Hospitals report on costs to lawmakers

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AUGUSTA — Maine hospitals have met voluntary limits on cost increases and profit margins, according to a report presented to legislators on Tuesday.

The report indicated a sharp increase in free care at some hospitals, including Central Maine Medical Center in Lewiston.

Hospitals agreed to voluntarily limit increases in their average cost per patient to 3.5 percent and their overall profit margins to 3 percent, goals that were written into the 2003 Dirigo Health law.

“Hospitals have been working very hard to reduce expenses and to control costs both due to the Dirigo targets and because it’s the right thing to do,” said David Winslow, vice president of financial policy at the Maine Hospital Association. “In my opinion, it’s pretty clear that we have succeeded in doing that. We need to continue to try to do better, and we will.”

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The report presented by Winslow to members of the Legislature’s Health and Human Services Committee was the result of more than two years of financial officers from Maine hospitals working with the Maine Hospital Association to provide a comprehensive, apples-to-apples comparison of their data.

Maine hospitals saw an average profit margin of 1.39 percent in 2007 and 1.48 percent in 2008, according to the data.

But not all hospitals met the voluntary 3 percent limit. In 2008, Bridgton and Rumford hospitals, members of the Central Maine Healthcare Corp., exceeded it, with operating margins of 6.8 percent and 3.21 percent, respectively.

Central Maine Medical Center had an operating margin of about one-quarter of a percent in 2007 and 1.33 percent in 2008. St. Mary’s Regional Medical Center’s operating margin was 3.88 percent in 2007 and 2.12 percent in 2008.

The information in the report provided only percentages for operating margins, not the actual profits and expenditures.

Winslow stressed that looking at the results for single hospitals in the report could be misleading.

“We think the best way to look at it is if you total all the hospitals up and you do the calculation; you get rid of a lot of volatility, because all of a sudden you’ve taken small hospitals and although they may have a year where they have a higher or smaller margin, when you include it all together it’s a pretty good way to look at how the state is doing,” he said.

A complicated but nationally accepted formula was used to calculate each hospital’s per-patient cost.

Statewide, hospitals averaged a slight reduction in cost per patient in 2007, about one-half percent. In 2008, costs rose about 3 percent.

Again, local hospitals varied from the average. CMMC’s cost per patient rose 9.3 percent in 2008 over the previous year; Bridgton’s rose 9.2 percent and in Rumford, they rose by 3.1 percent. Between 2003 and 2007, CMMC’s average cost per patient declined by about 2 percent. No one at CMMC was available to discuss the changes late in the day on Tuesday, spokesman Randall Dustin said.

Year to year volatility was apparent in the per-patient cost data from St. Mary’s Regional Medical Center. In 2007, costs increased 5.1 percent per case over the prior year; but in 2008, they decreased by 4.8 percent.

According to the report, the statewide average of cost per patient was $6,893 in 2008. At CMMC, the average was $6,863; at St. Mary’s, $6,518. The report specified that those numbers reflected the per-patient cost to the hospital, not the charge for treatment.

The last portion of the report listed the annual totals for uncompensated care, which includes charity care and unpaid bills. The totals for uncompensated care were given in dollar amounts, rather than year-over-year percentages.

Uncompensated care totaled about $296 million in 2008, up from about $249 million in 2007. Winslow said the economic recession was a factor and would likely drive up the volume of uncompensated care in the future.

CMMC, with about $32 million in uncompensated care in 2008, boasted the second-highest amount behind Maine Medical Center in Portland, which totaled $45.7 million. In 2007, CMMC listed $19.7 million in uncompensated care, whereas Maine Medical Center provided $41 million. St. Mary’s had $10.9 million in 2007 and $11.7 million in 2008.

rmetzler@sunjournal.com

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