Colorado hospitals bagged a statewide profit margin of 6.6% in 1994, putting them ahead of many of their peers elsewhere.
But their performance dipped slightly from 1993 levels, when hospitals recorded a profit margin of 6.8% of total revenues, according to a new report from the Colorado Hospital Association. Their profit margin from patient revenues, however, jumped to 5.5% in 1994 from 4.9% in 1993.
Profit margins for 1994 for hospitals nationwide are not yet available from the American Hospital Association, but AHA figures released in April show total profits dipping toHealthcare costs
5.5% during the first three quarters of 1994 from 5.8% in the prior-year period (April 17, p. 3)
This is the sixth year the CHA has released detailed financial and utilization data for 66 general acute-care hospitals. Its summary data excludes federal and military hospitals, as well as speciality hospitals.
Colorado hospitals' strong financial performance is due in part to controlling expenses.
They racheted down their average length of stay to 4.7 days in 1994 from 4.9 days in 1993. Expenses per inpatient stay, meanwhile, rose only 2% in 1994, about half of what's expected to show up in national figures. Total expenses grew 3.1% to $3.2 billion-the lowest increase recorded in 11 years but still slightly ahead of revenue growth (See chart).
Additionally, Colorado hospitals granted deeper discounts to managed-care plans and other payers. Negotiated discounts amounted to 13.1% of total charges in 1994, or $678 million, compared with 11.1% of charges in 1993. As a result, aggregate total profits at Colorado hospitals grew minutely, up 0.3% to $226 million.
Expense control isn't the only reason profits of Colorado hospitals exceed national averages. In 1993-the last year for which comparable data is available-Colorado hospitals charged $91 more per admission than all U.S. hospitals, for an average bill of $10,357. They also doled out less in wages, bad debt and charity care. For example, they spent about $555 per admission in 1993 on both charity and bad debt, while the national average was $608.
Surprisingly, a few rural hospitals re-corded some of the highest profit margins in the state. For example, 16-bed Keefe Memorial Hospital, located on the eastern border of Colorado in Cheyenne Wells, chalked up a profit of $832,500, or 24.7% of total revenues in 1994.
The 39 rural hospitals included in the data, however, reported an average profit margin of 6.3%.
The highest profit margin in the Denver metropolitan area was reported by 138-bed Aurora (Colo.) Presbyterian Hospital. The Health-One facility earned $8.6 million for an 11.9% profit margin. Rose Medical Center also came in high on the list with a profit of $14.5 million for an 11.1% margin. The 255-bed hospital was bought by Columbia/HCA Healthcare Corp. earlier this year. Both hospitals will be part of the Columbia system if a joint venture with HealthOne is completed (May 15, p. 6).
Denver Health and Hospitals, a tax-supported system that provides indigent care for the city and county, recorded a 10.5% profit margin, or $22.4 million in earnings. Since 1991, its profit margins have topped 10% each year.
C.L. Harmer, a spokeswoman, for the 333-bed system, said it is building reserves for capital investment. "There's no question we're in the best financial condition we've been in anyone's memory," she said.