Partners HealthCare posts $195 million gain
Partners HealthCare System Inc., the state's largest hospital network, today posted a $195 million gain on operating revenue of $8.1 billion for the fiscal year ending Sept. 30.
The results topped the $164 million gain Partners reported on revenue of $7.6 billion for fiscal year 2009. Its margin -- operating revenue minus expenses -- climbed to 2.4 percent, up from 2.2 percent last year.
While the improvement was modest, Partners, which owns the Harvard-affiliated Massachusetts General and Brigham and Women's hospitals in Boston, is still in better financial shape than other health care organizations in the state. It finished the 2010 fiscal year with investments of $5 billion, including its endowment, up from $4.6 billion a year earlier.
"This is a healthy bottom line, but not extravagant," said health care consultant Mark A. Bard, managing director at Navigant Consulting in Needham. "To make a 2.4 percent margin in today's environment, that represents real diligence in managing costs more efficiently. There are plenty of hospitals with margins below 1 percent."
But like all of the state's health care providers, Partners hospitals and doctors faced widening shortfalls in reimbursements from government insurance payers such as Medicare and Medicaid during the past year. That deficit totaled $815 million for Partners, 9 percent more than last year's $748 million shortfall.
Government payers represent about 40 percent of patient revenues at Partners, less than the share at many community hospitals and urban safety net hospitals across Massachusetts.
The government-payment gap was partly offset at Partners by a 9 percent increase in research revenues, much of it due to the federal stimulus money that boosted programs at Mass General and Brigham and Women's, two of the top recipients of National Institutes of Health grants. In addition, Partners reported increases in other revenue not associated with medical care, such as royalty payments from technology licensing, clinical trial revenue, and medical consulting fees from other hospitals.
"We're trying to diversify the revenue base as much as we can," said Peter K. Markell, the Partners vice president of finance.
Containing health care costs has emerged as a top priority of government and business leaders in Massachusetts and across the US. In response, Partners hospitals have launched their own efforts to redesign medical procedures to reduce expenses and improve efficiency. "There's just a lot of cost pressure," Markell said.
He said one success over the past year was a 10 percent drop in use of costly radiology imaging procedures. The reduction was due partly to "decision support systems" put in place by Partners hospitals and more stringent authorization systems by insurers governing when imaging tests should be conducted, Markell said. Another factor was an increase in the number of patients who delayed having tests done because of higher out-of-pocket expenses in insurance policies.
Markell said cost management and more affordable and efficient care would continue to drive Partners' operations next year.
"We have a two-pronged focus right now," he said. "One is on care redesign. We are trying to look at the entire episode of care a patient might need from start to finish. The second focus is patient affordability, how do we reduce the unit cost of the care we deliver."
Partners' net patient service revenue rose 6 percent in fiscal year 2010 due to price increases and more complex and severe inpatient cases. But its total operating expenses also increased 6 percent due to higher employee compensation and benefits and the higher cost of clinical technologies, pharmaceuticals, and other supplies.