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Massachusetts Acute Hospital Financial Performance: Fiscal Year 2009
Division of Health Care Finance and Policy
May 2010
Massachusetts Division of Health Care Finance and Policy - 2
About this Report
This report is prepared in response to M.G.L. c. 118G, section 6A, which requires the Division of Heath Care Finance and Policy (DHCFP) to assess and report on Massachusetts acute hospital financial performance. It provides a statewide analysis of acute hospital audited financial data over an eight year period (fiscal year 2002 through fiscal year 2009). The report examines hospital profitability, liquidity, and capital structure ratios in order to monitor the financial status of acute hospitals. Presented are industry analyses by quartiles and medians and comparisons of financial performance trends of different hospital cohorts: teaching, community, and disproportionate share hospitals (DSHs). The report is accompanied by individual hospital fact sheets detailing financial trends, which are available on the DHCFP website: www.mass.gov/dhcfp.
Summary of Findings for Fiscal Year 2009
• Overall, Massachusetts acute hospital financial performance improved in fiscal year 2009 (FY09) when compared to FY08.
• Most hospitals (80%) reported earning a surplus in FY09 compared to 65% in FY08.
• Reflecting ongoing uncertainties in the economic climate, one third of hospitals experienced non-operating losses in FY09, about the same is in FY08. Non-operating gains or losses include items which are not related to operations, such as investment earnings.
• Liquidity slightly improved reflecting the overall improvement in financial performance. Acute hospitals were able to collect revenue and pay bills in slightly fewer days in FY09 than in FY08.
• Hospitals ability to meet debt obligations slightly improved due to increases in total income across the industry in FY09.
• Teaching versus Community Hospital Performance
– Both teaching and community hospitals reported improved financial performance with increases in median total margins in FY09 compared with FY08.
• Disproportionate Share Hospital Performance
– Median total profits for all hospitals increased in FY09. However, disproportionate share hospitals’ median total margin is lower than all other hospitals in FY09. Disproportionate share hospitals had a more difficult time meeting current liabilities and took about six days longer to pay their bills than all other hospitals in FY09.
Massachusetts Division of Health Care Finance and Policy - 3
Acute Hospital Total Margin
-2.1%-1.8%
1.6% 1.7%
-1.3%
0.4%0.3%
1.2%1.6%
3.1% 3.1% 3.0%
0.9%
2.2%2.6%
3.3%3.7%
5.8% 5.9% 5.8%
3.8%
4.8%
0.2%0.8%
-4%
-2%
0%
2%
4%
6%
8%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Many hospitals experienced increases in total income. The financially weakest hospitals showed the steepest improvement in FY09 compared with FY08.
In 2009, thirteen out of sixty-four hospitals (20%) reported a total loss compared with twenty-three hospitals (35%) during FY08.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Total margin is the ratio of total income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 4
Acute Hospital Operating Margin
-2.7%
-1.7%
0.1% 0.1%
-1.1%
0.1%0.0% 0.2%
0.8%
1.7% 1.9% 1.7%
0.7%
1.9%2.1%1.8%
2.9%
3.5% 3.4% 3.4%2.9%
4.7%
-0.2%
-2.4%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Overall, operating margins have strengthened, with the median operating margin increasing to 1.9% in FY09 from 0.7% in FY08.
Fourteen hospitals (22%) reported a loss from operations during FY09.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: INGENIXConsulting based on the hospital financial database used for the 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Operating margin is the ratio of operating income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 5
Acute Hospital Total and Operating Margins by Geographic Region
Hospitals in the Western region of Massachusetts have the lowest total and operating margins in the state.
Hospitals in the central and southeast regions of the state have the highest total margins (both at 2.9%) and the southeast region also has the highest operating margin (3.0%).
Note: Regions are categorized using the Department of Public Health’s Emergency Medical Services (EMS) Zones.
■ Negative Total Margin ■ Positive Total Margin
Massachusetts Division of Health Care Finance and Policy - 6
Acute Hospital Non-Operating Margin
0.2%
0.6% 0.6%
0.3%
0.7%0.9%
1.2%
1.6%
0.2%
1.2%
1.6%
2.1%
2.5%
3.2%
0.9%
-0.2%-0.2%
0.5%
-0.2%
0.2% 0.4%
1.3%
1.1%
2.5%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Similar to 2008, many hospitals continued to experience low non-operating margins in 2009.
Twenty two hospitals (34%) reported a non-operating loss during FY09.
Benchmark: Northeast US median FY08 = 0.07%
Benchmark Source: INGENIXConsulting based on the hospital financial database used for the 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Non-operating margin is the ratio of non-operating income to total revenue. Non-operating income includes items not related to operations, such as investment income, charitable contributions, gains (losses) from the sale of assets and other unrelated business activities (such as fundraising expenses, and insurance claim or lawsuit settlements). A parent or foundation that holds assets that the hospital controls may incur a change in beneficial interest in net assets that would be included in the hospital’s non-operating margin.
Massachusetts Division of Health Care Finance and Policy - 7
Acute Hospital Current Ratio
1.08 1.131.03
1.14 1.16 1.12 1.15 1.19
1.621.51
1.601.53
1.421.55
1.45 1.50
2.021.94
2.11 2.11
1.942.07
1.85
1.99
0.0
0.5
1.0
1.5
2.0
2.5
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
A high current ratio indicates the ability to meet current liabilities and a lower probability of financial insolvency.
