Healthcare Business News

Higher patient volume at Shands comes with higher costs

By Beth Kutscher
Posted: August 15, 2014 - 1:30 pm ET

Shands Teaching Hospital and Clinics, part of University of Florida Health, treated more patients and booked higher revenue in its fiscal 2014, but rising expenses cut into its operating surplus.

For the year ended June 30, Gainesville-based Shands earned a net surplus of $110.6 million (PDF) on revenue of about $1.2 billion. In fiscal 2013, its net surplus was $125.5 million on $1.16 billion of revenue.

Non-operating revenue, mainly from gains on its investments, increased nearly three-fold and boosted the bottom line. However, its operating margin fell to 7% for the year, down from 10.2% in fiscal 2013.

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In its earnings report, Shands attributed the 3% increase in revenue to 8.2% growth in admissions and 5% in outpatient visits. It also saw patients with higher acuity and received what it described as modest rate increases from insurers. Another $2.4 million came from Medicare and Medicaid revenue for meeting meaningful-use standards with its electronic health-record system.

However, those factors were negated by a $7.6 million increase in bad debt and 20.1% more observation cases, which pay less than inpatient visits.

But the true pinch came from an 8.6% increase in its salary and benefit expenses as well as a 5.2% increase in supply and service costs. The higher patient volume meant higher staffing needs, as well the need for more drugs and other supplies.

Many of the trends had persisted throughout the year.

Shands also made a $2.1 million payment in June as part of its settlement to resolve a whistle-blower case alleging that it overbilled Medicare and Medicaid between 2003 and 2008. The whistle-blower in the case, which was filed in U.S. District Court in Jacksonville, Fla., was an outside consultant whose audit into Shands billing practices found inconsistencies in whether short stays were billed as inpatient or outpatient.

The system had already paid $19.4 million toward the settlement in July 2013.

Follow Beth Kutscher on Twitter: @MHbkutscher

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