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Hospitals report hefty reserves

Senate set to vote on having providers defray coverage cost

By Kay Lazar
Globe Staff / May 18, 2010

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Massachusetts hospitals are sitting on billions of dollars in reserve funds, according to a report released yesterday by the Patrick administration.

The revelation comes as the state Senate is expected to vote today on a proposal that would require many hospitals to make one-time contributions totaling $100 million to a fund to help small businesses pay their health insurance costs.

A separate report issued by the administration yesterday shows that 80 percent of acute care hospitals made more money in 2009 than in 2008. Teaching hospitals as a whole did far better than community hospitals.

The facilities are under increased scrutiny as pressure builds to rein in health care costs, and the two reports from the state’s Division of Health Care Finance and Policy reveal wide disparities in the wealth of hospitals across Massachusetts.

“This suggests the ongoing need to really monitor and ensure that we have a full and complete understanding of the financial performance and resources of all health care providers, in an era when health care affordability is a real concern,’’ said Sarah Iselin, former commissioner of the division and now president of the Blue Cross Blue Shield of Massachusetts Foundation, a public policy organization.

The report on hospital systems’ reserves shows that, in total, they amassed $17.2 billion in total net assets as of September 2008, the most recent data available. Roughly a third of that, $5.7 billion, was concentrated in the Partners HealthCare system, which includes Boston teaching giants Brigham and Women’s and Massachusetts General hospitals.

Partners spokesman Rich Copp said that since the time period reflected in the report, the hospital system has lost “hundreds of millions’’ of dollars.

“Having sufficient assets allows us to sustain our mission of patient care, teaching, research, and service to the community during economic downturns like the one we just experienced,’’ Copp said.

Tom Traylor, vice president of government operations at Boston Medical Center, said his institution also has weathered significant financial losses since 2008, largely due to substantially smaller reimbursements from the state for caring for poor patients. He said the hospital system lost $72 million in the 2009 fiscal year and is projected to lose $144 million in the fiscal year that ends in September.

The report showed that in 2008, the hospital had $1.3 billion in total net assets. That figure includes the reserves the provider carried in its health insurance plan, BMC HealthNet, which covers Medicaid patients, Traylor said.

The report indicates that other large institutions that serve a disproportionate share of low-income patients aren’t doing nearly as well. For instance, Cambridge Health Alliance had just $222 million in reserves in 2008.

State regulators require hospitals to regularly report detailed financial information, but Health Care Finance and Policy Commissioner David Morales said his agency had trouble compiling a comprehensive picture of their financial strength because state rules do not require parent companies of hospitals to report such detailed information as well.

“A hospital may not have a lot of cash on hand because the money is being sent to the parent company,’’ he said. “It’s not illegal, but we don’t have enough data to analyze it.’’

Morales declined to say whether, based on the state’s findings, hospitals could afford to contribute to a fund that would defray health insurance costs for small businesses. Senate President Therese Murray inserted the contribution requirement, which would apply to more prosperous hospitals, into a sweeping bill to control medical costs that is slated to be voted on today in the Senate.

Nancy Kane, a Harvard School of Public Health professor who specializes in assessing hospital financial performance, said the state’s report is a good first step in identifying the institutions’ financial health, but regulators need more concrete definitions of profits and liabilities to truly show an accurate picture. Unlike the health insurance industry, which has a widely agreed upon formula to measure financial stability, the hospital field lacks a similar barometer.

“More needs to be done before one could make a final determination that there are excess resources in these institutions,’’ Kane said.

“Some of the reason hospitals may have excess is because they have rates above everyone else’s,’’ Kane said, “and others may have excess because they manage their money better.’’

Kay Lazar can be reached at klazar@globe.com.