Children’s Hospital Colorado has strong income, especially when donations and grants are added. Credit: Eckert and Eckert/Design architect: H+L Architecture

Most Colorado hospitals report strong profits for 2010
Few independents remain as chains expand

By Erika Gonzalez
Colorado Public News

Most Colorado hospitals reported strong profits to the federal government for 2010, as consolidation has given them clout to demand more money from insurance companies.

Mergers also have given the hospitals economies of scale and allowed them to save money on supplies. Drives for efficient, quality care also are also key reasons for the hospitals’ financial strength, industry experts said.

“Three systems control about two-thirds of the hospital market in Metro Denver, and HCA-HealthOne alone has about 30 percent,” said industry research consultant Allan Baumgarten, who compiles the profit data in his Colorado Health Market Review.

Statewide, HCA-HealthOne has eight hospitals, Centura 13, Sisters of Charity of Leavenworth (Exempla) four and Banner Health another four. University of Colorado Hospital is on its way to forming a network of three hospitals and possibly more.

Statewide, only six independents remain out of the state’s 27 hospitals with more than 100 beds. They are Boulder Community, Children’s Hospital Colorado, Denver Health, Longmont United, Parkview in Pueblo and Memorial in Colorado Springs. University Hospital is the leading a pack of bidders to take over Memorial.

The concentration, says Baumgarten, gives those chains “significant market power in their negotiations with health insurers.”

About a dozen Colorado hospitals are losing money, according to the Colorado Hospital Association. They tend to be rural and often primarily serve Medicaid and uninsured patients, say industry analysts. Many with losses on hospital operations pulled out of the red with donations and other income. Denver Health Medical Center, for example, moved from $375 million in losses on operations to a $12 million profit.

“It’s still very much a struggle,” said Tom Nash, vice president of financial policy for the Colorado Hospital Association, citing an increase in the number of uninsured and underinsured patients.

To determine state hospitals’ profits, Baumgarten analyzed data filed by the hospitals with the federal Centers for Medicare & Medicaid Services. The hospitals report patient revenues, expenses, the number of days a patient utilizes a facility, patient discharges and income.

Many hospital officials don’t consider the numbers accurate because they do not include hospital revenue from other off-site sources, such as nursing homes or physician clinics owned by hospitals.

However, many hospitals refuse to discuss profits at all, and chains generally don’t break out individual results. So the Medicare data are the best available.

Centura, St. Mary Corwin in Pueblo and Children’s Hospital Colorado all declined to comment.

The report cites HCA-HealthOne, which owns eight metro-area hospitals, including Rose Medical Center and Presbyterian St. Luke’s, as the most profitable group in the state with 2010 pre-tax net income of nearly $384 million and pre-tax profit margins of 21 percent combined.

HCA-HealthOne spokeswoman Leslie Horna said the report “doesn’t include a lot of areas that we would consider important factors to consider when evaluating costs,” she said.

Horna said the report overestimates financials for Swedish Hospital and fails to account for the impact of taxes, marketing and other administrative expenses.

While Horna said the HealthOne’s hospitals were profitable, she declined to provide specific figures. She said the system’s success stems from the quality of care it provides and its ability to respond to market needs, such a demand for psychiatric beds.

The most profitable hospitals in the state were St. Anthony Summit in Frisco with 32 percent operating profits and Sky Ridge in suburban Denver at 32 percent.

Children’s Hospital also fared well according to the report, with a pre-tax profit margin of 13.9 percent or $13 million in operating income. But net income jumps to $84 million, partly due to strong donations and grants.

Beyond the metro-area, Loveland’s McKee Medical Center was a big winner with $26.8 million in net income and a profit margin of 17.5 percent.

“I really believe much or our success is due to taking proactive steps to improve quality and that includes decreasing lengths of stays, keeping people well and ultimately doing things better with less,” said McKee’s CEO Marilyn Schock.

Schock says the hospital, owned by Banner Health, has improved quality and more effectively controlled costs by investing in technology. Its new robotic surgical system, for example, has shortened hospital stays and healing times for hysterectomies and other procedures, she said. The hospital also is renovating one of its floors to allow staff to operate more efficiently and effectively.

Baumgarten said many Colorado hospitals are employing similar tactics.

“To the credit of the hospitals, my general impression is that they are also focused on lean, efficient operations as well as maximizing revenues,” said Baumgarten.

St. Mary Corwin Medical Center in Pueblo, which provides more than $54 million in charity care annually, had a 2010 pre-tax loss of $5.3 million – the largest in the state. Rochelle Kelly DeVargas of Centura, which owns the hospital, declined comment.

Centura’s Porter Adventist hospital in Denver, also had a loss of nearly $433,000 in 2010, according to the report.

Grand Junction’s Community Hospital was also in the red, with a net loss of $1.2 million.

However, many others – both in urban and rural settings – are the edge, says the CHA’s Nash. Medicare and Medicaid reimbursements remain an issue, he said, with hospitals receiving 71 cents on the dollar for Medicaid and 76 cents on the dollar for Medicare.

McKee’s Schock agrees that low reimbursements coupled with the increase in uninsured and underinsured patients is the chief challenge facing hospitals today.

NORTHERN COLORADO: Northern Colorado hospitals recorded pre-tax net income of $85,627,106 in 2010, according to the Review. Poudre Valley in Fort Collins and McKee Medical Center were among the most profitable in the region. Poudre Valley posted pre-tax net income of $28.9 million or 8.2 percent of net patient revenue, while McKee Medical Center had pre-tax net income of $26.8 million or 17.5 percent of net patient revenue. North Colorado Medical Center reported $22.5 million net income or 6 percent. None of the Northern Colorado hospitals tracked in the report showed a loss in 2010.

SOUTHERN COLORADO: Southern Colorado hospitals registered $72.9 million in pre-tax net income in 2010, according to the Review. Memorial Hospital in Colorado Springs and Pueblo’s Parkview Medical Center led the region in profitability, with pre-tax net income of $32.1 million and $28.9 million respectively for 2010. St. Mary Corwin Medical Center in Pueblo lost $5.3 million in 2010.


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