Financial Hurdles Linger for California Hospitals, Report Finds
California hospitals on average in 2005 had a lower profit margin than hospitals nationwide, but fewer California hospitals operated with deficits in 2005 than did in 1999, according to a report released by the California HealthCare Foundation, the San Diego Union-Tribune reports.
CHCF commissioned PricewaterhouseCoopers to conduct the report, based on data from 355 general acute care hospitals in the state.
The report found that:
- The average profit margin for California hospitals was 2.03% in 2005, compared with the national average of 2.89% (Darcé, San Diego Union-Tribune, 6/21). The median operating margin for California hospitals in 2005 was 1.3%;
- 28.2% of California hospitals reported financial losses in 2005, down from more than 50% in 1999;
- There were 1.9 hospital beds per 1,000 California residents in 2005, a drop from 2.2 beds per 1,000 state residents in 2001;
- 26 acute care hospitals -- 7.3% of such facilities in California -- closed between 2001 and 2005, about the same percentage of closures between 1995 and 1999;
- California lost 13.6% of hospital beds between 2001 and 2005, compared with 6.9% nationwide over the same time period; and
- Private health insurance is the only payer that reimburses California hospitals at a rate that exceeds the cost of treatment.
In addition, the report noted that the gap between hospitals doing well financially and those faring poorly widened since 2001, when CHCF released another report on the issue (Colliver, San Francisco Chronicle, 6/21). According to the report, not-for-profit hospitals in urban areas typically were strong financial performers, while small rural facilities operated by public hospital districts or local governments tended to struggle financially (San Diego Union-Tribune, 6/21).
Geographically, hospitals in the Sacramento area reported the highest operating margins for 2005 at 10%. By comparison, facilities in Los Angeles County on average reported negative operating margins.
David O'Neill, a senior program officer at CHCF, said, "Overall, there has been improvement," adding, "However, that improvement is modest and there is a very, very wide margin between the hospitals that are performing well and those that are not."
Anne McLeod, vice president of reimbursement and economic analysis for the California Hospital Association, said that hospitals are in a better position to negotiate rates with insurers than they were in 1999 but that increases to reimbursements would not offset higher medical costs (San Francisco Chronicle, 6/21).
The California HealthCare Foundation is the publisher of California Healthline.