0%	higher	2024: P50=99.6%, P25=91.1%, P10=76.0%. Most hospitals are at near-100%.
Charity-to-Bad-Debt Ratio	2.0×	0.2×	higher	2024: P75=2.68, P10=0.06. High ratio = good patient assistance screening.
UC Recovery Efficiency %	35.0%	2.0%	higher	2024: P90=35.3%, P10=1.8%, median=17.4%. Ideal at P90; poor at P10.
Occupancy Rate %	75.0%	20.0%	higher	2024: P75=74.2%, P10=16.3%. Fixed-cost absorption benchmark.
Avg Length of Stay (days)	3.0 days	15.0 days	lower	2024: P25=2.95 days, P50=3.68 days, P90=15.3 days. Lower-is-better; ideal near P25.
Discharges per Bed	50.0	8.0	higher	2024: P75=48.0, P10=5.4. Bed utilization throughput.
Medicaid Mix %	2.0%	25.0%	lower	2024: P25=1.8%, P50=4.4%, P90=23.2%. Lower-is-better; ideal near P25.
ICU Bed %	8.0%	25.0%	lower	2024: P25=8.5%, P95=24.0%. Fixed-cost intensity signal.
IP Cost Coverage	900	400	higher	2024: P50=857, P10=393, P75=1,219. Note: stored values are 10× the percentage (e.g. 857 = 85.7% coverage). Formula audit pending.
Medicare Revenue %	5.0%	22.0%	lower	2024: P50=10.0%, P75=16.7%, P95=25.6%. Lower-is-better; ideal near P25.
Medicare Day Share %	3.0%	27.0%	lower	2024: P10=1.3%, P50=4.3%, P90=26.9%. Lower-is-better; ideal near P25.
VBP Net Impact	+$100K	−$180K	higher	2024: P10=−$176,611, P90=+$105,089, median=$0. Values are raw dollars, not percentages.
DSH % of Medicare	0.8%	4.2%	lower	2024: P25=0.78%, P50=1.26%, P95=4.2%. Lower-is-better; ideal at P25.
Medicare Mix %	17.0%	60.0%	lower	2024: P25=17.75%, P50=26.9%, P90=55.7%.
Govt Payor Dependency %	13.0%	38.0%	lower	2024: P25=13.0%, P50=22.1%, P90=37.7%. Lower-is-better; ideal at P25.

Sources: HFMA Key Hospital Financial Statistics and Ratio Medians; MedPAC March Report (current year); BVR/AHLA Guide to Healthcare Industry Finance and Valuation, Chapters 3 and 38; Moody's and S&P Not-For-Profit Healthcare Rating Criteria. Calibrated against 2024 HCRIS national distribution (n ≈ 5,900 hospitals). Thresholds are calibrated to actual 2024 HCRIS distributions. Ideal ≈ P75 (higher-is-better) or P25 (lower-is-better). Poor ≈ P10 (higher-is-better) or P75–P85 (lower-is-better).

Report Definitions

All 54 metrics, max points, direction, and valuation context

Financial Highlights14 metrics · 22% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Operating Margin %	Operating_Margin_Pct	↑ Higher	9.0%	−35.0%	25
Net Margin %	Net_Margin_Pct	↑ Higher	12.0%	−12.0%	15
Days Cash on Hand	Days_Cash_On_Hand	↑ Higher	150 days	0 days	22
Current Ratio	Current_Ratio	↑ Higher	3.5×	0.5×	13
Debt-to-Equity	Debt_to_Equity_Ratio	↓ Lower	0.15×	2.5×	15
A/R Days	AR_Days	↓ Lower	52 days	200 days	10
Quick Ratio	Quick_Ratio	↑ Higher	1.0×	0.0×	6
Return on Equity %	Return_On_Equity_Pct	↑ Higher	20.0%	−23.0%	6
Return on Assets %	Return_On_Assets_Pct	↑ Higher	12.0%	−15.0%	4
Cash Flow to Debt	Cash_Flow_To_Debt	↑ Higher	0.55×	−0.12×	18
Operating CF Margin %	Operating_CF_Margin_Pct	↑ Higher	18.0%	−8.0%	14
Exec. Comp. to Revenue %	Exec_Comp_To_Revenue_Pct	↓ Lower	—	—	8
Investment Return %	Investment_Return_Pct	↑ Higher	—	—	8
Endowment to Op. Expenses	Endowment_To_OpEx_Pct	↑ Higher	—	—	10
Total					174

