Assessing Similarity in Production from Organizational and Department-Level Financial Accounting Statements

Area of Science:

• Health Care Management
• Financial Accounting
• Information Science

Background:

• Hospitals are complex organizations with challenges in financial analysis.
• Department-level financial data is difficult to interpret due to coordinated care.
• Stakeholders face difficulties inferring management decisions from financial statements.

Purpose of the Study:

• To apply information entropy-based comparability analysis to identify hospital peer groups.
• To assess the impact of specific departments on peer group formation.
• To understand operational similarities within identified hospital peer groups.

Main Methods:

• Utilized information entropy-based comparability analysis.
• Analyzed overall and department-level financial data from Washington State critical access hospitals (FY 2019).
• Focused on medical laboratory and pharmacy departments due to their cross-departmental impact.

Main Results:

• Identified hospital peer groups based on financial and operational similarities.
• Both medical laboratory and pharmacy departments significantly impact peer group formation.
• The pharmacy department demonstrated the largest impact on peer group identification.

Conclusions:

• Information entropy analysis is effective for identifying hospital peer groups.
• Departmental financial data, particularly from critical support services like pharmacy, is crucial for accurate hospital comparability.
• Pharmacy's significant impact suggests its central role in hospital operations and financial performance.