News briefs: Hospital profit margins show negligible increase
June 1, 2001 4 minutes read
News briefs
Hospital profit margins show negligible increase
Operating profit margins at U.S. hospitals flattened at an annualized average of 3.69% in 2000, indicating only a slim degree of financial health, according to a report by Solucient, a provider of benchmark information on health care.
Hospital operating margins increased 0.41% over 1999 and remained relatively low, a full 36.6% lower than in 1997. Solucient president Gregg Bennett says margins of from 3%-4% are not sustainable in the long run, especially given the pressure from increasing drug costs and hospital labor shortages. He also says hospitals are still feeling the sting of the 1997 Balanced Budget Act and its clamp on Medicare payments.
Other key findings from the study, "The Health of Our Nation’s Hospitals," include: smaller hospitals finished the year best at 4.84%, their highest operating margin since 1997; larger hospitals produced the slimmest operating margins at 2.83%; regionally, western hospitals posted the weakest operating margins — 3.9%, while northeastern hospitals fared the best, going from break-even in 1999 to almost 5% in 2000. For more information, visit www.solucient.com.
Teaching hospitals give more than their share
Medical schools and their primary teaching hospitals are providing a disproportionate share of uncompensated care to the poor and uninsured, according to a study released by The Commonwealth Fund. The study, "A Shared Responsibility: Academic Health Centers (AHC) and the Provision of Care to the Poor and Uninsured," reports that such institutions provide uncompensated care at a rate that is increasing faster than for other types of hospitals.
Partially based on data provided by the "AHA’s [American Hospital Association] Annual Survey of Hospitals," the study reports that AHCs are experiencing a substantial increase in the treatment of patients who do not have health insurance and cannot pay for medical services. Other types of hospitals see a decrease in such care, the study shows. AHCs are providing up to 44% of the charity care provided in some communities, and that care is causing a significant negative impact on the AHCs’ operating margins. For more information, go to www.cmwf.org.
AHA adds group on outpatient coding
The American Hospital Association (AHA) has launched a new division to provide hospitals advice on how to properly code for Medicare outpatient services. The new division, the Central Office on the Health Care Financing Administration’s Common Procedural Classification System (HCPCS), was created to respond to Medicare’s new outpatient payment system that requires hospitals and health systems to code for all outpatient procedures or services.
Hospitals that direct HCPCS coding questions to the AHA will receive written advice. Questions can be sent to the AHA’s Central Office on HCPCS, One N. Franklin St., 29th Floor, Chicago, IL 60606.
In addition, AHA Coding Clinic on HCPCS provides advice, articles, and regulatory updates in a quarterly newsletter that is available through AHA’s order services at (800) 242-2626. A continuing education video program, "Implementing APCs: Best Practices," is available by calling (888) 999-9242.
HCFA gives direction on cost-to-charge ratios
The Health Care Financing Administration (HCFA) has provided Medicare program intermediaries detailed instructions on how they are to calculate the payments certain hospitals and community health centers are due to make up for some of the losses they suffered in the switch to the outpatient prospective payment system, according to a report in the on-line news service AHA News Today.
HCFA’s Program Memorandum Transmittal A-01-51 gives instructions on how to calculate payment-to-cost ratios for determining the transitional corridor payments, or transitional outpatient payments. Rural hospitals with fewer than 100 beds, qualifying cancer hospitals, and children’s hospitals are to receive the full difference between what they would have gotten under the pre-Balanced Budget Act system and what they would get under the new outpatient prospective payment system. All other hospitals and CMCHs get a portion of that difference.
The new program memorandum also notes that hospitals using subscripted cost centers and providers that changed the types of services they furnish after the cost reporting period HCFA used to calculate the original ratio may request recalculations of their cost-to-charge ratios.
CBO: McCain-Kennedy bill would drive up care costs
The patient’s bill of rights co-sponsored by Sens. John McCain (R-AZ), and Edward Kennedy (D-MA), would increase premiums by an additional 4.2%, according to an analysis by the Congressional Budget Office (COB).
Critics say this could cause many employers, already facing a 13% increase in health care costs this year, to drop plans. Dan Danner, chairman of the Health Benefits Coalition, says it would be "unconscionable" for Congress to enact any legislation that would make health care more expensive and risk the possibility of millions of more Americans losing their health coverage.
Despite language regarding a "cap" on lawsuit damages to employers, the bill still leaves them open to unlimited, class-action suits, the COB study contends. A recent survey shows that 46% of employers carrying health plans would drop them if they were made vulnerable to expanded health care liability. A copy of the CBO analysis, requested by Sen. Don Nickles (R-OK) of the Budget Committee, can be found at www.cbo.gov/showdoc.cfm?index=2796&sequence=0&from=7.
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