Cost Efficiency4 metrics · 18% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Cost per Adj. Discharge	Cost_Per_Adj_Discharge	↓ Lower	$10,500	$54,000	35
Cost-to-Revenue Ratio	Cost_To_Revenue_Ratio	↓ Lower	91%	134%	25
Overhead % of Expenses	Overhead_Pct_Of_Expenses	↓ Lower	13.0%	30.0%	20
Non-Labor Cost per Discharge	NonLabor_Cost_Per_Discharge	↓ Lower	$34,000	$211,000	20
Total					100

Labor Costs5 metrics · 13% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Salary per Discharge	Salary_Per_Discharge	↓ Lower	$19,500	$150,000	30
Contract Labor %	Contract_Labor_Pct	↓ Lower	0%	15.0%	30
Salary % of Operating	Salary_Pct_Of_Operating	↓ Lower	62.0%	101.0%	20
Salary % of Revenue	Salary_Pct_Of_Revenue	↓ Lower	60.0%	114.0%	15
Benefits Load Ratio	Benefits_Load_Ratio	↓ Lower	0.025×	0.18×	15
Total					110

Revenue & Allowances4 metrics · 12% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Revenue Realization %	Revenue_Realization_Pct	↑ Higher	50.0%	12.0%	30
% Outpatient Revenue	Pct_Outpatient_Revenue	↑ Higher	80.0%	0%	25
Revenue Growth %	Revenue_Growth_Pct	↑ Higher	14.0%	−7.0%	25
Net Rev per Adj. Disch. Growth %	Net_Revenue_Per_Adj_Disch_Growth	↑ Higher	12.0%	−14.0%	20
Total					100

Overhead & Capital11 metrics · 10% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Depreciation % of Expenses	Depreciation_Pct_Of_Expenses	↓ Lower	3.0%	10.0%	20
Asset Turnover Ratio	Asset_Turnover_Ratio	↑ Higher	0.55×	0.16×	20
Equity Ratio %	Equity_Ratio_Pct	↑ Higher	74.0%	20.0%	20
Fixed Asset Turnover	Fixed_Asset_Turnover	↑ Higher	2.5×	0.6×	10
Capital Intensity Ratio	Capital_Intensity_Ratio	↓ Lower	0.2×	0.7×	10
LT Debt to Net Assets	LT_Debt_To_Net_Assets	↓ Lower	0.05×	1.6×	10
Avg Age of Plant (yrs)	Avg_Age_Of_Plant	↓ Lower	12 yrs	90 yrs	20
CapEx to Depreciation Ratio	Capex_To_Depreciation_Ratio	↑ Higher	2.3×	0.25×	20
Program Expense Ratio	Program_Expense_Ratio	↑ Higher	—	—	15
Admin Expense Ratio	Admin_Expense_Ratio	↓ Lower	—	—	10
Fundraising Efficiency	Fundraising_Efficiency	↑ Higher	—	—	5
Total					160

Uncompensated Care12 metrics · 7% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
UC Cost % of Expenses	Uncompensated_Care_Pct_Of_Expenses	↓ Lower	1.0%	15.0%	25
Charity Care % of Revenue	Charity_Care_Pct_Of_Revenue	↓ Lower	0.5%	10.0%	20
Bad Debt % of Revenue	Bad_Debt_Pct_Of_Revenue	↓ Lower	1.0%	10.0%	20
Medicare Bad Debt Recovery %	Medicare_Bad_Debt_Recovery_Pct	↑ Higher	99.0%	76.0%	20
Charity-to-Bad-Debt Ratio	Charity_To_Bad_Debt_Ratio	↑ Higher	2.0×	0.2×	15
UC Recovery Efficiency %	UC_Recovery_Efficiency_Pct	↑ Higher	35.0%	2.0%	20
Community Benefit %	Community_Benefit_Pct	↑ Higher	—	—	15
Financial Assistance %	Financial_Assistance_Pct	↑ Higher	—	—	12
CB Revenue Offset %	CB_Revenue_Offset_Pct	↓ Lower	—	—	5
Research & Education %	Research_Education_Pct	↑ Higher	—	—	5
Bad Debt (990) %	Bad_Debt_990_Pct	↓ Lower	—	—	5
Medicare Shortfall %	Medicare_Shortfall_Pct	↑ Higher	—	—	5
Total					167

