The return-on-assets figures for Nevada's major hospitals were not as rosy-or gloomy, depending on your viewpoint-as the state's hospital association may have first thought.
The Nevada Association of Hospitals and Health Systems last month released return-on-assets figures that showed Nevada hospitals were far below the national average. This was actually good news for the hospitals because they're mandated by the state to limit their billed charges to the annual percentage rise in the medical-care component of the U.S. Consumer Price Index (Sept. 30, p. 17).
Return on assets is calculated by dividing net income by total assets. A lower-than-average figure would suggest the hospitals were doing a better job of keeping their charges down and controlling their costs than other hospitals across the country.
The association had reported that the average return on assets for Nevada hospitals was 2.1% for 1996 and 1.1% for 1994. The latest available national data show a 1994 average of 4.8% for large urban hospitals.
But on Sept. 30, the day the figures appeared in MODERN HEALTHCARE, the association retracted them. It said the return-on-assets figures for the six largest hospitals in Nevada "are in error." Jeanette Belz, president of the association, said correct figures would be available in three weeks at the earliest. She said the discrepancy was attributable to a computer "operator error" and that the association is looking into getting new software programs.
Chris Thompson, chief of the state's healthcare financial analysis unit, earlier had indicated skepticism of the association's figures. He said the mistake represents "carelessness on their part." He said he views the error as an "innocent mistake" that led the association to draw "inappropriate conclusions."
Thompson said the actual return-on-assets figures for Nevada's "Big Six" hospitals is closer to 8.1%, far above the national average. Those six hospitals are St. Mary's Healthcare Network and Washoe Medical Center in Reno, and Desert Springs Hospital, Columbia Sunrise Hospital and Medical Center, Valley Hospital Medical Center and University Medical Center, all in Las Vegas.
Thompson said he thought the association made the mistake of adding together the assets from each quarterly report rather than using a single year-end figure. The result, he said, was to overstate the amount of each hospital's assets by a factor of four and to underestimate the return on assets by 75%.
However, Thompson said the high return does not particularly bother him. "I'm much less concerned with the profitability of the hospitals than what the patients in Nevada are paying," he said.
Thompson said the state's report, released last week, shows none of the hospitals exceeded the mandated 4.8% cap on the rise in their hospital charges for the fiscal year ended June 30.
At the same time, he said, the hospitals have not lost their profitability. He said the five largest hospitals posted a combined profit of about $64.4 million in both fiscal 1995 and 1996.