Massachusetts acute hospitals’ short term liquidity slightly improved with a median current ratio of 1.5 in FY09, up from 1.45 in FY08.
Benchmark: Northeast US median FY08 = 1.55
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Current ratio is the ratio of current assets to current liabilities.
Massachusetts Division of Health Care Finance and Policy - 8
Acute Hospital Days in Accounts Receivable
45 44
3835 36 36 37
35
51
40
61
56
52
48 47 46 4745
4242
52
45
42 42
0
10
20
30
40
50
60
70
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Days in accounts receivable measures the average number of days that patient receivables are outstanding, or the average collection period.
The median number of days taken to collect revenue shortened by two days in FY09 compared with FY08.
Benchmark: Northeast US median FY08 = 46.2
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Days in accounts receivable is the ratio of net patient accounts receivable to net patient service revenue/(quarters of data x 91.25).
Massachusetts Division of Health Care Finance and Policy - 9
Acute Hospital Average Payment Period
46 4643 43 44 44
4844
54 5451 51 51 52
56 57
62
68
63 63 6460
6866
0
10
20
30
40
50
60
70
80
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Average payment period measures the time it takes a hospital to pay current liabilities. High values indicate potential liquidity problems.
In FY09, the average payment period ranged from a low of 28 days to a high of 142 days, with the median being 57 days.
Benchmark: Northeast US median FY08 = 60.3
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Average payment period is the ratio of current liabilities less estimated third-party settlements to total expenses less depreciation and amortization/quarters of data x 91.25.
Massachusetts Division of Health Care Finance and Policy - 10
Acute Hospital Debt Service Coverage
1.2 1.3
1.71.9 2.0
1.2
1.72.0
2.5 2.6
3.23.4
2.5
3
3.43.2
3.7
4.6
5.0
5.6
4.5 4.5
2.6
3.7
0
1
2
3
4
5
6
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Debt service coverage measures the ability to meet principal and interest payments in the coming year.
Better coverage, as evidenced by a higher value, results in a better bond rating.
This ratio improved in FY09 due to more positive financial performance across the industry.
Benchmark: Northeast US median FY08 = 2.7
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Debt service coverage is the ratio of total income plus interest expense plus depreciation and amortization to interest expense plus current portion of long-term debt.
Massachusetts Division of Health Care Finance and Policy - 11
Acute Hospital Cash Flow to Total Debt
6.3%7.6%
9.3%
12.1%
7.7%
10.5%10.5%
13.9%
18.2%
14.9%
20.4%
16.5%
20.3%
27.5%
19.3%
24.6%
13.5%12.3%
20.4%
11.4%
17.6%
28.0%
18.1%
25.0%
0%
5%
10%
15%
20%
25%
30%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Cash flow to total debt indicates the potential for future financial problems or insolvency.
This ratio improved in FY09 due to improving financial performance across the industry.
Benchmark: Northeast US median FY08 = 12.5%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Cash flow to total debt is the ratio of total income plus depreciation and amortization to total current liabilities plus total long-term debt.
Massachusetts Division of Health Care Finance and Policy - 12
Acute Hospital Equity Financing
33.3%
26.2% 25.5% 26.9% 27.1%
32.9%
28.2%
18.7%
41.6% 41.9%43.7% 42.7% 43.1%
48.8%
43.2%
37.9%
61.1%58.7%
60.9% 61.0% 61.0%63.9%
58.0%55.7%
0%
10%
20%
30%
40%
50%
60%
70%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
25th percentile Median 75th percentile
Equity financing measures the proportion of total assets financed with equity.
In FY09 acute hospitals’ equity financing declined, reflecting some hospitals’ declining position in net assets.
A number of hospitals experienced an actuarial reconciliation of pension related assets and obligations in FY09 which had a negative impact on net assets.Benchmark: Northeast US median FY08 = 47.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Equity financing is the ratio of total net assets to total assets.
Massachusetts Division of Health Care Finance and Policy - 13
Teaching and Community Hospitals• In this analysis, the Division of Health Care Finance and Policy defined teaching hospitals according to the Medicare Payment Advisory Commission’s
(MedPAC) definition of a major teaching hospital: at least 25 full time equivalent medical school residents per one hundred inpatient beds.
• Based on this definition and using a 2006 base year, the 15 hospitals listed below were assigned to the teaching cohort for all the years of this analysis.
