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Wednesday, September 08, 2010
N.M. Hospital Profits Top National, Neighbors'
By Winthrop Quigley
Copyright © 2010 Albuquerque Journal Journal Staff Writer
New Mexico hospitals posted bigger profit margins in 2006 and 2008 than their counterparts nationally and in each of four neighboring states, according to an analysis conducted for the state Human Services Department.
The Hilltop Institute, a health and social policy research group affiliated with the University of Maryland, found New Mexico hospitals earned a 9.88 percent profit margin in 2008. Nationally, hospitals posted profit margins of 2.64 percent.
The state received the report shortly after it implemented a 3 percent cut in hospital reimbursement rates for Medicaid patients, a move hospitals said would cost them $117 million.
Human Services Secretary Katie Falls said the study was designed to show if state hospitals could survive Medicaid cuts.
Falls, who couldn't explain why New Mexico hospitals had a higher profit margin, said the state wanted "to make sure the health care system was a healthy one and available to our (Medicaid) clients. The only time we looked at this is when (the hospitals) came back and said they couldn't sustain (proposed reimbursement cuts), that it would put them under."
Hilltop said that in 2008, Arizona hospitals earned a 1.65 percent profit margin, Colorado earned 4.92 percent, Oklahoma earned 6.08 percent and Texas earned 7.03 percent. Hospitals in those four states reported an average profit margin of 5.85 percent.
Revenue and expense data were derived from American Hospital Association surveys of hospitals nationwide. Individual hospitals cannot be identified. The institute's report does not attempt to explain why New Mexico hospitals were more profitable than hospitals in other states.
New Mexico hospital profitability was lower than the nation's and its neighbors' in 2007, at 6.77 percent compared to a national margin of 6.88 percent and an average margin of 8.23 percent among four neighboring states. In 2006, New Mexico margins were 9.18 percent, the national margin was 6 percent and the four-state average was 7.79 percent.
New Mexico Hospital Association president Jeff Dye said the study and any policies it might justify are "really a blunt instrument." While hospitals in the aggregate may be profitable, individual hospital profitability can vary widely, he said.
Dye said it is inappropriate for the Human Services Department, which administers Medicaid, "to worry about total margin. That's beyond their scope of contracting (with hospitals to care for Medicaid patients). They should be worried about fair and equitable payment for Medicaid services."
Dye said hospital financial health can depend on many factors, including whether hospitals get most of their payment from Medicare, Medicaid or commercial insurance, whether they get donations and how well their endowment fund, if they have one, is invested.
In general, hospitals make little, if any, money on Medicare and Medicaid patients and try to recover some of that lost ground from commercial payers, Dye said. All payer sources are trying to reduce payments to hospitals, he said.
"There is no question the Medicaid budget is in dire straits," Dye said. "Hospitals have already stepped up to the plate" by taking cuts in payment, including reductions last year in reimbursements from the state.
Falls defended the need for the study.
"When hospitals say they can't sustain a decrease in rates, that it threatens the viability of the hospitals, we have to ask, how are hospitals doing?" she said. "They raised the issue."
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