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Charity Care Write-Downs Drop, Oregon Hospitals Report Boost in Government Health Plan Enrollment

Oregon’s hospitals are writing down far less unpaid revenue as “charity care,” as patients enroll in Medicaid-funded health plans and shift away from more traditional private insurance, according to a confidential report obtained by The Lund Report.
January 29, 2016

Oregon’s hospitals are writing down far less unpaid revenue as “charity care,” as patients enroll in Medicaid-funded health plans and shift away from more traditional private insurance, according to a confidential report obtained by The Lund Report that provides a series of benchmarks for how different types of hospitals are performing.

The document doesn’t name individual hospitals, but instead groups them in clusters to report aggregate or average figures for a number of metrics: payer mix, inpatient and outpatient care, and charity care all included. The big picture seems to suggest a shift away from workplace-based and private insurance plans, and toward greater enrollment in government-backed programs.

But the report, in which hospitals are grouped according to size and geography, shows that not all hospitals in the state are seeing the same results. And it can be hard to tell when shifting figures reflect a genuine trend, and when they reveal only meaningless fluctuations. Also, the figures obtained by The Lund Report come from a document that had not been fully vetted, so some numbers could eventually be updated or revised.

Full-year figures are expected in mid-February or later. Until then, here’s a closer look at how size, geography, payments and shifting priorities have played out for hospitals across the state.

Remote and rural

Twelve Oregon hospitals have fewer than 50 beds and are also located more than 30 miles from the next-nearest hospital. These small operations often provide a critical lifeline in the communities they serve.

Collectively, these hospitals posted a 4 percent operating margin in the third quarter of 2015, down from an 8 percent margin in the second quarter, though otherwise consistent with the financial results these hospitals have reported since 2008.

The numbers suggest they’re succeeding at an Affordable Care Act -driven push to provide more outpatient and less inpatient care. The hospitals reported a third-quarter 2015 average of 1,024 inpatient days – reflecting steady year-over-year and quarter-over-quarter declines in inpatient days that go back at least as far as seven years, when the quarterly average was 1,859. They also reported 13,318 outpatient visits during Q3 2015, reflecting steady gains since 2008, when the quarterly average for outpatient visits was 9,169.

With significant older populations, these hospitals have consistently relied heavily on Medicare – which provided 43 percent of payer revenue in 2008, and 42 percent in the first quarter of this year. But Medicare has been inching down, to now 40 percent of the revenue mix in the third quarter of 2015.

Medicaid’s share of the payer mix has stayed fairly constant since the Affordable Care Act expanded access to low-income health insurance. After contributing about 7 percent of revenue from 2008

through 2013, Medicaid spiked to 23 percent of payer revenue in 2014, and was at the same level in Q3 2015.

The rest of the payer mix in the third quarter of 2015: 3 percent self-pay, down by half since the ACA’s reforms; 34 percent private insurance; 2 percent charity care.

Rural, but competitive

For another 20 small hospitals, the competition is stiffer. Though they have fewer than 50 beds, and thus fewer staff and resources than much larger healthcare operations, they also have competition: other hospitals within 30 miles. But they’ve managed halting improvements since the passage of the ACA.

These hospitals reported a 4 percent operating margin in the third quarter of 2015, the highest operating margin this group has reported in records that date back to 2008.

While the more remote small hospitals analyzed above have seen Medicare shrink as a share of payer revenue, the reverse is the case with this more competitive bunch. In 2008, Medicare at these hospitals was 41 percent of the revenue pie. By Q3 2015, it had grown to 45 percent.

Medicaid has also climbed, from 11 percent of the revenue mix in 2008 to 23 percent in 2015’s third quarter. The rest of the payer mix for the third quarter of last year: 2 percent self-pay; 30 percent private insurance; 1 percent charity care.

As with the state’s other small hospitals, this group seems to be succeeding at the Affordable Care Act -driven push to provide more outpatient and less inpatient care, at least in the short term. The long-term results are less clear cut. The hospitals reported a third-quarter 2015 average of 1,001 inpatient days – reflecting steady quarter-over-quarter declines in inpatient days from earlier in the year. But from 2011 through 2014, these hospitals saw fewer inpatients than they’re accustomed to today – roughly 940 to 990 quarterly average. Some have speculated that higher enrollment in Medicaid could be spurring patients to seek deferred treatment, which could be behind a spike in these visits – but the data is still vague.

Outpatient visits at these hospitals have climbed more steadily than inpatient days have declined. In 2008, they reported a quarterly average of 19,984 outpatient visits; by the third quarter of 2015, that figure was 22,826 – down by about 500 since outpatient visits peaked.