Teaching Hospitals
Baystate Medical CenterBeth Israel Deaconess Medical CenterBoston Medical CenterBrigham and Women's HospitalCambridge Health AllianceCaritas St. Elizabeth's Medical CenterChildren's Hospital BostonDana-Farber Cancer InstituteLahey ClinicMassachusetts Eye and Ear InfirmaryMassachusetts General HospitalMount Auburn HospitalSaint Vincent HospitalTufts Medical CenterUMass Memorial Medical Center
Community Hospitals
Anna Jaques Hospital Marlborough HospitalAthol Memorial Hospital Martha's Vineyard HospitalBaystate Franklin Medical Center Mercy Medical CenterBaystate Mary Lane Hospital Merrimack Valley HospitalBerkshire Medical Center MetroWest Medical CenterBeth Israel Deaconess Hospital-Needham Milford Regional Medical CenterCape Cod Hospital Milton HospitalCaritas Carney Hospital Morton Hospital and Medical CenterCaritas Good Samaritan Medical Center Nantucket Cottage HospitalCaritas Holy Family Hospital Nashoba Valley Medical CenterCaritas Norwood Hospital New England Baptist HospitalClinton Hospital Newton-Wellesley HospitalCooley Dickinson Hospital Noble HospitalEmerson Hospital North Adams Regional HospitalFairview Hospital North Shore Medical CenterFalmouth Hospital Northeast HospitalFaulkner Hospital Quincy Medical CenterHallmark Health Saint Anne's HospitalHarrington Memorial Hospital Saints Medical CenterHealth Alliance Hospital Signature Healthcare Brockton HospitalHeywood Hospital South Shore HospitalHolyoke Medical Center Southcoast Hospitals GroupHubbard Regional Hospital Sturdy Memorial HospitalJordan Hospital Winchester HospitalLawrence General Hospital Wing Memorial Hospital and Medical CentersLowell General Hospital
Massachusetts Division of Health Care Finance and Policy - 14
Acute Hospital Median Total MarginTeaching vs. Community Hospitals
6.0%
7.2%
5.1%
0.9%1.1%
2.8%
1.7%
1.6%
3.1% 3.0%
2.2%1.8%
3.9%
1.3%
3.0%
4.9%
2.7%2.5%
0.8%0.3%
0.9%1.2%
3.1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Both teaching and community hospitals experienced increases in median total margin in FY09 compared with FY08.
Teaching hospitals had higher profitability than community hospitals in each of the past eight years.
The median total margin was 5.1% for teaching hospitals compared with 1.7% for community hospitals in FY09.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Total margin is the ratio of total income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 15
Acute Hospital Total MarginTeaching vs. Community Hospitals, FY09
The overall financial performance of acute hospitals varies widely by teaching status.
Three teaching hospitals (20%) reported losses in FY09 compared with five (33%) in FY08. Ten community hospitals (20%) reported losses in FY09 compared with eighteen (36%) in FY08.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Total margin is the ratio of total income to total revenue.
8.4%7.3%
-15.1%
-6.96%
2.2%OverallMedian
Teaching HospitalsMedian: 5.1%
Community HospitalsMedian: 1.7%
Massachusetts Division of Health Care Finance and Policy - 16
Acute Hospital Median Operating MarginTeaching vs. Community Hospitals
3.2%
4.1%
5.0%
1.8%
1.4%
0.4%
1.5%
0.2%
0.8%
1.7% 1.7%1.9%
1.0%
2.0%
3.1%
1.2%
2.8%
0.1%
1.1%
0.0%0.0%
0.7%
1.9%
0%
1%
2%
3%
4%
5%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
The median operating margin improved for community hospitals and teaching hospitals in FY09 compared with FY08.
The median operating margin for teaching hospitals was significantly higher in FY09 than it was for community hospitals in FY08 (5% vs. 1.5%).
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Operating margin is the ratio of operating income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 17
Acute Hospital Operating Margin Teaching vs. Community Hospitals, FY09
Operating margin performance varied widely by teaching status in FY09.
Five teaching hospitals (33%) and nine community hospitals (18%) reported operating losses in FY09.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Operating margin is the ratio of operating income to total revenue.
8.4% 8.4%
-18.5%
-8.1%
1.9%OverallMedian
Teaching HospitalsMedian: 5.0%
Community HospitalsMedian: 1.5%
Massachusetts Division of Health Care Finance and Policy - 18
Acute Hospital Median Non-Operating Margin Teaching vs. Community Hospitals
0.6%
4.6%
1.0%
0.6%0.8%
1.1%1.4%
0.2%
0.9%
1.3%1.6%
0.2%
-0.1%
1.7%
1.0%
2.5%
1.9%
0.5%
1.1%
0.2%0.4%0.3%
1.2%
0.7%
-1%
0%
1%
2%
3%
4%
5%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Teaching hospitals experienced an improvement in their median non-operating margin in FY09 compared with FY08. Community hospitals’ median non-operating margin, however, continued to decline.
The median non-operating margin was slightly higher for teaching hospitals compared with community hospitals in FY09 (1% and 0.2%). Benchmark: Northeast US median FY08 = 0.07%
Benchmark Source: INGENIXConsulting based on the hospital financial database used for the 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Non-operating margin is the ratio of non-operating income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 19
Acute Hospital Non-Operating Margin Teaching vs. Community Hospitals, FY09
Four teaching hospitals (27%) and nineteen community hospitals (39%) reported non-operating losses in FY09.
Benchmark: Northeast US median FY08 = 0.07%
Benchmark Source: INGENIXConsulting based on the hospital financial database used for the 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Non-operating margin is the ratio of non-operating income to total revenue.
5.4%
3.4%
-8.3%
-1.1%
0.2%OverallMedian
Teaching HospitalsMedian: 1.0%
Community HospitalsMedian: 0.2%
Massachusetts Division of Health Care Finance and Policy - 20
Acute Hospital Median Current Ratio Teaching vs. Community Hospitals
1.50
1.50 1.49
1.50
1.461.49
1.54
1.72
1.36
1.82
1.61
1.44
1.58
1.44
1.39
1.50 1.45
1.55
1.42
1.60
1.531.51
1.62
1.30
1.40
1.50
1.60
1.70
1.80
1.90
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Current ratios for teaching and community hospitals have varied over time. However, in FY09 the median current ratio improved among teaching and community hospitals.
