Some hospitals rich, others not

Overall, 2005 a good year in metro area, new report shows

Rachel Brand, Rocky Mountain News

Friday, November 10, 2006

Poor hospitals struggling to make money and dependent on foundation support. Luxurious medical facilities rolling in cash.

The Denver area has both, sometimes within a mile of each other, a report released today showed.

HealthOne's Swedish Medical Center was the most profitable facility in the area last year, earning $84 million before taxes - a pretax profit margin of 25.6 percent, according to the study.

By contrast, Centura's Porter Adventist and Parker Adventist hospitals lost $3.75 million and $3.22 million, respectively. Nonprofit hospitals, which don't pay taxes, reported an average net operating margin of 11 percent.

"Colorado hospitals have improved their financial results in the past few years, and 2005 was their strongest year in recent memory," University of Minnesota analyst Allan Baumgarten wrote.

The numbers were released in his annual Colorado Managed Care Review, which offers a comprehensive look at hospital finances.

HealthOne and Centura Health - two of the largest Denver systems - have declined to release financial details for years.

"This is a good time for hospitals and their systems in Colorado," Baumgarten wrote. "Consolidation and more efficient operations have strengthened their balance sheets and cash flow, they are in the midst of huge construction programs, and they are filling beds."

Hospitals consume a significant chunk of health care dollars and have been blamed as one source of spiraling medical costs and profiteering.

From 40 percent to 45 percent of health insurance premiums are earmarked for hospital care. If hospital prices go up, so do health insurance premiums and out-of-pocket costs.

Metro hospital systems have added and replaced at least six medical centers in the past four years. The study showed the new facilities don't all mint money.

Within six months in 2003 and 2004, Centura Health and HealthOne built cutting-edge facilities to serve booming Douglas County.

HealthOne's Sky Ridge Medical Center in Lone Tree fills 72.2 percent of its 138 beds and earned $35.25 million in 2005, before taxes. That's a pretax tax profit margin of 23.2 percent.

But Centura's Parker Adventist Hospital fills 63.6 percent of its 64 beds and lost $3.75 million last year. That's after losing $10.35 million in 2004.

Centura didn't return a call for comment. HealthOne credited efficiency and strong management for its hospitals' performance.

"HealthOne clearly is receiving comparable reimbursements from the health plans, and at the same time our quality rankings and ratings from government continue to rate very high," spokeswoman Linda Kanamine said. "And our satisfaction is also very high. That's a sign of a very well-run organization."

Hospitals that serve elderly and poor patients in droves earn less money. Some 44.1 percent of Longmont United's patients are seniors on Medicare, and the facility had a 5.1 percent margin.

"The one thing that really stands out is that high Medicare utilization obviously has a significant impact on net income," Matt Hartzler, the hospital's director of strategic planning and marketing, said.

The hospitals that treated the most poor were Denver Health, Children's Hospital, the University of Colorado Hospital and Avista Adventist.

The busiest hospitals were Exempla's Lutheran Medical Center, followed by Longmont United Hospital, Boulder Community Hospital, Sky Ridge Medical Center, Children's Hospital and Swedish Medical Center.

All of those hospitals had occupancy rates above 70 percent, while the metro average was 67.5 percent.

The report is based on facility cost reports submitted to Medicare.

HealthOne strongly objected to the numbers, saying they didn't accurately reflect the company's bottom line because certain expenses were excluded. The numbers also don't include taxes as high as 50 percent.

"This is not an accurate depiction," Kanamine said.

But accountants from Medicare and the Healthcare Financial Management Association, a health care trade group, disagreed, saying numbers reported in facility cost reports mirror traditional hospital income statements.

"Worksheet G and G-3 should be a reflection of (hospitals') financial statements that they would give out to anyone who asked for them," said Margot Warren, accountant for the Centers for Medicare and Medicaid Services. "That's what they are intended to be."

brandr@RockyMountainNews.com or 303-892-5269