Oregon hospitals appeared to be in a much stronger financial position when the second quarter ended June 30, according to preliminary confidential documents obtained by The Lund Report. ’ 26 DRG hospitals had a total margin of 8.7%, compared to a 6.7% operating margin, while they averaged 71,304 outpatient visits and experienced 10,738 inpatient days. Emergency room visits averaged 9,156 for all DRG hospitals. As a clarification, DRG stands for Diagnosi-Related Group, and is used to identify the "products" provided by hospitals such as an appendectomy. Since 1982, Medicare has reimbursed hospitals based on their DRG codes.
Meanwhile, the 29 smaller rural hospitals in Oregon, known as Type A and B because they receive cost-based reimbursement, also performed well during the same time span, averaging a total margin of 6 %, with an operating margin of 4% and had 18,418 operating visits with 1,163 inpatient days. These 29 rural hospitals averaged 2,641 emergency room visits.
Statewide, charity care remained at a low 2% for the majority of hospitals, which was comparable to the quarter ending March 30.
Officially, Oregon Health Authority’s Office of Analytics is currently reviewing the second quarter data, according to Lori Coyner, director of health analytics, who told The Lund Report: “We just received the second quarter data from the hospital association and are getting it aggregated and transferred to us, and I would expect to release that sometime at the end of November.”
Each quarter, state officials analyze financial and utilization trends of the state’s hospitals, which self-report such data in a program administered by Apprise Health Insights, an offshoot of the Oregon Association of Hospitals and Health Systems. Neither of the Kaiser hospitals are included in this analysis because they do not report such financial information since their integrated makes it difficult to separate hospital financial data from other operations, Coyner said.
First Quarter Results
When The Lund Report analyzed the data from Oregon’s DRG hospitals during the first quarter of 2014, taking into consideration their financial and utilization trends, Peace Health Sacred Heart Riverbend came away as the strongest – with an operating margin of 17.6%, a total margin of 17.9%, and 2.1% Science University ranked 24th among the state’s DRG hospitals with an average of 5.7 days.
In terms of favorability, Willamette Valley Medical Center, a for-profit hospital in McMinnville, had the second best operating and total margin - 16.4%, with its charity care falling to 0.5% – right below McKenzie Willamette – the only other for-profit hospital in Oregon – which had the lowest charity care percentage – 0.4%.
The only other hospital with a double digit operating margin in the first quarter was Providence St. Vincent Medical Center, at 10.2%, while its charity care nestled right in the middle of the other
statewide DRG hospitals, at 2.7%, while inpatient discharges fell by 9.1% and emergency room visits decreased by 12.7%.
Three other hospitals had a total margin in the double digit column – St. Charles, Asante Rogue and Legacy Mt. Hood, while five hospitals saw their margin dip into the negative column – Samaritan Albany (-0.6%), Good Samaritan Regional Medical Center (-2.1%), Providence Medford (-2.5$), Portland Adventist (-3%) and PeaceHealth Sacred Heart University (-15.2%).
Meanwhile, three hospitals by Providence had the compared to the first quarter of 2013 – Providence Milwaukie (-15.5%), Providence St. Vincent (-22.6%) and Providence Willamette Falls (-48.4%).
Among the state’s smaller, more rural hospitals – also known as Type A and B – which have fewer than 50 beds – the two hospitals run by Peace Health had the highest total margin in the first quarter—Cottage Grove (21.5%) and Peace Harbor (11.8%) followed by St Anthony Hospital (16.2%) Harney District and Good Shepherd (each at 12.1%), and Providence Newberg (11.2%) according to the analysis by state officials.
These smaller hospitals – their DRG counterparts – also saw a decline in charity care with overall percentages falling from 3.9% statewide in the first quarter of 2013 compared to 2.3% in 2014. Silverton Hospital had the highest percentages among these smaller hospitals, landing at 6.1% followed by Tillamook County (4.2%), Good Shepherd (4.1%) and Providence Hood River and St. Alphonsus which tied at 4%. Coming in last was Coquille Valley (0.3%) with Blue Mountain (0.6%), a close second.
Inpatient discharges also fell significantly at several rural hospitals – Pioneer Memorial (-38.9%), St. Charles Madras (-32.4%), West Valley (-25.5%), with Providence Hood River and Harney District tying at -20%.
Surprisingly, Samaritan Pacific saw its emergency room visits swell by 31.6%, followed by Providence Hood River (18%), and Southern Coos (14.8%).
Overall, such visits maintained “a fairly consistent 1.5% year to year increase for the past five years,” according to the analysis by the Oregon Health Authority.
Looking at the data overall, OHA’s Coyner said officials will know more about the performance of hospitals once the second quarter data has been analyzed. “We’ll see if the trends hold.”
Big Changes in Payer Mix
“big takehome message” the fact that the payer mix changed so dramatically in 2014 with the significant increase of Medicaid revenue – up 20.5% -- and the significant decrease in self-pay revenue – down 3.3% -- as a result of the Medicaid expansion. Overall revenue from Medicare remained flat – 42.9% in the first quarter of 2014 compared to 43% in 2013, while commercial dropped from 35.1% to 33.4% during that same time span. DRG hospitals average 64% of their revenue from Medicare and Medicaid, while Type A and B hospitals average 64% and 65% respectively.
Jeff Winkley, MPH, a senior financial policy analyst with the OHA, also commented on the first quarter report, telling The Lund Report:
“Our data sourced from the hospitals themselves doesn’t seem to show anything that
would point to large changes in payment methodologies. There are definitely some hospitals reporting a high operating margin and those that have a large negative margin as well and this wide distribution seems to be consistent over the past several years. Furthermore, even within a single hospital, it is also not uncommon for there to be sizable swings in margin from one quarter to the next. There are many factors that can contribute to this including timing of payment adjustments such as DSH, meaningful use, provider tax and other incentive payments; many of these payments come in only once per year which can really affect the margin for whichever month those payments came in and don’t relate to the patient activity in that same quarter per se. “
And from the perspective of the Oregon Association of Hospitals and Health Systems, its director of public affairs, Philip Schmidt, shared the following statement:
“Oregon’s hospitals are pleased to have been a part of ensuring that so many more Oregonians now have health insurance coverage as a result of the ACA. We applaud policymakers and our partners in this important endeavor.
“As has been widely reported, hospitals in states that have expanded Medicaid are seeing a rapid change in payer mix. Uncompensated care is dropping as expected and, while overall revenue is up, we cannot forget that Medicaid still significantly underpays for the actual cost of providing care. We are also in the midst of 10 years of cuts to Medicare hospital payments - $150 billion in all. These factors are all expected to achieve balance over time.
“In the short term, it is a challenging new scenario that must be allowed to play out for a few years. Hospitals are closely watching the financial data that accompanies these payer shifts and will adjust accordingly. But for now, Oregon hospitals and the rest of the healthcare community are waiting to see how the re-enrollment and redetermination process plays out. Many Oregon health policy experts and insurers are anticipating as much as 15-20 percent drops in coverage in Medicaid and qualified health plans offered through the exchange.
"Whatever happens, hospitals will work to meet the challenges of a change in payer mix and will ensure that they are still the community anchors that they have always been.”