Benchmark: Northeast US median FY08 = 1.55
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Current ratio is the ratio of current assets to current liabilities.
Massachusetts Division of Health Care Finance and Policy - 21
Acute Hospital Median Days in Accounts Receivable
Teaching vs. Community Hospitals
In FY09 teaching hospitals took about four days longer than community hospitals to collect revenue.
Benchmark: Northeast US median FY08 = 46.2
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Days in accounts receivable is the ratio of net patient accounts receivable to net patient service revenue/(quarters of data x 91.25).
43
3940
41
36
53
51
40
44
4242
51
52
46
42
40
45
42
35
37
39
41
43
45
47
49
51
53
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Massachusetts Division of Health Care Finance and Policy - 22
Acute Hospital Median Average Payment Period Teaching vs. Community Hospitals
56
55
52
55
54
51 51
56
57
52
57
5656
54
55
58
51
53
50 49
54
49
50
51
52
53
54
55
56
57
58
59
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
In FY09, community hospitals took roughly three days longer than teaching hospitals to pay their bills (58 and 55 days, respectively).
Benchmark: Northeast US median FY08 = 60.3
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Average payment period is the ratio of current liabilities less estimated third-party settlements to total expenses less depreciation and amortization/quarters of data x 91.25.
Massachusetts Division of Health Care Finance and Policy - 23
Acute Hospital Median Debt Service Coverage Teaching vs. Community Hospitals
4.3
3.9
3.4
3.2
2.9
3.7
3.0
3.3
2.72.6
4.2
2.42.5
3.2
1.9
2.4
2.5
2.6
2.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Teaching hospitals were better able to meet principal and interest payments than community hospitals in FY09.
However, the median debt service coverage ratio improved for both teaching and com-munity hospitals in FY09 compared to FY08.
Benchmark: Northeast US median FY08 = 2.7
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Debt service coverage is the ratio of total income plus interest expense plus depreciation and amortization to interest expense plus current portion of long-term debt.
Massachusetts Division of Health Care Finance and Policy - 24
Acute Hospital Median Cash Flow to Total DebtTeaching vs. Community Hospitals
22.2%21.6%
9.8%
19.0% 18.8%
20.5% 20.5%
13.1%
20.6%20.5%
16.4%18.1%
12.4% 14.8%
17.4%
13.0%
17.8%
11.1%
14.9%
18.2%
13.9%
10.5%
17.6%
11.4%
0%
5%
10%
15%
20%
25%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Cash flow to total debt ratios show similar trends by teaching status. Both teaching and community hospitals experienced increases in this metric in FY09.
The lower this ratio, the more likely a hospital will find it difficult to meet current and long term financing needs.
Benchmark: Northeast US median FY08 = 12.5%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Cash flow to total debt is the ratio of total income plus depreciation and amortization to total current liabilities plus total long-term debt.
Massachusetts Division of Health Care Finance and Policy - 25
Acute Hospital Median Equity FinancingTeaching vs. Community Hospitals
54.7%
43.1% 43.0% 43.4%
34.8%
42.7% 43.2%
37.9%
42.4%
40.5%
47.4%48.7%
48.3%45.9%
42.4%42.3%
40.4% 40.3%
41.6%43.1%
43.7%
41.9%
48.9%
30%
35%
40%
45%
50%
55%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Teaching Community Statewide
Teaching hospitals currently have greater equity financing than community hospitals, although the median equity financing ratio declined for both teaching and community hospitals in FY09.
A number of hospitals experienced an actuarial reconciliation of pension related assets and obligations in FY09 which had a negative impact on net assets.
Benchmark: Northeast US median FY08 = 47.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Equity financing is the ratio of total net assets to total assets.
Massachusetts Division of Health Care Finance and Policy - 26
Disproportionate Share and All Other Hospitals• In this analysis, the Division of Health Care Finance and Policy defines disproportionate share hospitals as those hospitals with a large percentage (63% or more) of patient
charges attributed to Medicare, Medicaid, other government payers, and free care.
• Based on this definition and using a 2007 base year, the 18 hospitals listed below were assigned to the disproportionate share hospital cohort for all the years of this analysis.
Disproportionate Share Hospitals
Berkshire Medical CenterBoston Medical CenterCambridge Health AllianceCape Cod HospitalCaritas Carney HospitalCaritas Good Samaritan Medical CenterCaritas St. Elizabeth's Medical CenterClinton HospitalHolyoke Medical CenterLawrence General HospitalMercy Medical CenterMerrimack Valley HospitalNorth Adams Regional HospitalQuincy Medical CenterSaint Anne’s HospitalSaints Medical CenterSignature Healthcare Brockton HospitalSouthcoast Hospitals Group
All Other Hospitals
Anna Jaques Hospital Lowell General HospitalAthol Memorial Hospital Marlborough HospitalBaystate Franklin Medical Center Martha's Vineyard HospitalBaystate Mary Lane Hospital Massachusetts Eye and Ear InfirmaryBaystate Medical Center Massachusetts General HospitalBeth Israel Deaconess Medical Center MetroWest Medical CenterBeth Israel Deaconess Hospital-Needham Milford Regional Medical CenterBrigham and Women's Hospital Milton HospitalCaritas Holy Family Hospital Morton Hospital and Medical CenterCaritas Norwood Hospital Mount Auburn HospitalChildren's Hospital Boston Nantucket Cottage HospitalCooley Dickinson Hospital Nashoba Valley Medical CenterDana-Farber Cancer Institute New England Baptist HospitalEmerson Hospital Newton-Wellesley HospitalFairview Hospital Noble HospitalFalmouth Hospital North Shore Medical CenterFaulkner Hospital Northeast HospitalHallmark Health South Shore HospitalHarrington Memorial Hospital Saint Vincent HospitalHealthAlliance Hospital Sturdy Memorial HospitalHeywood Hospital Tufts Medical CenterHubbard Regional Hospital UMass Memorial Medical CenterJordan Hospital Winchester HospitalLahey Clinic Wing Memorial Hospital and Medical Centers
Massachusetts Division of Health Care Finance and Policy - 27
Acute Hospital Median Total MarginDisproportionate Share vs. All Other Hospitals
1.2%
2.7%
-0.4%
1.9%
3.6%
4.2%
2.5%3.0%
0.9% 1.1%
2.5%
0.7% 0.8%
0.2%
1.0%
3.3%
1.3%
0.4%
2.2%
3.1% 3.1%
1.6%
0.3%
-1%
0%
1%
2%
3%
4%
5%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Disproportionate share hospitals generally have lower total profitability than other hospitals.
