Publisher’s Notebook: What’s behind the hospital profits?

The question looms large, given a recent report by the Colorado Hospital Association that showed huge increases in hospital profits from patient carestatewide, including at most hospitals in Northern Colorado. Sixty-five hospitals across the state posted earnings of $195 million from patient care last year, an increase of 8.9 percent from $179 million reportedthe previous year. Among Northern Colorado hospitals, Poudre Valley Hospital in Fort Collins experienced the heftiest increase in profits – known among nonprofitfacilities as patient service margins – soaring 390 percent to $8.9 million last year from $1.8 million in 1994. Next came North Colorado Medical
Center in Greeley, with a 279 percent gain, to $5.9 million, and Longmont United Hospital, with a 228 percent gain, to $6.2 million. And those numbers don’t even include nonoperating gains or tax subsidies. McKee Medical Center in Loveland saw a more modest increase, with profits from patient care jumping 53 percent to $4.2 million. Platte Valley
Medical Center in Brighton actually saw a decline in profits of 12 percent, to $250,000. And Estes Park Medical Center remains in the red, with a net
loss of $215,362. The trend toward increased profits stems largely from hospitals’ efforts to become more cost-effective and efficient in a managed-care environment.
The Colorado Hospital Association reports, for example, that the average length of stay declined at all hospitals in Northern Colorado, to 2.5 days at
Estes Park, four at Longmont United, 3.8 at McKee, 4.7 at North Colorado Medical, 2.6 at Platte Valley Medical and 3.9 at Poudre Valley. Similarly, outpatient visits grew at a far more rapid pace than inpatient admissions, which in many cases declined at Northern Colorado medical
facilities. Outpatient charges as a percentage of total patient charges increased at every local facility save for Longmont United and Estes Park. What’s that mean? Simply that patients are spending less time in the hospital and more time as outpatients. And many hospitals are cutting costs by cutting employees, although that trend by no means has been embraced by all local hospitals. Poudre Valley
Hospital has cut full-time-equivalent employees from 1,362 in 1994 to 1,352 in 1995, with 6.7 FTEs per adjusted occupied bed. That compares with
7.3 in 1993. But at North Colorado Medical Center, FTEs jumped to 1,614 last year from 1,564 the previous year. FTEs per adjusted occupied bed rose from 7.0
in 1994 to 7.1 last year. Managed care overall carries another price for hospitals, namely negotiated discounts for high-volume buyers. Take a look at Poudre Valley, which
saw such discounts shoot up 19.2 percent, to almost $5.7 million. Obviously, managed-care forces are being felt at every level of health care. While it’s proper to examine hospital “profits,” especially when some facilities are posting two, three and four hundred percent increases, one must
remember that at nonprofit institutions, “profits” usually are plowed back in some fashion into the community, through new medical equipment,
facilities or charity. At least they should be. But the public must fight hard to ensure that the quality of care isn’t suffering as hospitals cut costs. Businesses in every industry know when profits
should be returned to the business through investment in equipment, research or people. We in the public have a right to make that determination for
our hospitals. ¥¥¥ Those of you who have read our newspaper from the beginning know that we pride ourselves on providing comprehensive economic and real estate
data to the business community. That’s why we jump on any opportunity to improve that data. This issue, you’ll find a different source for most of the data found in our Real Estate Databank. We’ve turned to Dale Adair, publisher of The
Northern Colorado Letter, to provide us with data on residential and commercial sales, including breakdowns of sales by community and rankings of
the top sales in the region. We think the data will be more accurate and current than what we’ve been able to procure in the past. Christopher Wood can be reached at (970) 221-5400, 356-1683 or (800) 440-3506. His fax number is (970) 221-5432, and his e-mail address is
ncbr@aol.com.