The roster of money-losing hospitals includes not only so-called safety-net institutions such as Boston Medical Center and Cambridge Health Alliance — which treat large numbers of low-income patients and are most dependent on government payers — but also three Partners hospitals, including Faulkner Hospital in Jamaica Plain and North Shore Medical Center in Salem, and eight hospitals now owned by Steward. Also on the list are Beth Israel Deaconess Medical Center-Needham and Boston’s Dana-Farber Cancer Institute.
In some cases, the losses stem from one-time events, such as Dana-Farber’s spending to build its Yawkey Center for Cancer Care. In others, like the Needham campus of Beth Israel Deaconess, the weak economy came into play, forcing patients to delay elective procedures for fear of losing their jobs if they took time off from work.
Steward — which had owned its hospitals for less than a year when the 2011 fiscal year ended — was spending heavily on capital improvements. Multi-hospital organizations, like Steward and Partners, say their broader reach allows them to offset losses at weaker hospitals with financial gains in other parts of their businesses.
Smaller medical centers have fewer resources and less clout in negotiating payments with insurers. Some are buckling under the weight of mounting pension liabilities. In addition, hospitals are being pressured by state government and commercial health plans to reduce costs by conducting fewer imaging tests and lowering the number of patients treated in emergency rooms. Under the traditional fee-for-service payment contracts many hospitals still have with insurers, however, they aren’t rewarded for those money-saving steps.
“We’re caught in that awkward time when we’re telling everybody to restructure and transform, but the payment systems are lagging,” said Kane at the Harvard School of Public Health.
But the biggest economic factor for many hospitals, especially those serving low-income communities, is Medicaid funding cuts. In essence, the state is prodding hospitals to control expenses even as the government reduces funding critical to their medical operations.
“Massachusetts health care reform will advance cost control, but it doesn’t address the underpinnings of Medicaid, which will worsen in 2013,” said Kate Walsh, chief executive of Boston Medical Center. Medicaid payments typically don’t cover the entire price of health care provided by Boston Medical Center, where roughly half of the patients are covered by Medicaid or other low-income health insurance programs.
Like other hospitals, Boston Medical Center has been aggressively slashing operating spending and reengineering its business model to strengthen ties with neighborhood health clinics. Such measures are likely to accelerate in the coming year at hospitals big and small, as they try to find their niche in the state’s evolving health care marketplace.
Robert Weisman can be reached at email@example.com.