Median total profits for all hospitals increased in FY09. However, disproportionate share hospitals’ median total margin is lower than all other hospitals in FY09 (1.1% and 2.5%).
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Total margin is the ratio of total income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 28
Acute Hospital Median Operating Margin Disproportionate Share vs. All Other Hospitals
0.7%
1.3%
0.6%
1.1%
2.3%2.2%
0.8%
1.7% 1.7%
0.7%
0.4% 0.3%0.0%
0.5%
-0.4%-0.5%
1.9%
2.3%
0.5%
1.9%
0.2%
1.9%
0.0%
-1%
0%
1%
2%
3%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Historically, disproportionate share hospitals tend to be less profitable from operations than other hospitals.
Median operating margin improved for all hospitals in FY09 compared with FY08, but more sharply for all other hospitals than for disproportionate share hospitals.
Benchmark: Northeast US median FY08 = 0.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Operating margin is the ratio of operating income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 29
Acute Hospital Median Non-Operating MarginDisproportionate Share vs. All Other Hospitals
0.2%
0.8%
1.8%
0.3%
0.1%
1.3%
0.7%
0.9%
0.3%
0.1%
0.5%
1.1%1.0%
1.3%
0.5%
0.2%
1.6%
0.4%
0.9%
0.7%
1.2%
0.0%
0.5%
1.0%
1.5%
2.0%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Non-operating profits continued to decline for many hospitals in FY09 due in large part to the economic climate.
Benchmark: Northeast US median FY08 = 0.07%
Benchmark Source: INGENIXConsulting based on the hospital financial database used for the 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Non-operating margin is the ratio of non-operating income to total revenue.
Massachusetts Division of Health Care Finance and Policy - 30
Acute Hospital Median Current RatioDisproportionate Share vs. All Other Hospitals
Disproportionate share hospitals’ ability to pay current bills is not as strong as that of other hospitals.
Their median current ratio of 1.33 in FY09 was lower than the statewide median of 1.5.
Benchmark: Northeast US median FY08 = 1.55
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Current ratio is the ratio of current assets to current liabilities.
1.301.28
1.33 1.33
1.62
1.47
1.59
1.48
1.62
1.51
1.55
1.45
1.501.50
1.341.33
1.54
1.67 1.691.69
1.60
1.42
1.53
1.62
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Massachusetts Division of Health Care Finance and Policy - 31
Acute Hospital Median Days in Accounts Receivable Disproportionate Share vs. All Other Hospitals
38
39
43
42
40
44
38
46
48
37
40
52
45
52
42
51
4242
36
38
40
42
44
46
48
50
52
54
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Disproportionate share hospitals took about the same number of days to collect their accounts receivables as all other hospitals in FY09.
Benchmark: Northeast US median FY08 = 46.2
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Days in accounts receivable is the ratio of net patient accounts receivable to net patient service revenue/(quarters of data x 91.25).
Massachusetts Division of Health Care Finance and Policy - 32
Acute Hospital Median Average Payment PeriodDisproportionate Share vs. All Other Hospitals
61
60
54 54
51 51
52
56
57
54
58
57
59
5656
5454
53
4948
49
53
51
47
49
51
53
55
57
59
61
63
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
Historically, dispropor-tionate share hospitals have taken longer to pay bills than other hospitals.
In FY09, dispropor-tionate share hospitals took about six days longer to pay their bills than all other hospitals.
Benchmark: Northeast US median FY08 = 60.3
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Average payment period is the ratio of current liabilities less estimated third-party settlements to total expenses less depreciation and amortization/quarters of data x 91.25.
Massachusetts Division of Health Care Finance and Policy - 33
Acute Hospital Median Debt Service CoverageDisproportionate Share vs. All Other Hospitals
1.5
1.9
2.6
4.2
3.5
3.2
3.4
3.7
2.5
33.2
2.6
1.9 2.0
2.2
1.7
2.8
3.9
2.6
3.7
2.3
2.0
2.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
All hospitals on average show an improvement in meeting current debt obligations in FY09 compared with FY08.
However, in general, disproportionate share hospitals have a more difficult time meeting debt obligations than do all other hospitals.
