Although the financial performance of Rhode Island’s 13 community hospitals improved, the numbers themselves remain less than impressive compared with benchmark figures from around the country.
“We are at a much longer distance than we would like to be from saying we’ve turned things around,” said Edward J. Quinlan, president of the Hospital Association of Rhode Island.
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As in years past, he said a recently released report is validation of the difficult financial picture the state’s hospitals have faced over the past six to seven years.
In a report released in June by the state Department of Health, local hospitals still stack up poorly to their national counterparts in terms of profitability, net worth and debt capacity. The Rhode Island figures for all of those categories did improve and in 2003, the most recent year audited numbers were available, profit margins for the state’s hospitals improved from being almost a full percent in the red to a 0.6 percent profit.
Benchmark profits from the nation and the Northeast are not yet available, though in 2002 they stood at 2.6 percent and 0.8 percent respectively.
“Things improved quite a bit in 2003, almost every measure was up,” said Bruce Cryan, the Department of Health analyst who wrote the report, “The Health of R.I.’s Hospitals (2003).”
The last version of the report, released more than a year ago in April 2003, found a huge disparity between the nonexistent profitability of the local hospitals and a 3 percent to 4 percent profitability average for national institutions between 1998 and 2001. The figures for 2003 all moved in the right direction with the institutions’ net worth increasing and their reimbursement collection time and debt capacity improving.
The only falloffs came in the form of slightly lowered liquidity from 2002 and a greater loss of net worth than regional or national counterparts.
According to the report, collectively the hospitals are a $2.2 billion industry for the state, comprising 8 percent of the gross state product. With a payroll of nearly $1.2 billion and investment in construction and equipment of more than $125 million each year, the financial health of the system is hugely important to the state, even before considering the importance of the services the institutions provide.
With a decline again in net worth, Quinlan said local institutions were being forced to dip into their endowments while some others have again had to delay capital investments. Quinlan also pointed to the lower debt hospitals in Rhode Island carry compared to others in the Northeast and nationally.
He said without showing they have the capacity to pay the money back, the state’s hospitals continue to have lower bond rating than their peers, making it harder and more expensive to borrow money for capital improvements and equipment when they need it.
“So far, year to date for 2004, we’re just about at the break-even point,” Quinlan said. “Breaking even is no fiscal goal for any organization to have.”
Quinlan said recent independently verified reports show that the state’s public and private reimbursements continue to lag behind most other regions of the country, even as other reports show that the local hospitals’ costs are among the lowest anywhere. Quinlan said the importance of the report lies in its demonstration that the current system is not sustainable and is “fraying at the edges.”
“One year out of the last seven of minuscule profits isn’t going to make this thing work,” said Quinlan, who said he believes the key to real change remains upping the state’s reimbursement rates.
Analyst Cryan said reports from previous years have found essentially the same trends, though he added, “The surprise is that the results are so consistent.” The report has been issued at varying intervals over the past 16 years and is in its fifth edition. Cryan said the report would be passed on to members of the General Assembly for their review.
The report also ranks individual hospitals in the state using a composite score of eight measures, including profitability, liquidity, leverage and efficiency. Miriam Hospital and Bradley Hospital (which saw dramatic improvement in its own numbers), performed the best financially during the three-year analysis period. The weakest financial performers were Roger Williams and Westerly hospitals.
Other hospitals included in the study were Landmark Medical Center and Butler, Kent, Memorial, Newport, Rhode Island, South County, St. Joseph and Women & Infants’ hospitals.
