34 on List of Largest Hospitals Report Losing Money

For the first time on Arkansas Business’ list of largest hospitals and medical centers, companies were ranked by net patient revenue instead of gross patient revenue.

The change in the list mirrors the accounting changes in the health care industry. The changes are designed to make it easier for people to determine how much revenue hospitals received. The much higher gross revenue figure included inflated patient charges that a hospital never expected to receive from private or public insurance payers.

Mark McGinnis, the chief financial officer at St. Vincent Health System of Little Rock, told Arkansas Business last month that most hospital systems have moved to the new accounting of revenue and now the change isn’t a big deal to hospital CFOs.

He said the change “makes the financial statement more readable to the typical reader.”

The information for the Arkansas Business’ list comes from the hospitals, tax returns and annual Medicare costs reports, which are unaudited.

Get the List: Click here to get the list of Arkansas’ largest hospitals by revenue.

The $1.8 Billion Corridor

Four of the five top spots on this year’s list were controlled by hospitals in Little Rock that were just off of Interstate 630 and generated $1.775 billion in patient revenue.

The hospital with the highest net patient revenue was the UAMS Medical Center, which had net patient revenue of $607.5 million for its fiscal year that ended June 30, 2012.

Just down Interstate 630 from UAMS is the No. 2 hospital, Baptist Health Medical Center-Little Rock, which reported net patient revenue of $431.9 million for 2012.

Arkansas Children’s Hospital landed in the No. 3 position with revenue of $423.45 million for its fiscal year that ended June 30, 2012.

The No. 5 position was held by St. Vincent Infirmary Medical Center. It reported revenue of $312.3 million for its fiscal year that ended June 30.

Profitability

On the annual checkup of hospitals, 34 out of the 88 hospitals on this year’s list — 38 percent — reported losing money, which is slightly higher than last year’s list, which showed 35 percent of the hospitals losing money.

Paul Cunningham, executive vice president of the Arkansas Hospital Association, said that historically, about a third of the hospitals on the list report net losses.

The hospital with the biggest net loss on this year’s list was St. Vincent Infirmary Medical Center in Little Rock. It reported a loss of $39.3 million for its fiscal year that ended June 30. For its fiscal year that ended in 2012, it had a net income of $7.7 million.

“Earnings at St. Vincent Health System were impacted by the failure of payment from commercial insurers to keep pace with increases in the cost of labor and medical supplies,” Peter Banko, president and CEO of the St. Vincent Health System, said in a statement to Arkansas Business. “In addition, across-the-board federal government sequestration cuts reduced Medicare revenue by 2 percent during the year. Earnings were also affected by costs associated with hospital electronic medical record system implementation in November 2012.”

Still, Banko said, St. Vincent was able to invest $36 million on the building and equipment for its Jack Stephens Heart Institute. And it did have some good news in January when it received the American Nurses Credentialing Centers’ Magnet Recognition designation for its nursing leadership, clinical practice, innovations and patient outcomes.

The hospital with the highest net income was Arkansas Children’s Hospital with $32.9 million.

Of that amount, about $8.5 million came from money earned on its endowment and investments, Gena Wingfield, senior vice president and chief financial officer at ACH, said in an email to Arkansas Business.

The remaining amount “reflects an operating margin of about 5 percent which is attributable to ACH management of expenses to better track with revenues,” she said in the email. “Another way of saying it, ACH managed our spending to approximately 95 percent of the revenues we received and the remaining 5 percent margin we are able to move to our endowment to help increase our savings for the future.”

Wingfield also said there was a “slight” increase in the share of patients who had some type of health insurance during its fiscal year.

During the fiscal year that ended June 30, 2012, ACH treated about 217 patients a day in its hospital and reported about 324,000 visits for outpatient procedures.

Sources: Tax returns filed by nonprofit hospitals and public salary reports for state-owned hospitals