Benchmark: Northeast US median FY08 = 2.7
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Debt service coverage is the ratio of total income plus interest expense plus depreciation and amortization to interest expense plus current portion of long-term debt.
Massachusetts Division of Health Care Finance and Policy - 34
Acute Hospital Median Cash Flow to Total DebtDisproportionate Share vs. All Other Hospitals
8.4%
20.7% 20.5%
13.9%
17.6%18.2%
19.5%19.0%
8.3%
9.9%
12.3%11.4%
13.6%12.9%
15.8%
13.1%
19.7%
16.0%
20.3%
14.9%
20.5%
10.5%
11.4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
All hospitals’ cash flow to total debt ratio improved in FY09 from FY08, signaling less difficulty meeting debt obligations.
Benchmark: Northeast US median FY08 = 12.5%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Cash flow to total debt is the ratio of total income plus depreciation and amortization to total current liabilities plus total long-term debt.
Massachusetts Division of Health Care Finance and Policy - 35
Acute Hospital Median Equity FinancingDisproportionate Share vs. All Other Hospitals
37.7%
36.3%
44.5%
53.4%
43.1% 43.2%
39.6%
33.3%
36.5%
33.9%
35.6%35.5%
38.7%
47.5%
48.2%48.4%49.4%
43.9%
37.9%
48.9%
42.7%43.7%
41.9%41.6%
30%
35%
40%
45%
50%
55%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
DSH All Other Statewide
The median equity financing ratio decreased for all hospitals in FY09 compared with FY08.
A number of hospitals experienced an actuarial reconciliation of pension related assets and obligations in FY09 which had a negative impact on net assets.
Benchmark: Northeast US median FY08 = 47.9%
Benchmark Source: 2010 Almanac of Hospital Financial and Operating Indicators, INGENIX
Note: Equity financing is the ratio of total net assets to total assets.
Massachusetts Division of Health Care Finance and Policy - 36
Acute Hospital Financial PerformanceFY09
HospitalsOperating
Margin
Non-Operating
Margin
Total Margin
Profit (Loss)
Community
Harrington Memorial Hospital 3.55% -0.57% 2.98% 2,577,772
Health Alliance Hospital 4.71% 0.30% 5.01% 8,361,742
Heywood Hospital 1.11% -0.66% 0.45% 403,756
Holyoke Medical Center* 0.56% 0.06% 0.62% 732,174
Hubbard Regional Hospital closed
Jordan Hospital 1.00% 0.44% 1.44% 2,694,255
Lawrence General Hospital* 1.29% 0.04% 1.33% 2,295,000
Lowell General Hospital 2.77% -1.15% 1.62% 3,484,314
Marlborough Hospital 1.50% 0.88% 2.38% 1,600,000
Martha's Vineyard Hospital 0.95% 2.09% 3.04% 1,494,444
Mercy Medical Center*
Merrimack Valley Hospital* -2.32% 0.00% -2.32% -1,296,298
MetroWest Medical Center -4.03% 0.15% -3.88% -9,615,651
Milford Regional Medical Center 4.88% 0.26% 5.15% 9,634,717
Milton Hospital -0.04% -2.27% -2.32% -1,509,891
Morton Hospital and Medical Center 3.87% 0.32% 4.19% 5,501,692
Nantucket Cottage Hospital -18.50% 3.39% -15.10% -5,005,000
Nashoba Valley Medical Center 1.35% 0.00% 1.35% 604,163
New England Baptist Hospital 0.61% 2.61% 3.22% 6,043,000
Newton-Wellesley Hospital 3.86% 0.05% 3.91% 14,088,000
Noble Hospital -1.66% 0.14% -1.52% -844,131
North Adams Regional Hospital* -0.68% -4.53% -5.21% -3,085,733
North Shore Medical Center 1.35% 0.15% 1.50% 6,613,000
Northeast Hospital 1.70% -0.98% 0.72% 2,295,347
Quincy Medical Center* -1.47% -0.13% -1.60% -1,760,117
Saint Anne's Hospital* 6.36% 0.99% 7.35% 10,627,070
Saints Medical Center* 0.09% 0.49% 0.58% 783,000
Signature Healthcare Brockton Hospital* 2.11% -1.01% 1.10% 2,229,682
South Shore Hospital 3.00% -4.42% -1.42% -5,458,354
Southcoast Hospitals Group* 2.96% -0.96% 2.00% 12,308,413
Sturdy Memorial Hospital 8.39% -8.33% 0.06% 81,575
Winchester Hospital 4.00% -0.08% 3.92% 10,005,952
Wing Memorial Hospital 0.04% 0.59% 0.62% 440,000
HospitalsOperating
Margin
Non-Operating
Margin
Total Margin
Profit (Loss)
Teaching
Baystate Medical Center 7.17% -0.30% 6.86% $59,557,000
Beth Israel Deaconess Medical Center 0.47% 1.61% 2.07% $26,070,000
Boston Medical Center* -2.53% 1.41% -1.13% ($11,329,000)
Brigham and Women's Hospital 5.03% 0.03% 5.06% $105,500,000
Cambridge Health Alliance* -8.13% 1.17% -6.96% ($36,959,136)
Caritas St. Elizabeth's Medical Center* 6.10% -0.25% 5.85% $22,335,669
Children's Hospital Boston 5.58% 1.19% 6.78% $88,388,000
Dana-Farber Cancer Institute -5.30% 5.39% 0.09% $734,917
Lahey Clinic 4.60% 0.99% 5.63% $49,315,126
