In Texas, where hospitals have cried the loudest about Medicare and Medicaid payment shortfalls and hospital closures, hospitals also have posted huge profits, according to data obtained last week from the Texas Health Department.
The data, requested by MODERN HEALTHCARE, show that Texas acute-care hospitals earned nearly $4 billion in profits between 1988 and 1992, the latest year for which figures were available.
In fact, total aggregate hospital profits doubled between 1991 and 1992, to more than $1.5 billion from $761.8 million. The jump in profits follows a 19% increase in aggregate profits in 1991 and a 42% increase in 1990.
The 1992 figure represents an 8.4% total profit margin, compared with a 4.6% total profit margin for all acute-care hospitals nationally, according to the American Hospital Association.
The aggregate profits in Texas also represent nearly 13% of the entire hospital industry's aggregate profit of $11.9 billion in 1992, AHA data show.
James Houdek, senior vice president of healthcare finance at the Texas Hospital Association, attributed the strong showing by the THA's hospital members to aggressive cost-cutting efforts.
"Our hospitals have been very active in radically reducing their costs," he said. "What we're seeing is the efficient operation of hospitals to meet new needs."
He said hospitals are spending the money to restructure themselves to deal with market changes, such as the increased demand for outpatient services.
The health department's data are based on an annual survey of hospitals conducted by the THA on behalf of the state and the AHA. The latest figures are based on responses from the approximately 460 acute-care hospitals in operation in the state in 1992.
What makes the profitability figures from Texas ironic is that the THA for years has complained about inadequate Medicare and Medicaid reimbursement and its effect on hospital closures. Texas typically leads the country in annual hospital closings.
In a January 1989 press release, the THA noted, "For the third consecutive year, Texas led the nation in the number of hospital closures, with 19 hospitals closing in 1988." THA President Terry Townsend said a key factor in the closings was "inadequate payment for services rendered...under the Medicare and Medicaid programs."
In 1988, Texas hospitals earned an aggregate profit of $403.4 million on total revenues of $10.1 billion.
Twelve Texas hospitals closed in 1991, and those that stayed in operation earned an aggregate profit of $761.8 million on total revenues of $15.5 billion.
In its January 1992 statement on hospital closures, the THA acknowledged that Medicare and Medicaid reimbursement had improved, although it still said funding was inadequate.
The THA said 60 Texas hospitals enjoyed higher Medicare payment rates after being geographically reclassified into higher-paying urban markets.
Also, according to the state health department, Texas hospitals received about $315.3 million in Medicaid disproportionate-share payments for treating large numbers of poor people in 1991, up from $35.1 million in 1990.