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Tuesday, June 22, 2004
Hospitals made a healthy profit, state report shows
Copyright © 2004 Blethen Maine Newspapers Inc. | ||
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AUGUSTA — The past decade was generally good to Maine hospitals - a conclusion that the hospitals and the administration of Gov. John Baldacci can agree upon. From 1993 to 2002, the operating margin at many Maine hospitals was usually higher than in the rest of the country, according a new report done for a Baldacci-appointed group that is studying the future of Maine's hospitals. But that's where the agreement ends. The Baldacci administration says the report, drawn from audited financial reports, shows that hospitals can slow their spending - so costs do not end up being shifted from insurers to consumers - without compromising financial health or quality of care. But hospitals say that the report merely shows they have been fiscally responsible, and that the data must be looked at year-by-year. They point out that in 2002, the median operating margin for Maine hospitals fell below the nation's median, and was only slightly higher than the region's. Profits from patient services dropped as hospital expenses grew, reflecting the higher number of people using the hospitals, said David Winslow, vice president of the Maine Hospital Association. "It's interesting to look at the late 1990s, but it's not particularly relevant to where we are now," Winslow said. How the data is interpreted is important because it will influence the decisions of the Commission to Study Maine's Hospitals, a group that includes a business leader, a consumer advocate and several health-care professionals. The commission, created by the governor's Dirigo Health reform law a year ago, will present recommendations to the Legislature in November regarding hospital spending, as well as the quality and accessibility of care. It's not clear how much sway the report on hospital finances, presented to the commission on Monday, will have. But commission Chairman Bill Haggett, chief executive officer of Naturally Potatoes and former CEO of Bath Iron Works, described it as "excellent background data" that "will be very helpful." The report was written by Nancy Kane, a management professor at Harvard University's School of Public Health. Kane, who was hired by the Governor's Office of Health Policy and Finance, has helped states such as New Hampshire, Massachusetts and West Virginia analyze hospital efficiencies. Kane said most Maine hospitals have had healthy operating margins because they're often the only game in town. In states such as Massachusetts, where hospital competition is fiercer, managed care drove down hospital profits. Kane, who supports the Dirigo Health reform law and has been working with the commission since September, said Maine hospitals can decrease expenses by investing in a statewide electronic patient record system that could be accessed by doctors to cut down on time and errors. "They have the money to spend on improving care and reducing costs," Kane said. Kane said hospitals also should reassess their greatest cost burdens. In 2002, hospitals transferred nearly $45 million to affiliates, primarily hospital-owned physician practices. But Winslow said that's an unavoidable cost and blamed low Medicaid reimbursement to physicians. Hospital ownership can raise the reimbursement rate for a physician practice by 80 percent - from about 40 cents on the dollar to 72 cents on the dollar. Winslow said hospitals usually subsidize the remaining 30 percent as well, to keep doctors in the community. Kane's work has been funded in part by grants for Dirigo Health from the Commonwealth Fund and the Maine Health Access Foundation, totaling more than $1 million. Kane is expected to help analyze financial reports for 2003. That's when hospital systems were asked to voluntarily cap cost increases and operating margins, as part of Dirigo Health reforms. Staff Writer Josie Huang can be contacted at 791-6364 or at:
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