State report highlights hospital assets


State House News Service — The hospitals that remain in Massachusetts following nearly two decades of heavy consolidation held $17.2 billion in net assets in 2008, but posted dramatically different financial results, with teaching hospitals registering far stronger financial performance than non-teaching hospitals, according to a Patrick administration report released on the eve of Senate debate on cost containment efforts.

The Division of Health Care Finance and Policy report recommends improved data collection, including better reporting of holding company financials, and increased oversight of hospital financials, noting there are currently no standardized guidelines regarding appropriate levels of hospital-accumulated financial resources.

The report determined that Children’s Hospital, with $951 million, and Massachusetts General Hospital, with $710 million, were the Massachusetts hospitals with the greatest total unrestricted net assets in 2008. The hospitals with the least were Caritas Carney Hospital with $20 million and Merrimack Valley Hospital with $8 million.

The state’s largest health care system, Partners Healthcare, registered $5.7 billion in total net assets.

Martha’s Vineyard Hospital is owned by Mass General and is part of the Partners network of hospitals.

The overdue report concluded that the acute care hospital industry shrank from 111 facilities in 1990 to 66 in 2008, a 40 percent decrease primarily attributable to mergers and acquisitions but also reflective of hospital closures.

According to the report, hospitals “cannot remain financially viable without earning and maintaining adequate financial resources,” but “the ongoing accumulation of financial resources may lead to higher than necessary prices and higher than necessary health care costs.”

In a statement, the Massachusetts Hospital Association said the $17.2 billion in net assets “can be easily misleading” and includes assets of hospitals, community health centers, physician practices, nursing homes, home health agencies, assisted living residences, and other retirement housing facilities.

The association said the “most impressive element of the division’s report is the inadequacy of hospital total surpluses and reserves.” It added, “Hospitals’ needs for reserves are significantly different from those of insurers, given their scope of responsibility and exposure. Hospitals must balance their charitable and societal missions with positive financial performance if they are to adequately serve their communities. While a majority of the Bay State’s hospitals are not-for-profit, all hospitals are capital-intensive enterprises and must maintain reserves for capital and infrastructure investments/improvements, labor costs, and fiscal uncertainties such as continued government underpayment for care.”

Rising health care costs are choking private and public sector budgets, consuming a disproportionate share of newly available revenues and suppressing hiring in the private sector and the ability to spend on other priorities in the public sector. Major payment system reforms are under consideration.

The report also found that hospitals that are part of multi-hospital systems had somewhat stronger financial performance than did hospitals that are not part of larger systems.