While some state hospital associations have taken control of the release of hospital financial data, others continue to rely on state agencies to collect and disseminate that information.
But that's often placed the associations and their members in the awkward position of defending higher-than-expected profits.
In Virginia, the state agency is the Virginia Health Services Cost Review Council, which issues a number of annual reports, including one on hospital and nursing home profitability and another on commercial diversification deals by hospitals and nursing homes.
In July 1992, the council released its annual profitability report, announcing a 35% increase in profits earned by acute-care and rehabilitation hospitals in the state (July 20, 1992, p. 8).
In its press release, the council cited the results as an example of the "rising healthcare costs in the Commonwealth," emphasizing that "taxpayers paid the largest share of Virginia's total hospital bill through the federal Medicare program and the state Medicaid program."
A day before the council released its report, the Virginia Hospital Association pre-empted the council with its spin on the findings, highlighting the fact that Virginia ranked 30th in the nation in average net patient charges per adjusted admission.
After three consecutive years of huge profit increases, earnings by the state's 128 acute-care hospitals dropped 4.6% last year to $337.2 million on total revenues of about $8.5 billion (See chart, this page).
Shining example.One hospital that showed well in the report was Fairfax Hospital in Falls Church, Va. Last year, the hospital reported a "surplus" of $28.5 million on net operating revenues of about $359.8 million. That's down slightly from a $35.4 million profit on net operating revenues of about $337.9 million in 1992.
That represents a drop in total profit margin to 7.9% last year from 10.5% in 1992. Still, the 1993 figure was double the statewide hospital profit margin of slightly less than 4% last year.
"Hospitals are under scrutiny no matter if they have a good year or a bad year," said Ron Ewald, Fairfax's chief financial officer. "I'd rather be looked at for having a good year."
On the plus side, the community appreciates that the hospital isn't a drain on its resources, hitting policymakers up for tax increases to remain viable, Mr. Ewald said. Last year, for example, an editorial in the local newspaper praised Fairfax for maintaining fiscal soundness, he said.
On the down side, it's more difficult to manage costs in an organization that's doing well, Mr. Ewald said.
"People keep saying, `We have the money, let's spend it,' or `Why can't we share in the wealth?"' he said.
Old news.Timeliness of information is another problem hospital associations and their members face when ceding the release of financial data to someone else.
In Pennsylvania, the Pennsylvania Health Care Cost Containment Council released a report in June that found that profits at the state's 214 acute-care hospitals rose more than 25% to $472.5 million on net operating revenues of about $12.9 billion. That followed a 49% jump in aggregate profits the previous year (See chart, this page).
The latest data, though, are from 1991.
Joe Martin, a council spokesman, acknowledged that the data are old, but he said the council intends to issue another report with 1992 and 1993 data to get the council reports up to speed. No specific timetable exists for releasing the next report, however.
"The council has assured us that it will clean up its reports within six months," said John Russell, president of the Hospital Association of Pennsylvania. "(The) 1991 data are unacceptable and useless for public policy."
HAP doesn't produce its own data because, according to Mr. Russell, the information would be less credible than if it came from the state. Still, until the council begins releasing more timely data, HAP offers policymakers updated hospital financial statistics when needed based on quarterly reports from its membership, Mr. Russell said.
Although some hospitals are uneasy about the public disclosure of financial data, particularly given the penchant of local tax assessors in the state to go after not-for-profit hospitals with excess revenues, HAP is a strong supporter of the release of information.
The strategy fits in with HAP's goal of converting hospitals into organizations with missions of "improving the health of people, not the financial health of the institution," Mr. Russell said. Full disclosure places the burden on hospitals to demonstrate their commitment to the community, he said.
Conversely, Mr. Russell said HAP is trying to educate hospital trustees about abandoning financial status as the most important measure of a hospital executive's performance.
Although the council's report was outdated, it did reveal that even little hospitals can be profitable. It said 99-bed Titusville (Pa.) Area Hospital in northwest Pennsylvania posted a $1.9 million profit on net operating revenues of about $15.9 million. That's a nearly 12% total profit margin. The aggregate profit margin for Pennsylvania acute-care hospitals that year was 3.7%.
In the fiscal year that ended June 30, 1994, unaudited hospital figures indicate the hospital will post a record $2 million profit, said Anthony Nasralla, the hospital's CEO.
"Profit is not bad. It's what you do with it," he said. "The community should benefit from our success. You can't just sock it away. In a small town, people know what you're doing."
Community benefits should include increasing and improving services, holding down costs and enhancing access to services, Mr. Nasralla said. Those are all goals Titusville Area Hospital pursues, he said.
Although sometimes it isn't easy.
With success comes pressure, Mr. Nasralla said. That includes pressure from consumers, who wonder if they're getting gouged; from employees, who want bigger raises; from physicians, who want more and better medical technology and equipment; and from political subdivisions, which want contributions for municipal services.
Pressure even comes from other hospitals that want Titusville to pursue business ventures in which it makes most of the capital investment itself, Mr. Nasralla said.