Half of the acute care hospitals in the state are reporting operational losses
of between $1 million and $4 million, according to the Hospital Association
of Rhode Island.
Hospital Association President Edward Quinlan said preliminary and unaudited reports show that as of the end of the fiscal year in September, six of the 12 hospitals are reporting losses.
Last year eight hospitals reported losses, which might indicate that fiscal 2003 was a better year. Quinlan, however, said the situation doesn’t look like an improvement but a continuation of an entrenched struggle.
“This reflects the difficult situation hospitals are going through,” he said. “Many have to access their endowments and there has been delays in capital investments. This is a problem since Rhode Island has the fourth oldest group of hospitals in the nation.”
The final report, which is tentatively scheduled for a February or March release, could indicate other hospitals with losses.
This initial information compiled by Providence Business News was collected through interviews with hospital officials. Among those results is a positive showing by Lifespan’s group of hospitals, which expects an operational gain of $1.6 million.
In the red included South County Hospital in Wakefield; operational losses are expected to hit $2.3 million, up from last year’s $1.8 million loss.
South County Hospital Chief Executive Officer Lou Giancola said much of the loss had to do with overstaffing in the inpatient services. The volume of patients during the first part of the year did not meet expectations, although it picked up in the second half of the year.
Also, increases in health care costs for employees, pension plans and malpractice insurance were factors.
Giancola said his hospital is looking at other ways to lower operational costs.
“Our challenge is to look at ways to cut administrative costs at the payer-provider level,” he said. “We know the costs going into the billing end at the hospital, but we don’t know the costs of claims adjudication. By working more closely together, health insurers and our company can reduce costs at both ends of the system.”
Otis Brown, spokesman at Our Lady of Fatima Hospital in North Providence, said it has been in the red for the first time in 10 years. Losses hit $900,000 this year at the community hospital and reimbursements from local providers like Blue Cross & Blue Shield and UnitedHealthcare of New England are to blame, Brown said.
“Reimbursements are not keeping pace with the increase in expenses,” he said. “If they are not paying enough to treat their members, then that’s a great concern for us.”
Our Lady of Fatima is still in negotiations with Blue Cross to work out a contract for the coming year.
Brown has said increases in the cost of a nursing shortage, malpractice insurance and the rising cost of medication have all been factors in the increase of providing care to patients.
Quinlan said the reality of the health care industry is that health insurers are doing well while hospitals are struggling just to break even.
“The message HARI is trying to convey is that there is an imbalance in the health care,” he said. “Providers of all sizes and purposes are struggling while insurers are recording significant increases year in and year out.” He added that he’s troubled about a general trend that favors the health of insurers over the health of providers.
“There’s a need for balance,” he said.
Scott Fraser, spokesman for Blue Cross & Blue Shield of Rhode Island, calls Quinlan’s argument innuendo and says that health insurers are not to blame for the hospitals’ problems.
“Our reimbursements are a very small portion of the revenue stream at hospitals. The average we pay is 27 percent of the total, and that’s including our Medicare product,” he said. “He’s charging innuendo, but is not drawing a direct line.”
Blue Cross, as well as other health insurers in the state, have had profit increases of 4.3 percent, according to a recent report by the state Department of Health.
At Blue Cross, which has 70 percent of the health insurance market in Rhode Island, a portion of the revenues have been used in part to boost reserves. In 2002, the insurer reached $250 million.
Robert Urciuoli, president and CEO of Roger Williams Medical Center, said hospitals across the nation are seeing the same increase in revenues as health insurers in Rhode Island.
He said the average operational gains are between 4 percent and 5 percent. He added that states in New England like Rhode Island haven’t hit that mark.
“Health insurers have paid about 92 cents for each dollar spent on patient care,” he said. “I expect this to get slightly better in the process of implementing new negotiated prices. But, we’ve been losing significant amounts of money with health insurers in state.”
Roger Williams Medical Center in Providence has sneaked out of the red this year after six years of losses. Although the audited figures are not in yet, the hospital is looking at making between $200,000 and $500,000 above operating costs.
Urciuoli said this is positive, particularly since last year the hospital had losses of $10.6 million of which half was related to adjustments to bad debt.
At Lifespan, which is affiliated with Rhode Island Hospital, Newport Hospital, Miriam Hospital in Providence and Bradley Hospital in East Providence, operational gains are expected to be in the black for a second year. In 2002, the hospital group posted a $1.6 million operating increase.
“We don’t have audited financial figures yet, but we expect to do as well as we did in 2002, if not better,” said spokeswoman Nicole Gustin. “A lot of this was the result of cumulative efforts, including strong management at all our hospitals.”
She added that she is not certain whether the gain includes operational costs at the New England Medical Center, which Lifespan broke ties with back in December 2002.
Lifespan had recorded a combined loss of $56.6 million in fiscal year 2000 and 2001 when NEMC was part of its group.
