The Integrated Vulnerability Measure A Novel Financial Distress Index for U.S. Hospitals

Introduction Hospital closures and other manifestations of financial distress threaten timely access to care across the United States. Widely used, publicly available distress indicators have important limitations when they are applied to the full spectrum of hospital types and operating environments. Methods Using Medicare cost report data from the Healthcare Cost Report Information System (HCRIS) from 2017 to 2022, the Integrated Vulnerability Measure (IVM) was developed as a composite index that forecasts whether an acute-care or Critical Access Hospital (CAH) will enter financial distress in two years. Financial distress was defined as closure, cash flow margin below -5 percent, or negative equity two years after the observation year. Hospitals were also grouped into four risk categories based on predicted probability. Results The Integrated Vulnerability Measure showed strong predictive power and sorted hospitals into meaningful risk groups. In the validation sample, 51 percent of hospitals were classified as low risk, 30 percent as mid-low risk, 11 percent as mid-high risk, and 8 percent as high risk. Hospitals in higher-risk groups were substantially more likely to experience financial distress within two years than those in lower-risk groups. Conclusions By offering a flexible and generalizable measure, the IVM gives policymakers, regulators, and health system leaders a tool for early identification of vulnerable hospitals and for targeting technical assistance or other interventions that help preserve local access to essential care.