Mass. hospital finances are declining

Expenses are rising faster than payments can keep up with them at one-third of Massachusetts hospitals, an industry association said today.

Two-thirds of the state's 65 acute-care hospitals saw their their financial condition get worse in the first half of fiscal 2008, according to a Massachusetts Hospital Association analysis of figures from October through March. For 37 percent of hospitals, their operating margin -- how much income from providing patient care is left over after paying for certain costs -- was negative. Also, for 37 percent of hospitals, their total margin -- which reflects income from all sources -- was negative after expenses were taking into account.

"After several years of improving finances, current year margins for Massachusetts hospitals have taken a turn for the worse," Lynn Nicholas, president and CEO of the trade group, said in a statement released with its report.

The median operating margin for all hospitals was 0.9 percent, down from 2.2 percent for the same period in 2007. Median total margin followed suit, at 1.8 percent compared with 3.5 percent for the time span a year ago. A healthy hospital margin is at least 3 percent, the hospital group said.

Hospital expenses grew by 7.6 percent between March 2007 and March of this year, with payroll and benefits increasing the most. Medicare's adjustment for inflation rose 3.3 percent. Revenues from patient care climbed 7.5 percent during those 12 months.