First Quarter Reports Indicate Hospital Margins Continue Their Upswing

Also, the latest filings by the Oregon Association of Hospitals and Health Systems showed that its president and CEO, Andy Davidson, saw his salary decline significantly.

Preliminary data indicates hospitals throughout Oregon saw their operating margins –which measures profitability -- continue their upward swing while charity care dropped to record-level lows, according to first quarter reports obtained by The Lund Report

Compared to the same time period in 2014, emergency department usage took a slight jump among all hospitals–with 32,938 people showing up compared to 30,945, representing a 6 percent increase.

Inpatient days rose by 4 percent – 36,985 vs. 35,434 in the first quarter of 2014, and outpatient days showed a similar 6 percent increase – 253,931 compared to 239,317. And, 232 full-time physicians worked in Oregon hospitals.

Hospital Association Salaries

Andy Davidson, CEO and president of the Oregon Association of Hospitals and Health Systems, earned $1.2 million in 2012, yet only took home $898,148 in 2013, representing a 25 percent decrease.

The 2013 IRS filings also revealed that Peggy Allen, chief financial officer, saw her salary increase by 14 percent, earning $219,801, while Andy Van Pelt, executive vice president, earned $225,090 (+28%), Diane Waldo, associate vice president of quality and clinical operations, $150,967 (+16%) and Andy Easton, associate vice president of government affairs and advocacy, $164,692 (+23%).

Although the 2014 filings are typically available in May, many nonprofit organizations including the hospital association apply for extensions, and it’s unknown when such information will become publicly available.

Finances of Largest Hospitals

During the first quarter ending March 30, the state’s largest hospitals reported that their total margin reached 10 percent compared to 7 percent in the same time period last year. Medicare revenue represented 42 percent of their income, Medicaid, 23 percent, self-pay, 2 percent, and 33 percent came from other sources, details of which were not provided.

Overall, charity care plummeted to 1 percent, while their operating margin stood at 8 percent. These 11 hospitals had 146 full-time physicians, an increase of 14 since last year, and their inpatient days reached 23,578 (+5), emergency room visits, 12,468 (+4%) and outpatient days, 119,194 (+4%).

Hospitals in this category include St. Charles Medical Center, Sacred Heart, Rogue Regional, Portland Adventist, Legacy Good Samaritan, Oregon Health & Science University, Providence Portland and St. Vincent and Salem Health.

Margins Increase at Mid-Size Hospitals

The trend occurring among the largest hospitals reached down to Oregon’s mid-size ones as well. With 100-199 licensed beds, these hospitals witnessed a sizeable growth in both their operating margin – which rose from 2 to 5 percent in the first quarter -- and total margin, which jumped from 4 to 7 percent.

Medicare revenue stayed the same – 48 percent – while Medicaid dollars rose slightly – 18 to 21 percent – self-pay dropped to 2 percent, other revenue brought in 29 percent and charity care fell to 1 percent.

These hospitals had 33 full-time physicians, saw their inpatient days climb to 7,069 (+7%), their emergency room visits spiral to 7,924 9+11%) and outpatient days reach 60,389 (+6%).

They include Bay Area, Good Samaritan, Tuality, Sky Lakes, Providence Medford, Mercy Medical, McKenzie Willamette and Legacy Meridian Park.

Trend Continues in Smaller Hospitals

From preliminary data, it appears smaller hospitals performed as well as their larger counterparts based on first quarter filings. Overall, their operating margin reached 7 percent, total margin 8 percent, while charity care levelled off at 2 percent.

Having 50-99 beds and located primarily in rural areas, these hospitals took in a greater proportion of Medicaid revenue – 27 percent compared to 23 percent a year earlier, while their Medicare dollars remained stable – 44 percent – self-pay dropped slightly to 2 percent and other revenues represented 28 percent.

With 24 full-time physicians, they reported 4,043 inpatient days (+3%), 7,294 emergency room visits (+2%) and 36,841 inpatient days (+8%).

These hospitals include Samaritan Albany, Three Rivers, Legacy Mt. Hood, Willamette Valley, Providence Milwaukie and Providence Willamette Falls.

Type A and B Hospitals on the Upswing

Because of their financial vulnerability, small rural hospitals – known as Type A and B – depending on their bed size and proximately to the nearest facility – receive cost-based Medicaid reimbursement, and are paid considerably more for outpatient and inpatient procedures from insurance companies and coordinated care organizations. This funding mechanism, authorized by the Oregon Legislature, has been challenged over the years, however the lobbying power of the Oregon Association of Hospitals and Health Systems along with the Office of Rural Health has kept this policy intact – for fear these hospitals will shut down, leaving their communities vulnerable.

Looking at their financial data, these 28 hospitals had better financial results than previous years, with none of their margins landing in the negative columns.

Hospitals classified as Type A – less than 50 beds and more than 30 miles from the nearest facility – saw their charity care drop to 2 percent during the first quarter, their operating margin climb slightly to 3 percent, and their total margin reach 8 percent – compared to 5 percent in the first quarter of 2014.

They had 10 full-time physicians, while 42 percent of their revenue came from Medicare, 24 percent from Medicaid, 2 percent, self-pay and 32 percent from other sources. Their inpatient days fell by 9 percent, reaching 1,239, while outpatient days grew by 12 percent, at 12,415 and emergency room visits climbed by 7 percent, at 1,955.

Type A hospitals include Blue Mountain, St. Alphonsus, St. Anthony, Curry General, Tillamook Regional, Grande Ronde, Good Shepherd, Harney District, Lake District, Pioneer Memorial and Wallowa Memorial.

Having a closer proximity to their urban counterparts, Type B hospitals are defined as having less than 50 beds, and 30 miles or less from the nearest facility.

During the first quarter, their operating margin reached 3 percent (2% a year earlier), and their total margin grew to 4 percent (up from 1%). Similar to other hospitals throughout the state, charity care dropped to its lowest level—1 percent – no doubt due to the Affordable Care Act with Oregon having more than 1 million people on Medicaid.

Medicare revenues remained flat – 45 percent – Medicaid dollars grew slightly – 23 percent – self-pay dropped to 2 percent and 30 people of their income came from other sources.

These small rural hospitals had 19 full-time physicians, their inpatient days reached 1,062 (+6%), emergency room visits spiraled (+17%) and outpatient days grew by 10 percent, reaching 25,092.

Included in this category are Asante Ashland, Samaritan Lebanon, Samaritan North Lincoln, Samaritan Pacific Communities, Columbia Memorial, Santiam Memorial, Lower Umpqua, Mid-Columbia, Pioneer Memorial, Providence Hood River, Providence Newberg, Providence Seaside, Southern Coos, St. Charles Madras and St. Charles Redmond.

Diane can be reached at [email protected].

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