Quarterly financial reports are a necessary evil for publicly traded companies, but that fiscal taskmaster is alien to most on the not-for-profit side of the hospital industry.
Even so, the largest hospital system in Fort Worth, Texas, not-for-profit Harris Methodist, made an unusual move last month by issuing an earnings release. The release also provided an interesting financial glimpse into one of the few hospital systems with a strong HMO because it showed how the HMO's financial fortunes are improving while the hospitals' are declining.
Harris Methodist issued the release to report on earnings of its newly for-profit HMO, Harris Methodist Health Plan. However, included in the news release were earnings for the not-for-profit hospitals as well. In addition to owning the area's largest provider-based HMO, Harris Methodist's purview includes six acute-care hospitals, two specialty hospitals and three fitness centers.
When asked about the news release, spokesman Brian Levinson explained it was "kind of a work in progress." Levinson is new to Harris Methodist, holding the new position of vice president of "stakeholder communications."
Harris Methodist's HMO, previously not-for-profit, converted to for-profit status earlier this year.
The earnings release was designed to convey a "positive message" about the system and the HMO to the community, Levinson said. The 10-year-old HMO, which has 230,000 enrollees, lost money in late 1994 and early 1995 but now is back in the black.
In fact, the figures show an interesting financial contrast between the HMO and the system's hospitals. Profits, which Harris Methodist calls "net excess," dropped at the hospitals by nearly half in the system's second quarter ended March 31: $6 million vs. $11.7 million in the year-ago quarter. Revenues slipped less than 1% to $115.8 million.
Levinson attributed the decline at the hospitals to increasing managed-care penetration and lower admission rates.
However, the story is different on the HMO side. The HMO reported profits of $2.6 million compared with a loss of $4.5 million in the year-ago period. Revenues increased 5% to $97.5 million.
In 1994 and 1995, the HMO staged a costly marketing push into neighboring Dallas County. That and other costs associated with growing the HMO contributed to a $20 million loss in 1994 (Aug. 21, 1995, p. 40).
Last year, Harris reduced costs by slashing fees to specialists.