They also reported 13,318 outpatient visits during Q3 2015, reflecting steady gains since 2008, when the quarterly average for outpatient visits was 9,169.

Slightly larger hospitals

Six Oregon hospitals with between 50 and 99 available beds were grouped together into a single category in the benchmark report.

With such a small number of hospitals, unusual performance at one can skew averages and totals for the entire group, and the benchmarks report does not break out details of individual organizations – so it’s hard to know what’s behind the 24 percent profit margin this group reported in the third quarter of 2015. That’s by far the largest operating margin of any group of hospitals since the 2008 start of the report.

But subtracting out non-operating expenses, which are not disclosed or detailed in this report, these slightly larger hospitals actually had a 0 percent total margin in the third quarter of 2015. That’s below the 3 percent total margin from 2013 that had been the group’s lowest performing period. It’s not clear from the information disclosed in the report what accounts for the high operating margins or low total margins at these hospitals.

These six organizations have seen payer-mix revenue shifts similar to those seen at hospitals across the state. Medicare is steady, at 42 percent of payer revenue in the third quarter of 2015, and in the year 2008. Medicaid is up, to 28 percent of the mix in the third quarter from 8 percent in 2008. The rest of the payer revenue in Q3 2015: 2 percent self-pay; 28 traditional care; 1 percent charity care.

Inpatient days at these hospitals have gradually declined through 2015, from 4,043 in the first quarter to 3,952 in the second quarter to 3,741 in the third quarter. But they’re up overall – perhaps reflecting the contradiction inhering in ACA-spurred efforts to cut inpatient visits while also expanding access to medical care. In 2008, the quarterly average for inpatient patient days was 6,353. In 2014, it was 4,093.

Outpatient visits, meanwhile, have been climbing since long before the ACA sought to shift focus from inpatient to outpatient care. From a quarterly average of 32,838 outpatient visits in 2008, these hospitals reported 37,679 outpatient visits in the third quarter of this year.

Medium hospitals

Nine Oregon hospitals have between 100 and 199 beds.

Their operating margins have always fluctuated, and continue to do so in the post ACA-era, though in the past year those fluctuations seem to be upward. In the 2015 quarters now available, operating margins at these hospitals were: 5 percent in the first quarter, 10 percent in the second, and 5 percent in the third. From 2008 through 2014, operating margins wavered between 2 and 6 percent.

Medicare is the largest revenue source at these hospitals, contributing 47 percent of payments – a figure that has stayed very steady since 2008, never higher than 48 percent or lower than 46 percent.

Medicaid is up to 21 percent of payer revenue, from 10 percent in 2008. The rest of the payer mix: 2 percent self-pay; 30 percent private insurance; 1 percent charity care.

Despite ACA-backed efforts to reduce inpatient hospital care, it’s not clear if inpatient days among these hospitals are up or down. In the 2015, here’s how many inpatient days these hospitals reported each quarter: 7,069 in Q1, 6,540 in Q2, 6,595. From 2008 through 2014, the number bobbed up and down, between a high quarterly average of 7,031 inpatient days and a low of 6,314.

The hospital has, however, boosted outpatient visits: from a quarterly average of 44,777 in 2008 to 60,144 in the third quarter of 2015.

The biggest of the bunch

Oregon’s 11 largest hospitals, which have 200 or more beds, see far more patients and handle far more money than most of the state’s smaller healthcare outposts, but in the benchmarks report – which looks at ratios, not absolute figures – these hospitals look a lot like their smaller peers.

They reported collective operating margins of 6 percent in the third quarter of 2015, below the 10 percent operating margins of Q2 or the 8 percent operating margins of Q1. But even with downward movement, the most recent operating margin was higher than reported by this group of hospitals from 2008 through 2013, when the margin flipped between 4 percent and 5 percent – never higher and never lower.

Medicare has edged up in importance to these hospitals over the year, providing 36 percent of payer revenues in 2008, and 41 percent in the third quarter of 2015. Medicaid growth has been far more substantial, with 24 percent of large hospital payer revenue coming in this category, up from 13 percent in 2008.

The rest of the payer mix: 2 percent self-pay; 34 percent traditional insurance; 1 percent charity care.

Inpatient days at these hospitals are up by about 1,000 days per quarter since 2008, and outpatient visits are down by about 15,000. In the third quarter of 2015, these hospitals reported 23,244 patient days, up from a quarterly average of 22,226 in 2008. They also reported 120,567 outpatient visits in Q3 2015, up from a quarterly average of 105,268 in 2008.

Courtney Sherwood can be reached at [email protected]. Follow her on Twitter at @csherwood.

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