Massachusetts Eye and Ear Infirmary -0.48% 3.46% 2.98% $6,622,712
Massachusetts General Hospital 4.97% 0.00% 4.97% $131,887,000
Mount Auburn Hospital 5.67% 1.02% 6.68% $19,617,000
Saint Vincent Hospital 8.41% -0.01% 8.41% $26,792,304
Tufts Medical Center -1.04% -1.14% -2.18% ($13,250,000)
UMass Memorial Medical Center 4.97% 0.34% 5.31% $70,615,377
Community
Anna Jaques Hospital 2.55% -0.06% 2.49% $2,663,837
Athol Memorial Hospital -6.03% 0.19% -5.84% ($1,314,156)
Baystate Franklin Medical Center -0.01% 0.69% 0.68% $574,000
Baystate Mary Lane Hospital 0.62% 2.50% 3.12% $1,042,000
Berkshire Medical Center* 0.17% -0.55% -0.38% ($1,242,388)
Beth Israel Deaconess Hospital-Needham 3.36% 0.33% 3.69% $1,795,560
Cape Cod Hospital* 2.30% 0.56% 2.86% $10,710,633
Caritas Carney Hospital* 4.29% 0.45% 4.75% $5,701,001
Caritas Good Samaritan Medical Center* 6.42% 0.17% 6.58% $12,990,838
Caritas Holy Family Hospital 4.09% 0.00% 4.09% $6,016,157
Caritas Norwood Hospital 2.17% 0.26% 2.43% $3,892,833
Clinton Hospital* 1.33% 1.50% 2.83% $743,000
Cooley Dickinson Hospital 4.68% 0.40% 5.08% $8,534,929
Emerson Hospital 0.55% -0.28% 0.28% $494,413
Fairview Hospital 2.05% -0.37% 1.68% $655,585
Falmouth Hospital 5.90% 0.85% 6.76% $9,589,738
Faulkner Hospital 1.54% 0.24% 1.78% $3,215,000
Hallmark Health 4.81% 1.39% 6.20% $17,151,000
Notes: Mercy Hospital has a 12/31 year end and data for Mercy were not yet available at the time this analysis was completed.
*Denotes Disproportionate Share Hospital.
Massachusetts Division of Health Care Finance and Policy - 37
Acute Hospital Financial PerformanceFY08
HospitalsOperating
Margin
Non-Operating
Margin
Total Margin
Profit (Loss)
Community
Harrington Memorial Hospital -3.34% 3.82% 0.48% $364,687
Health Alliance Hospital 5.45% -0.79% 4.66% $7,377,665
Heywood Hospital -0.60% 1.41% 0.81% $720,349
Holyoke Medical Center* -0.99% 0.21% -0.78% ($951,615)
Hubbard Regional Hospital -8.19% -0.32% -8.51% ($1,874,597)
Jordan Hospital -0.90% 0.50% -0.40% ($728,020)
Lawrence General Hospital* 1.64% 0.87% 2.51% $4,120,000
Lowell General Hospital 1.22% -0.18% 1.04% $1,966,929
Marlborough Hospital -0.61% 0.68% 0.08% $49,977
Martha's Vineyard Hospital 2.20% 3.49% 5.69% $2,647,444
Mercy Medical Center* n/a n/a n/a n/a
Merrimack Valley Hospital* -6.01% 0.00% -6.01% ($3,275,192)
MetroWest Medical Center -3.62% 0.21% -3.41% ($8,116,041)
Milford Regional Medical Center 3.39% 2.04% 5.43% $9,542,160
Milton Hospital -4.64% 1.77% -2.87% ($1,750,890)
Morton Hospital and Medical Center 0.36% 3.79% 4.14% $5,328,626
Nantucket Cottage Hospital -8.13% 6.56% -1.57% ($527,000)
Nashoba Valley Medical Center -0.96% 0.00% -0.96% ($427,612)
New England Baptist Hospital 0.96% 2.71% 3.68% $6,587,000
Newton-Wellesley Hospital 2.87% 0.94% 3.81% $12,870,000
Noble Hospital -0.86% 0.32% -0.55% ($294,163)
North Adams Regional Hospital* 5.48% 1.26% 6.75% $4,334,579
North Shore Medical Center 0.44% 0.21% 0.64% $2,813,000
Northeast Hospital 1.71% -3.01% -1.30% ($3,843,899)
Quincy Medical Center* -2.33% -0.21% -2.54% ($2,677,752)
Saint Anne's Hospital* 3.71% -4.51% -0.81% ($1,077,037)
Saints Medical Center* -1.12% -1.37% -2.49% ($3,281,000)
Signature Healthcare Brockton Hospital* -3.18% 0.55% -2.63% ($5,158,093)
South Shore Hospital 1.86% -1.65% 0.20% $716,924
Southcoast Hospitals Group* 2.58% -1.22% 1.36% $8,129,570
Sturdy Memorial Hospital 8.49% -2.23% 6.26% $9,230,619
Winchester Hospital 2.89% 0.23% 3.12% $7,583,429
Wing Memorial Hospital 0.50% 0.60% 1.10% $702,734
HospitalsOperating
Margin
Non-Operating
Margin
Total Margin
Profit (Loss)
Teaching
Baystate Medical Center 5.48% 0.86% 6.34% $53,334,000
Beth Israel Deaconess Medical Center 2.46% 0.77% 3.23% $39,328,000
Boston Medical Center* 6.44% -1.27% 5.17% $54,986,048
Brigham and Women's Hospital 5.15% -0.13% 5.03% $95,721,000
Cambridge Health Alliance* -6.77% 1.25% -5.51% ($29,448,181)
Caritas St. Elizabeth's Medical Center* 1.83% -2.24% -0.41% ($1,483,929)
Children's Hospital Boston 4.07% 1.26% 5.33% $63,381,000
Dana-Farber Cancer Institute -5.58% -1.69% -7.27% ($49,469,327)
Lahey Clinic 3.83% -0.07% 3.76% $30,111,095
Massachusetts Eye and Ear Infirmary -9.42% 7.04% -2.37% ($3,589,528)
Massachusetts General Hospital 4.62% -0.31% 4.31% $106,649,000
Mount Auburn Hospital 5.09% -1.20% 3.89% $10,501,964
Saint Vincent Hospital 7.44% -0.01% 7.42% $22,196,757
