DURANGO There really isnt a middle ground for the hospital business in Colorado. Hospitals are either reporting strong profit margins or struggling to scrape by, according to a recently released report.
To estimate state hospitals profits, Allan Baumgarten, who compiles the profit data in his Colorado Health Market Review analyzed data filed by the hospitals with the federal Centers for Medicare & Medicaid Services. The hospitals report patient revenues, expenses, number of days a patient utilizes a facility, patient discharges and income.
I generally agree with (the reports) findings, said Brett Gosney, chief executive officer of Animas Surgical Hospital in Durango.
Most Colorado hospitals reported strong profit margins in 2010.
HealthOne saw $383 million in net income. Centura Health took in $54 million.
Consolidation efforts gave them stronger economies of scale to keep costs down and more leverage to draw bigger payments from insurance companies, Colorado Public News reported.
The report highlights the results from large hospital systems, including Centura Health, the corporate structure that includes Mercy Regional Medical Center. But independent, rural hospitals and those that treat people with public-insurance policies such as Medicaid and Medicare arent faring as well, according to news reports.
The general trend for all hospitals is that costs have gone up and reimbursement payments have gone down, Gosney said. It has been an ongoing challenge for a number of years.
And for hospitals such as Animas Surgical Center, which accepts all payers, regardless of what their insurance is or if they even have insurance at all, the struggle has been greater.
All told, about a dozen Colorado hospitals are losing money, according to the Colorado Hospital Association. A few found themselves hundreds of millions of dollars short as 2010 was drawing to a close, and it took deep-pocket donors to pull them out of the red.
Its a stark example of why dominant systems have taken over the hospital business in recent years, Gosney said. Stronger negotiating powers and big-system cost-sharing abilities that come with greater economies of scale have increasingly become crucial to having a healthy bottom line.
Denver is a really typical example of what the dynamics in the hospital marketplace are, he said. The merger concept has been very active, and its really accelerating now.
Joe Pedly, chief financial officer for Mercy Regional Medical Center, agreed and said without the financing and purchasing leverage Centuras big system provides, the hospital wouldnt be faring as well as it has in recent years. The hospital benefits particularly, and maybe ironically, in health-insurance cost savings for its employees, he said.
Mercy Regional Medical Center ended 2010 with $10 million in net income a report said. Pedly said 2011 numbers were similar. The hospital definitely has had some bad years, though, he said.
The margins are so fragile in the hospital business, Pedly said.
The number of independent hospitals continues to fall with each passing year as major hospital systems take over. Of Colorados 27 hospitals, only six remain independent.
Mercy Regional Medical Centers merger with Centura last spring is an example.
Meanwhile, many smaller hospitals are fighting to stay in the black particularly in the face of impending health-care reform rules that will affect both providers and insurers. Insurers already are preparing for battle and aggressively raising rates, to combat the effects of health-care reform, even though much of the reforms rules wont be implemented until 2014, Gosney said.
As more people are added to Medicaid under the new rules and federal help with the increased costs tapers off in the coming years, Gosney said hospitals such as Animas Surgical Center must consider how much can we absorb?
The once-bloated health-care and hospital systems in the state and nation have stripped much of the fat that previously kept costs high, he said.
We must make the jump from very efficient to hyper-efficient, he said.
Gosney predicted many rural hospitals will shutter in the coming years because they are unable to cope with the situation.
For Gosneys hospital, which treats a rapidly growing population of active baby boomers on Medicaid who need expensive procedures to keep them active and healthy, such as total knee and hip replacements, concerns are mounting that federal reimbursements will fall further from covering costs or wont cover the procedures at all.
Weve all heard the politicians talking about Medicare being bankrupt in 20 years, Gosney said. Thats real stuff.
His advice to locals and the hospitals plans for the future: We will continue to do our best to have a terrific hospital, but the best thing people can do is be focused on prevention and try to stay out of the hospital.
Pedly echoed the need for locals to be focused on prevention, saying its important people take charge of their health, listen to their doctors, take prescribed medications and generally have healthful lifestyle habits. But he worries less about the impending health care reforms and the future of federal programs.
Pedly thinks the future of Medicare and Medicaid remains in the voters hands, and people will not let important benefits and programs be cut.
Also, unlike many hospitals in the nation that will see payments and revenue decline under the new rules because of new policies that will penalize hospitals with lower-quality facilities and services, Mercy likely will see a slight increase, he said.
Were in a better position than other hospitals today because of the quality care we provide, Pedly said.
Colorado Public News contributed to this report.
