Hospital Profit Margins Slightly Down in 2010

Close to 20 executives associated with Oregon hospitals earn more than $1 million per year
The Lund Report
June 10, 2011 – Oregon hospitals finished the year 2010 with a slightly lower profit margin than in 2009 due to increased uncompensated care and further shortfalls in Medicare and Medicaid, according to Kevin Earls, senior vice president of the Oregon Association of Hospitals and Health Systems.
Overall profit margins last year were 4.17 percent compared to 4.27 percent the year before, Earls said. The state normally releases audited financial statements in October, but these latest figures are gleaned from un-audited statements. In 2009, Oregon hospitals earned more than $250 million in net income.
Last year, hospitals gave out around $1.2 billion in uncompensated care, about $1 billion more than in 2000, said Earls. This figure, however, represents full-billed unpaid charges and bad debt, and not actual costs.
A review of IRS form 990s submitted by not-for-profit hospitals and obtained through the Oregon Department of Justice show the true cost of charity care provided by hospitals was far less than the amount reported to Oregon researchers.
In 2009, charity care figures reported to the state were two to three times higher than the amount reported to the IRS. Portland Adventist Medical Center, for instance, reported to the state $19.7 million in full-billed charity care charges, though the true cost was $5.9 million. Legacy Emanuel reported charity care charges twice as high as the true cost reported elsewhere.
Earls said hospitals are required to report billed charges to the state and true cost to the IRS. Those IRS forms also include shortfalls in Medicare and Medicaid reimbursement.
“Long disadvantaged by Medicare reimbursement, this feature in Oregon’s approach allows consumers to see the actual effect of Medicaid and Medicare underfunding and its contribution to the cost-shift occurring to private health insurance premiums,” Earls said.
This shortfall too is included in community benefit reports the Oregon legislature approved in 2007. But some four years later, those reports have still not been made public as intended. State officials plan to incorporate those statements into an overall hospital report to come out later this month, said Alissa Robbins, communications officer for the Oregon Health Authority.

Executive compensation

A review of financial disclosure forms by not-for-profit hospitals to the IRS also revealed that close to 20 executives associated with Oregon hospitals earned more than $1 million in 2009. Most of those, however, oversee multiple hospitals including those in other states.
Exclusive to Oregon, Russ Danielson, vice president and CEO for Providence Health & Services statewide was the highest paid hospital executive in 2009 earning $1.4 million in total compensation. Danielson was followed by Larry Mullins, president/CEO of Good Samaritan Hospital in Corvallis and Dr. George Brown, president & CEO of Legacy Health System, who each earned $1 million.
Robert Pallari, former CEO of Legacy Health Systems, who retired in 2006 received another $500,000 in deferred compensation in 2009 as part of a non-compete agreement. Pallari earned more than $2 million per year as Legacy’s top executive.

To Learn More

For a complete list of top executive compensation for Oregon hospitals click here.
For related stories click here.


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I would like to know if the cost as a percent of charges is based on the audited financials vs the 990. A listing including the gross charges is almost irrelevent but the gross revenue is. What percentage of gross revenue is written off? The net profit includes the "charity care" which is really paid by the rest of us as an indirect tax on healthcare.

Nice job of reporting. And well-observed by "anonymous" that there's no such thing anymore as actual "charity care" -- anyone with coverage ends up paying for that. Hospitals might just as well label that column as "cost-shift" but that doesn't look nearly so pretty in their annual reports. --kilroy

The fraud occurs when u have unregulated unethical demeanor by several hospital executives, doctors, nurses, and pharmacists whom are allowed to escape their professional medical duties, and pick and choose which patient actually really receives the best quality care, and who actually recieves lower standard poor quality care? The oregon hospitals are allowed to go unanswered here, they can literally kill someone in their care and immediately hide behind medical errors, or technical issues that they have the power to deem appropriate?(meaning that if u are uninsured, or have oregon health plan, your life can be compromised, or services limited or refused or not provided here in oregon). When u see these unprofessional acts here in oregon, there is no powers stopping these highly paid hospital staff members whom drive away in newer model cars, and stay far away from the area where they work, and cant relate to the less fortunate? Instead of introducing a house bill 3560/ we need a actual task force that imposes criminal and civil sanctions on all hospital staff and executives, whom allow this abuse to occur at the legacy health systems daily, in oregon.