Hospital Profits Soar in 2014

New data reveals that the majority of hospitals in Oregon are witnessing record breaking profit margins.

Oregon hospitals are earning higher profit margins than ever before, thanks to the Affordable Care Act. With fewer uninsured people walking into their doors and Medicaid boosting their bottom line, the operating margin –also known as profit – was at an all-time high at the end of 2014.

Recent data obtained by The Lund Report indicates that all the hospitals – even the smaller Type A and B ones in rural Oregon – have seen their profitability spiral upward.

Obviously the Oregon Association of Hospitals and Health Systems recognized this trend, and that could have been one of the reasons they announced a new community benefit recently, offering free care to families who are not Medicaid eligible and whose income is below 200 percent of the federal poverty level.

Yet another initiative launched by the association on OPB Radio and on billboards in Portland touts Oregon hospitals for their role in maintaining healthy communities. And, at the state Legislature, the hospital association is fighting efforts by OSPIRG and SEIU to create more transparency by giving consumer real-time information about the cost of procedures and requiring hospitals to post their prices by insurance type.

Instead, the association is pressuring lawmakers to pass more lenient legislation, calling upon the Oregon Health Authority to use the all-payer, all-claims database to list the median prices at hospitals and hospital clinics for the 50 most common inpatient procedures and 100 most common outpatient procedures.

What The Data Shows

The latest financial data reveals that the state’s largest hospitals – with over 200 beds – including 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 – had an overall operating profit margin of 6 percent at the end of 2014, while their total margin – including investments – reached 8 percent, and their charity care plummeted to 2 percent.

Looking at their payer mix, 40 percent of their revenue was derived from Medicare; 22 percent from Medicaid, while only 2 percent of patients were self-pay. During the same time span in 2008, these hospitals only brought in 36 percent of their revenue from Medicare, 13 percent from Medicaid, while self-paying patients represented 5 percent of their payer mix.

The inpatient days at these large hospitals stayed relatively the same over the past seven years – 22,226 in 2008 compared to 22,055 in 2014, on average, while emergency room visits slightly increased from 11,307 to 12,203. The biggest change occurred among outpatient visits – reaching 126,192 in 2014 vs. 105,268 in 2008.

And these same hospitals saw their full-time physician equivalents jump from 114 to 152 in those seven years.

Mid-Size Hospitals See Growth

Larger hospitals aren’t alone in witnessing higher profit margins. Oregon’s mid-size hospitals – with 100-199 beds – are on the same track, and, overall, realized an operating margin of 5 percent at year end, compared to a total margin of 7 percent. They represent Bay Area, Good Samaritan, Tuality, Sky Lakes, Providence Medford, Mercy Medical, McKenzie Willamette and Legacy Meridian Park.

Inpatient days fell to 6,365 compared to a high of 7,031 in 2008, representing an 11 percent drop, while emergency room visits reached 7,464 and outpatient visits soared to a new high of 57,889, a 13 percent increase since 2008. These hospitals had 36 full-time physician equivalents at the end of 2014, while 47 percent of their revenue came from Medicare and 20 percent from Medicaid.

Smaller Hospitals Perform Well

Six hospitals that have between 50-99 beds saw their operating margins soar from 2 percent in 2013 to 7 percent last year, while their total profit margin reached a new high of 8 percent compared to just 3 percent two years ago.

During that same time span, their inpatient days increased slightly – 3,606 compared to 3,789 last year, but those figures saw a dramatic drop since 2008 when these hospitals averaged 6,353, a 40 percent decrease over the past seven years.

Their Medicaid revenue nearly doubled since 2008 – reaching 25 percent, while Medicare dollars were relatively the same – 42 percent of total revenue, while their charity care dropped in half during that same time span – from 4 percent to barely 2 percent.

The hospitals that fall into this category are Samaritan Albany, Three Rivers, Legacy Mt. Hood, Willamette Valley, Providence Milwaukie and Providence Willamette Falls.

Rural Hospitals on the Upswing

Oregon classifies rural hospitals according to their size and remoteness. Those called Type A have fewer than 50 beds and are more than 30 miles from the nearest facility, while Type B hospitals also have fewer than 50 beds but are 30 miles or less from the nearest hospital.

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

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.

Their operating margin stood at 4 percent at the end of 2014, while they landed in the negative column in 2013 – at -1 percent. Last year, the total margin of these hospitals stood at 7 percent. Their Medicare revenue changed very slightly over the past seven years, reaching 43 percent in 2008 and 41 percent last year, while their Medicaid dollars – similar to other hospitals – grew dramatically from 13 percent to 23 percent in 2014, and their self-pay revenue – which generally came from people without insurance – took a nose dive – 7 percent in 2008 and dropped to 3 percent last year. Charity care followed suit, falling to 2 percent in 2014.

Inpatient days, on average, dropped significantly – by 30 percent since 2008 – reaching 1,280 in 2014, while outpatient visits grew – by 22 percent – during that same period – and reached 11,266.

Looking at the Type B rural hospitals, their Medicare revenue grew slightly over the past seven years – and stood at 44 percent in 2014, while Medicaid dollars doubled, reaching 23 percent of total revenue, while charity care was at an all-time low, at 2 percent.

Similar to other small rural hospitals, inpatient days dropped by 28 percent, standing at 984, on average, while both emergency visits and outpatient visits grew substantially, reaching 3,049 and 23,293 respectively. These hospitals had 17 full-time physicians, on average.

The hospitals in this category include 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, Coquille Valley, St. Charles Madras and St. Charles Redmond.

Diane can be reached at [email protected].

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