The ways that Oregon’s hospitals make money and collect on bills have changed drastically since the Affordable Care Act was passed, according to a quarterly report obtained by the Lund Report that provides a series of benchmarks for how different types of hospitals are performing.
The big picture that emerges from the Oregon hospitals benchmark report is, on one level, a familiar one: With more people enrolled in Medicaid-backed health coverage, far fewer patients are showing up unable to pay for care. Hospitals are being paid more quickly, seeing more outpatient visitors and having fewer patients spend the night.
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. Among small, rural hospitals with fewer than 50 beds, for example, there’s a big gap. The 11 small Oregon hospitals with no competition within 30 miles report that they had an average operating margin of 3 percent in 2008, before the Affordable Care Act passed; by the second quarter of 2015, their operating margin had climbed to 10 percent. The 19 rural hospitals with competitors close by, however, have seen much tighter operating margins – with average operating margins of 0 percent in 2008 improving to just 3 percent in the second quarter of this year.
Here’s a closer look at how size and geography have played out for hospitals across the state.
Remote and rural
Oregon has 11 small, remote, rural hospitals – those with fewer than 50 beds that are located more than 30 miles from the nearest hospital. These small health care outposts often provide a critical lifeline in the communities they serve. And they seem to be doing well since the passage of the Affordable Care Act.
In 2008, this group of hospitals reported a slim 3 percent operating margin. With 7 percent of revenue coming from people who paid for their own care, and 3 percent of charges being written off as “charity care,” these hospitals were used to tight budgets and tough times. They were also used to waiting to be compensated, even when they did get paid. The typical patient bill took 62 days for collections.
By the second quarter of 2015, however, things were picking up. Self-pay patients contributed just 2 percent of revenue, just 1 percent of charges were written off as charity care. Medicaid had grown from 13 percent of revenue to 23 percent. Operating margins climbed to 10 percent. And the number of days to collect on a typical patient bill dropped to 50.
Rural, but competitive
Another 19 small rural hospitals face more competition than their remote peers. They have fewer than 50 beds, but they also vie for patients from other hospitals within a 30 mile radius. And that extra competition seems to be making financial life more challenging than for any other category of hospitals in the state.
They’ve never had it easy. In 2008, this group of hospitals reported an average operating margin of 0 percent. They relied on self-paying patients for 7 percent of revenue, and wrote off 4 percent of charges as charity care. The typical patient bill took 62 days to collect on. Medicaid was the source of 11 percent of patient revenue in 2008, and grew to 23 percent of patient revenue by the second quarter of 2015, but that has not been enough to give these institutions the same boost as other hospitals around Oregon have experienced.
Their April-June 2015 operating margin was somewhat improved from 2008, at 3 percent. Self-paying patients were down to 2 percent of revenue, and charity care was down to 2 percent, as well. But it was still taking 54 days, on average, for these hospitals to collect on bills, barely an improvement from the pre-ACA era.
The hospital benchmarks report does not break out the performance of specific hospitals or offer explanations for the numbers it includes, but recent Lund Report coverage of healthcare finances may offer insight into some of the challenges these small, rural, yet competitively challenged institutions face.
As previously reported, Southern Coos Hospital & Health Center and Coquille Valley Hospital, both located in the shadow of the much larger Bay Area Hospital, have complained that growing Medicaid enrollment has left them competing to ink favorable agreements with coordinated care organization Western Oregon Advanced Health, or WOAH, which has been a source of pricing and competitive stress.
Slightly larger hospitals
Six Oregon hospitals with between 50 and 99 available beds were grouped together into a single category in the benchmark report. They seem to have seen financial results similar to their larger peers, and to smaller hospitals that face less competition.
In 2008, these “slightly larger” hospitals reported average operating margins of 8 percent. They relied on self-paying patients for 7 percent of revenue, and wrote off 4 percent of charges as charity care. The typical patient bill took 62 days to collect on. Medicaid was the source of 12 percent or patient revenue.
By the second quarter of 2015, Medicaid had doubled as a source of revenue, to 24 percent. Self-paying patients were down to contributing just 2 percent of revenue, and charity care consumed just 1 percent of charges. The typical bill took 40 days to collect on. Operating margins had climbed to 10 percent.
Medium hospitals
The story was similar at the nine Oregon hospitals that have between 100 and 199 beds:
* Medicaid went from 10 percent of payer revenue in 2008 to 21 percent in the second quarter of this year.
* Self-pay went from 6 percent to 2 percent.
* Charity care dropped from 3 percent to 1 percent.
Bill payments are also arriving much more quickly at these hospitals. In 2008, the average bill took 60 days to collect on. By the April to June period of 2015, that was down to 47 days. And these hospitals’ operating margins climbed from 2 percent to 10 percent over that seven-year period.
They relied on self-paying patients for 7 percent of revenue, and wrote off 4 percent of charges as charity care. The typical patient bill took 62 days to collect on. Medicaid was the source of 11 percent of patient revenue in 2008, and grew to 23 percent of patient revenue by the second 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.
In 2008, this group of hospitals reported a 4 percent operating margin. They reported that 5 percent of revenue came from people who paid for their own care, and 4 percent of charges were written off as “charity care.” The typical patient bill took 54 days to collect on.
By the second quarter of 2015, self-pay patients contributed just 1 percent of revenue, just 1 percent of charges were written off as charity care. Medicaid had grown from 13 percent of revenue to 23 percent Operating margins climbed to 10 percent. The number of days to collect on a typical patient bill had edged down to 48.
One detail does set these large hospitals apart: Tiny, small and medium-sized hospitals all report that outpatient visits are up and inpatient visits are down. Yet at the largest Oregon hospitals, inpatient visits actually climbed.
Here’s how each size category of hospitals changed on these measures, from 2008 through the second quarter of 2015:
* Remote and rural: Outpatient visits up 42 percent, inpatient days down 32 percent.
* Rural but competitive: Outpatient visits up 20 percent, inpatient days down 27 percent.
* Slightly larger (50 to 99 beds): Outpatient visits up 15 percent, inpatient days down 38 percent.
* Medium (100 to 199 beds): Outpatient visits up 37 percent, inpatient days down 7 percent.
* The biggest hospitals (200 or more beds): Outpatient visits up 17 percent, inpatient days up 6 percent.
The benchmark report does not explain this trend, but the numbers at all but the largest hospitals seem to reflect several goals of the Affordable Care Act, which encourages hospitals to take a more holistic approach to patients that treats their visits as outpatient encounters, minimize the need for overnight stays and limit the need for hospitalization. Growth in inpatient stays at large hospitals could reflect a number of causes: population growth, referrals from other hospitals seeking to get their own numbers down, the demands of an aging populace with more complicated healthcare needs. Or other factors could be at play that aren’t as readily apparent.
-- Courtney Sherwood can be reached at [email protected]. Follow her on Twitter at @csherwood.
