I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
State studies hospitals’ profitability to help make painful decisions
That decision, which is part of New Mexico’s ongoing effort to prune health care costs, came down earlier this year after the state got a sense of the financial health of many New Mexico hospitals.
It did that, in part, by relying on a little-known report issued in January that found the state’s investor-owned hospitals reported a collective profit of nearly 10 percent in 2008, a profit margin that outpaced similar groupings of hospitals in Texas, Oklahoma, Arizona and Colorado — and easily beat the national average.
“It wasn’t the only thing we looked at,” Carolyn Ingram, the state’s Medicaid director, said of the report commissioned by the state Human Services Department and that surveyed the state’s for-profit hospitals; nearly a third of the state’s 42 medical centers are investor-owned.
Other factors the state considered in making the decision were what other states paid for similar services and where costs were increasing, Ingram said.
But the report, completed by the Hilltop Institute, a think tank at the University of Maryland, played a role in the decision to cut the reimbursement rate used to pay hospitals for outpatient radiological services.
And that bothers Jeff Dye, executive director of the New Mexico Hospital Association.
“Ownership status should not be part of the discussion,” Dye told The Independent. “The key focus, as the Medicaid agency is looking at cost-saving measures, should be around fair and adequate payment to all hospitals.”
State looking for ways to cut Medicaid
The state’s reduction of what it reimburses hospitals for outpatient radiological services is merely one of dozens of actions the state has taken – or is considering taking – as New Mexico tries to trim Medicaid, the government’s low-income health insurance program.
Like many other states, New Mexico is under severe budget pressure, and Medicaid is one of the state’s big-ticket programs, especially as more and more New Mexicans enroll in the program because of the sour economy.
Cost-saving measures already under consideration include asking about 45,000 New Mexicans living below the poverty line to pay $75 monthly premiums for health insurance and requiring co-pays from low-income New Mexicans who use emergency room services.
And there could even more painful options ahead if Congress doesn’t pass a six-month extension of federal Medicaid stimulus dollars. No congressional action would leave New Mexico with a $160 million hole in the state budget that starts July 1.
Hospitals aren’t immune from the pain given the state’s budget crisis — a fact Dye acknowledges.
“The agency is rightfully looking at many options,” Dye said. “We just like to be in the discussion.”
But reducing reimbursement payments to hospitals for outpatient radiological services could be only the start.
New Mexico currently is studying whether to change how it reimburses hospitals for many outpatient services, Dye said.
The state likely won’t know until next month whether the potential change in reimbursement is revenue-neutral – meaning hospitals as a group won’t lose money — or whether it will cost them while saving the state money, Ingram said.
If the change results in some hospitals feeling more pain than others “perhaps a phase-in over two or three or four years would be better,” Dye said.
As for the decision to reduce the reimbursement payments made to hospitals for outpatient radiological services, the state tried to strike a balance between costs savings and the hospitals’ financial health, Ingram said.
The state almost lowered the payments to the rate used by Medicare, the federal health insurance program for the elderly. Medicare pays much lower rates than Medicaid.
“We didn’t go to the Medicare rate because it’d be too much of a hit,” Ingram said.
For-profit hospitals in NM did well in 2008; not as well in 2007
A general picture emerges about the financial health of New Mexico’s investor-owned hospitals from the Hilltop Institute’s report.
In addition to doing well financially in 2008, New Mexico’s investor-owned hospitals stacked up well against medical centers in the four neighboring states, reporting a collective profit margin of 9.18 percent — second only to Colorado that year.
New Mexico’s investor-owned hospitals didn’t perform as well in 2007, reporting the smallest aggregate profit margin among the five states in the region, the report shows.
The Maryland-based think tank used data from an annual report by the American Hospital Association (AHA) to come up with the profit margin for New Mexico’s investor-owned hospitals as a group.
That annual AHA report “presents historical data on a variety of measures, including revenues and expenses on a state-by-state and national basis.” But it doesn’t “provide detail at the individual hospital level.” So one can’t see how well, or how poorly, individual hospitals are doing year in, year out.
And that’s a problem, Dye said.
“Overall it’s pretty consistent that a third of hospitals lose money (each year), a third break even and a third make money,” Dye said. “The problem is that different hospitals are in different categories in different years.”
“It’s really a concern if policy makers look at categories by ownership or outliers … to make broad policy,” Dye added.
UPDATE: The Hilltop Institute report, and the underlying American Hospital Association report on which it is based, surveyed the profitability. or revenue after expenses, of all of New Mexico’s hospitals, not just investor-owned ones.