More than a half-dozen of Connecticut’s 31 hospitals are bleeding red ink, and that number is on the rise, according to the state Office of Health Care Access annual report recently presented to the Connecticut General Assembly.
More hospitals in Connecticut are reporting negative operating margins, up from eight to 11 from the previous year, said Cristine Vogel, commissioner of OHCA.
Although, as an aggregate, the state’s hospital system is financially strong, several hospitals have been showing some symptoms of failing health for several years, Vogel said.
“I say some symptoms because there is not just one indicator a hospital is in financial trouble,” Vogel explained. “Is there a trend, looking back over the past three years? One bad year isn’t enough to conclude a hospital is in financial distress.”
Three consecutive years with higher debt financing, patient number decreases and operating losses cumulatively create red flags that all is not well at a hospital, she said.
Patients Up, Revenue Down
Overall, hospitals are seeing more patients.
“Business is walking in the doors at all of our hospitals,” Vogel said. But while utilization is increasing, fewer patients are paying their bills.
Patient revenues rose 7 percent during fiscal year 2005, but at the same time, the number of uninsured also rose 3.7 percent, resulting in a $170 million unpaid hospital tab.
Although the uninsured are not singly responsible for some hospitals’ fiscal woes, uncompensated care affects the bottom lines of all Connecticut hospitals, which saw on average their operating margins decrease from 2.1 percent in 2004 to 1.8 percent in 2005.
The bottom line is that hospital profits are not keeping up with expenses. According to OHCA’s report, total operating expenses increased by 6.5 percent in 2005 — the most recent year with available data reviewed by OHCA — to more than $6 billion.
The barometer of a hospital’s financial health, Vogel said, depends on the number of patients who walk into a hospital and how they are insured.
Treating individuals without insurance isn’t an option in Connecticut. State law requires that hospitals treat all patients, regardless of their ability to pay, with the exception of cosmetic or elective procedures, Vogel explained.
A combination of state and federal funding, the Disproportionate Share Hospital Program helps defray some of those uncompensated hospital costs. In 2005, the program provided hospitals with $62.5 million based on each hospital’s uncompensated and under-compensated care provided to patients without an ability to pay privately or uninsured.
Work Force Competition
Recruiting health care workers is part of the reason hospitals are facing rising costs and why their bottom lines are shrinking, Vogel explained.
Health care worker shortages have lead to recruitment bonuses and higher salaries, Vogel said, adding, “Recruiting is so costly.”
Salaries, wages and benefits paid to hospital employees are the largest category of hospital expenses. Specifically, non-physician salaries, fringes and fees made up the largest portion, 54 percent of hospital expenses in 2005. Other costs continue to rise, such as health care benefits for workers and pharmaceutical supplies.