IP/OP Mix & Utilization5 metrics · 8% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
Occupancy Rate %	Occupancy_Rate_Pct	↑ Higher	75.0%	20.0%	30
Avg Length of Stay	ALOS_Days	↓ Lower	—	—	25
Discharges per Bed	Discharges_Per_Bed	↑ Higher	50.0	8.0	20
Medicaid Mix %	Medicaid_Mix_Pct	↓ Lower	2.0%	25.0%	15
ICU Bed %	ICU_Bed_Pct	↓ Lower	8.0%	25.0%	10
Total					100

Medicare Dependence10 metrics · 10% weight

Show metrics ▾

Metric	HCRIS field	Direction	Ideal	Poor	Max pts
IP Cost Coverage %	IP_Cost_Coverage_Pct	↑ Higher	900	400	25
Medicare Revenue %	Medicare_Revenue_Pct	↓ Lower	5.0%	22.0%	15
Medicare Day Share %	Medicare_Day_Share_Pct	↓ Lower	3.0%	27.0%	15
VBP Net Impact %	VBP_Net_Impact	↑ Higher	+$100K	−$180K	15
DSH % of Medicare	DSH_Pct_Of_Medicare	↓ Lower	0.8%	4.2%	10
Medicare Mix %	Medicare_Mix_Pct	↓ Lower	17.0%	60.0%	10
Govt Payor Dependency %	Govt_Payor_Dependency_Pct	↓ Lower	13.0%	38.0%	20
Medicare Revenue (990) %	Medicare_Revenue_990_Pct	↓ Lower	—	—	8
Investment Income to Rev. %	Investment_Income_To_Rev	↑ Higher	—	—	8
Contribution Revenue %	Contribution_Rev_Pct	↑ Higher	—	—	8
Total					134

Limitations

What the HFHI does not measure and known constraints

HCRIS is self-reported

Hospitals submit cost reports; errors, restatements, and intentional optimization of reported values can affect derived metrics. Extreme outlier values on any KPI may reflect a reporting anomaly rather than true performance.

Single fiscal-year snapshot

Scores reflect one year. Year-to-year changes should be interpreted alongside trend data shown in each report section. A single anomalous year (e.g., pandemic relief funding in 2020–2021) can materially distort absolute benchmarks.

No case-mix index (CMI) adjustment in primary scoring

The peer cohort is the full national dataset. It does not control for CMI, market competition, or urban/rural designation beyond the supplemental breakdowns. A quaternary trauma center will have structurally higher costs per discharge than a community hospital — this is visible in peer percentiles but not adjusted in the score.

Bed-size banding is coarse

Three tiers (<100, 100–249, 250+ beds) aligned with CMS/MedPAC segmentation. Teaching hospital overhead and case mix still vary substantially within the 250+ tier.

Missing data is penalized

HCRIS fields that are null or zero in a cost report submission result in 0 earned points on affected metrics, depressing the report score. Hospitals with incomplete cost report submissions will receive lower scores than their actual performance warrants.

Financial sustainability only

The HFHI is a financial sustainability indicator. It does not measure clinical quality, patient experience, community health outcomes, or operational safety. A hospital can score an A on the HFHI and still have quality issues, and vice versa.

Valuation sensitivity figures are illustrative

The Medicare rate sensitivity figures (1% cut = −0.45% to −1.05% valuation impact) are derived from BVR/AHLA valuation models using a discount-rate framework. They represent directional risk exposure, not a binding valuation opinion.

Challenge Our Methodology

Substantiated challenges are incorporated into the next methodology release

We take methodology challenges seriously. If a weight, threshold, cohort definition, or formula is wrong, we want to know — and we will publish a correction with attribution if the challenge is substantiated.

The form below routes directly to our methodology team. We review every submission within 5 business days and respond in writing. Challenges backed by published benchmarks (MedPAC, HFMA, peer-reviewed literature) receive priority review. All submissions are confidential.