Mass. hospital earnings rise 10%

Massachusetts hospitals collectively earned more than $1 billion in profits during the 2006 fiscal year, a 10 percent increase from 2005 and almost double the hospitals' 2004 profits, according to an analysis of publicly released financial data by the state's largest nurses union.

Most of the increased profits were attributable to a handful of Boston teaching hospitals, including Massachusetts General Hospital , which earned a profit of almost $300 million in the 2006 fiscal year. On the flip side, 40 hospitals had a lower profit margin; as a result, the average profit margin for Massachusetts hospitals actually dropped to 3 percent in 2006, from 3.5 percent in 2005.

The state's 69 acute-care hospitals are almost exclusively nonprofit, charitable institutions. Yet the hospitals say they must earn an annual profit so they can invest in equipment, technology, and buildings.

The Massachusetts Nurses Association , which is frequently at odds with the Massachusetts Hospital Association , the industry's trade and lobbying group, said yesterday that hospitals should use growing profits to hire more staff. The union has been fighting a legislative battle for years to win state-mandated staff-to-patient ratios.

"Massachusetts hospitals definitely put the 'profit' in 'nonprofit,' " said Donna Kelly-Williams , vice president of the union. "This year's profits could pay for the staffing needed to protect patients many times over, yet the safety of patients is being sacrificed to high industry profits and seven-figure CEO salaries."

The union tallied profits from individual hospital revenue data that is reported each year to the state's Division of Health Care Finance and Policy. The fiscal year ended Sept. 30, 2006. Reports were due to the state by Feb. 1, and the agency posted data for individual hospitals on its website Monday.

Hospitals earn profits from operations, investment income, and donations. Massachusetts General Hospital led with the most profits, at $295 million, a 12.5 percent margin, according to the Division of Health Care Finance and Policy website. Children's Hospital ranked second with $101 million, a 9.7 percent margin; and Brigham and Women's Hospital was third with a $69 million profit, a 4.1 percent margin. UMass Memorial Medical Center in Worcester reaped $45 million in profits, a 4.3 percent margin. Baystate Medical Center in Springfield was fifth with $44 million in profits, a 5.7 percent margin.

The number of hospitals losing money dropped to nine in 2006, down from 16 in 2004. Cambridge Health Alliance lost the most money in 2006, $13.6 million, a margin of minus 3 percent.

Last week, before the state's numbers were publicly posted, the Massachusetts Hospital Association said hospital expenses rose faster than revenues in 2006, even though Medicaid reimbursement rates for the state's hospitals was increased. The hospitals have long said that they have been shortchanged by Medicaid.

Robert E. Gibbons, Massachusetts Hospital Association interim chief executive, said yesterday that the union's analysis focused on the wrong statistics.

"For a decade, hospitals were eating their walls because payers were paying less than the cost of care, and the MNA wants to talk about a billion dollars?" Gibbons said. "Are they talking about the hundreds of millions of dollars that were not provided to the hospital community between 1993 and 2003? No, they are not, because they have an agenda that is about feather-bedding and salary inflation."

While the union alleged yesterday that there was "no statistically significant difference in hospital staffing levels between 2004 and 2006," the hospital association said the industry has increased nurse staffing by nearly 15 percent over the last three years. The fight over staffing levels and revenues is expected to be carried to Beacon Hill during the upcoming legislative session.

Christopher Rowland can be reached at crowland@globe.com.