Tufts Medical Center -1.14% -1.39% -2.53% ($14,673,000)
UMass Memorial Medical Center 4.08% 0.19% 4.27% $53,129,554
Community
Anna Jaques Hospital 0.73% 0.12% 0.85% $850,914
Athol Memorial Hospital 0.68% 0.45% 1.12% $257,812
Baystate Franklin Medical Center -2.48% 1.04% -1.43% ($1,180,000)
Baystate Mary Lane Hospital -1.04% 2.03% 0.99% $321,000
Berkshire Medical Center* 2.14% 1.54% 3.68% $11,957,432
Beth Israel Deaconess Hospital-Needham 1.39% 0.40% 1.79% $818,552
Cape Cod Hospital* -4.05% 0.88% -3.17% ($11,362,263)
Caritas Carney Hospital* 0.70% 0.44% 1.14% $1,334,649
Caritas Good Samaritan Medical Center* 0.00% 0.00% 0.00% $8,417
Caritas Holy Family Hospital 1.31% 0.00% 1.31% $1,976,575
Caritas Norwood Hospital -2.50% -1.37% -3.87% ($5,814,182)
Clinton Hospital* 1.01% 1.96% 2.97% $785,447
Cooley Dickinson Hospital 2.33% 0.81% 3.13% $5,101,153
Emerson Hospital -2.53% 1.06% -1.47% ($2,448,065)
Fairview Hospital 3.55% 0.95% 4.50% $1,592,437
Falmouth Hospital -3.09% 3.89% 0.80% $1,099,294
Faulkner Hospital -0.28% 0.55% 0.27% $471,000
Hallmark Health 0.44% 0.47% 0.91% $2,450,000
Notes: Recently, government employers, including Cambridge Health Alliance, were required to implement a new government accounting rule (GASB 45) that required them to record in their financial statements the present value of future retiree health benefit costs. In complying with this new rule, Cambridge Health Alliance’s balance sheet reflects a $221.9M liability and associated operating expense of $12.7M for its 2008 fiscal year. Mercy Hospital has a 12/31 year end and data for Mercy were not yet available at the time this analysis was completed.
*Denotes Disproportionate Share Hospital.
Massachusetts Division of Health Care Finance and Policy - 38
Report Notes
• The findings in this report are based on the filings of 64 of 65 acute hospitals in 2009; sixty hospitals have fiscal year ends October 1 through September 30. Five hospitals have different year ends: Cambridge Health Alliance, MetroWest Medical Center, and Saint Vincent Hospital have June 30 year ends, and Martha’s Vineyard Hospital has a March 31 year end. Mercy Medical Center has a December 31 year end. Mercy Medical Center’s data were not yet available at the time this analysis was completed.
• Annual financial data are reviewed by the Division of Health Care Finance and Policy and verified against either audited financial statements or hospital’s supporting documentation. All submitted hospitals’ data reviews were complete at the time of this analysis except for North Adams Hospital for which as filed data has been used.
• Depending on the organization of each hospital, data may exclude other aspects of some hospitals’ financial health, such as financial performance of endowments or the financial health of parent companies or other affiliated organizations.
• Quartile values can shed light on information about the distribution of financial ratio values across hospitals. Often, averages can be materially affected by outlier/extreme values at the low and high ends of a distribution. Examining quartiles, therefore, is a preferred means of assessing the overall distribution of values across hospitals. For instance, the ratio values of one-quarter of the hospitals at the lower end of the distribution will fall at or below the 25th quartile value. Similarly, the ratio values of one-quarter of the hospitals at the upper end of the distribution will fall at or above the 75th quartile value. The 50th percentile is the median of the distribution of values. Half of the hospitals’ financial ratio values will fall below the median, and half will fall above the median. These quartile measures are particularly useful when a distribution is markedly skewed, or where it is generally symmetrical but includes a few outliers.
• This report uses benchmarks from data available in the 2010 Almanac of Hospital Financial and Operating Indicators published by Ingenix. There is a two-year lag from the publication data, therefore the most current benchmark data for this report are 2008 data.
Division of Health Care Finance and Policy
Two Boylston Street
Boston, Massachusetts 02116
Phone: (627) 988-3100
Fax: (617) 727-7662
Website: www.mass.gov/dhcfp
Publication Number: 09-177-HCF-01
Authorized by Ellen Bickelman, State Purchasing Agent
Printed on Recycled Paper