A state agency released data Wednesday on the financial health of hospitals in California, showing a dramatic rise in labor costs across the industry and an increase in uncompensated care at public hospitals.
From 2006 to 2010, county and city hospitals provided far more uncompensated care than did facilities run by investor-owned companies or large nonprofit corporations. The rate rose from 23.5 percent to 25.5 percent of gross revenue for public hospitals, but it was only 4 percent for investor-owned or nonprofit hospitals.
The report from the Office of Statewide Health Planning and Development charted trends for the state's 400-plus hospitals during the five-year period:
The costs for salaries, wages and employee benefits increased faster than any other expense for hospitals, growing from $28.1 billion in 2006 to $36.4 billion in 2010, almost a 30 percent increase.
The percentage of hospitals that were profitable increased from 54.8 percent in 2006 to 66 percent in 2010.
Private managed-care health plans were the best payment source for hospitals. The payments averaged $5,054 per day for hospital patients, compared to payments averaging $2,426 per day from Medicare. Medi-Cal payments, which averaged $1,491 per day in 2006, increased to $1,943 daily in 2010, because of a statewide fee program that served to garner more federal funding for California.
OSHPD Director Robert David said it's important to take a reading on the financial health of hospitals because federal health care reforms will put more service demands on them in 2014.
Some hospital officials in Stanislaus County have expressed concern about a drop in patient census, which is reflected in the statewide data. The average daily census at hospitals fell from 53,186 in 2008 to 50,540 in 2010, a 5 percent decrease.
Fewer patients, less money
A decline in patients coming in for elective surgeries is said to have hurt the bottom lines at Memorial Medical Center of Modesto and Emanuel Medical Center of Turlock. Memorial recently announced it would lay off 114 employees and reduce hours for other workers. Emanuel officials are negotiating the possible sale of the church-owned hospital to Tenet Healthcare Corp. because of economic factors such as uninsured patients.
Jan Emerson-Shea of the California Hospital Association wasn't sure the report's net income figures for 2010 were a sign of improved health for hospitals. She suspected the improvement was tied to Assembly Bill 1383, which used fees collected from hospitals as a state match for additional federal dollars for serving Medi-Cal patients.
The program has mostly helped facilities in disadvantaged areas and is only a temporary fix, she said. She predicted an ongoing squeeze on health care providers in this decade, noting that federal health reform will make deep cuts in Medicare payments to hospitals.
Mike King, chief operating officer for Doctors Medical Center in Modesto, said uncompensated care is a problem for hospitals in Stanislaus County, where there is no county hospital.
Doctors, one of the 49 hospitals in the for-profit Tenet Healthcare chain, has a contract with the county to care for patients in the indigent health program. "We see a larger percentage (of uncompensated care) than other hospitals in the community, but it is a general challenge in our community and it's related to economic conditions and unemployment," King said.
He said the patient census at Doctors in 2010 reflected a decline in births, but the patient numbers have increased since. As for labor costs, King said, wages went up rapidly during the five-year period examined by the OSHPD because of shortages of nurses and other health workers with special skills.
King also said the net income figures in the report might not include all of the expenses for hospitals owned by large health systems. With larger health systems, some costs may not be accounted for at the hospital level or included in the financial data reported to the agency, he said.