Report: Calif. Hospitals’ Finances Rebounding, Challenges Remain
The rate of California hospitals operating profitably has rebounded since the economic recession, but some still are struggling to maintain positive profit margins, according to a report by the Office of Statewide Health Planning and Development, Payers & Providers reports.
OSHPD collects and analyzes data on more than 400 acute care facilities in the state.
The report found that among hospitals in California:
- Aggregate operating income reached $1.8 billion in 2010, up from less than $400 million in 2006; and
- Overall net income was more than $4.1 billion in 2010, up from $2.1 billion in 2008 (Shinkman, Payers & Providers, 7/17).
Specifically, the report showed that the percentage of hospitals operating profitably has rebounded, increasing from 54.8% in 2006 to 66.1% in 2010. In particular, investor hospitals and city and county hospitals experienced big increases in positive operating margins, the report notes (OSHPD report, July 2014).
However, the report found that labor costs increased by 29.5% from 2006 to 2010, with the average cost for a full-time employee rising from $77,021 to $95,222 in that time. The change likely was due to hospitals cutting lower-tier employees, such as maintenance workers and technicians, in an effort to reduce expenses.
Meanwhile, operating margins have remained "anemic" at 3.4% in 2011 and 2% in 2012, according to Payers & Providers.
Jan Emerson-Shea, vice president of external communications for the California Hospital Association, said that the Medi-Cal provider fee has been a driver in stabilizing hospital finances. Medi-Cal is California's Medicaid program. Specifically, the fee since 2009 has garnered about $2 billion annually for hospitals, according to Payers & Providers.
Emerson-Shea said, "Without the fee, hospitals would be losing more than $5 billion annually in Medi-Cal payment shortfalls," adding, "Even with the fee, hospitals are losing $2.5 billion a year in Medi-Cal payments."
Despite increases in income, Emerson-Shea said that California hospitals may be facing tough times ahead because "commercial rates have tightened and hospital margins have leveled off" (Payers & Providers, 7/17).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.