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28 2015 Central Mass By The Numbers • Worcester Business Journal www.wbjournal.com I t's difficult to pinpoint a single factor that's leading to bigger margins for most Bay State hospitals. "There really is no one story," said Aron Boros, executive director of the Center for Health Information and Analysis. There is commonality. Overall, inpatient volume at acute-care hospitals throughout the state is either flat or declining, according to Boros, whose agency, also known as CHIA, heads up health care financial report- ing efforts on behalf of the state. Meanwhile, outpatient volume is increasing. According to CHIA data, median total margins for Central Massachusetts hospitals shifted upward, just slightly, from a median of 4.1 percent in fiscal 2013, to 4.2 percent in fiscal 2014. Though full-year data for fis- cal 2015 (which ended Sept. 30 for most area hospitals) aren't yet available, quarterly data from summer indi- cated strong growth for many local hospitals. MetroWest Medical Center, with campuses in Framingham and Natick, experienced them most improvement. The hospital's operating margin was 7.3 percent at the end of June, up from -2.4 percent a year earlier, based on data for the first six months of the Tenet Healthcare-owned hospital's fiscal year. In a recent interview, hospital officials attributed the uptick in profitability to physician-recruiting efforts and expansion of services in high-demand areas. Growing the hospital's pool of specialists has increased its capture of outpatient volume, according to CEO Barbara Doyle. Harrington Memorial Hospital, which has campuses in Southbridge and Webster, saw its operating margin grow a sizeable 6 percent from June 2014 to June 2015. With an operating margin of 6.2 percent on June 30, Harrington also saw patient volume grow between 7 and 8 percent in fiscal 2015. Part of that is attributed to the opening of a new emergency department in Webster in January, which tripled capacity there. Like MetroWest Medical Center, investing in outpatient services has served Harrington well. In March of 2014, Harrington HealthCare opened a primary care office in Spencer, which CEO Ed Moore said has opened the system up to a segment of the pop- ulation it previously had trouble reaching. "We have a broader critical mass," he said. The Harrington case illustrates that what a hospital system does off the main campus is as important as what it does on the campus. Tom Sullivan, Harrington chief financial officer, said more than 80 percent of hos- pital revenue is generated by outpatient services. "The more we put out in the community as outpa- tient (care), the more successful we'll be," Sullivan said. While many Massachusetts hospitals are maximizing on the growing outpatient business, others have improved financial standing simply by reducing costs. More hospitals are embracing alternative payment methods, which are often called risk-based contracting, which motivates hospitals to manage their patients' health cost-effectively. If they exceed a given budget, they share in the cost, and if they come in under budget, they receive a por- tion of the savings. That's been another factor in improved performance at Harrington, which has moved toward adopting more risk-based contracts, according to Sullivan. Others have simply reduced their overhead expenses. Steve Roach, CEO of Marlborough Hospital, which is part of the UMass Memorial Health Care network, said the hospital began restructuring in early 2014 at a time when it was losing money. The hospital eliminated some positions, which were mostly executive-level jobs, basically cutting out some overhead costs, he said. Marlborough has also focused on process improve- ment to shorten door-to-doctor times in the emergency department. That has led to a steady increase in inpa- tient volumes. Marlborough's inpatient volume grew about 8 percent in fiscal 2015, according to Roach, and that impacted operating margins, pushing them up from -2.3 percent as of June 30, 2014, to 3.4 percent by the end of June this year. Ironically, competition from two new urgent care centers in town has helped Marlborough Hospital, because patients with minor illness are more likely to skip a trip to the emergency room and head to urgent care instead, leaving the hospital to focus on those who, more often, require inpatient care. "We have seen an increase in the acuity of our ER patients, which is what you truly want," Roach said. n By Emily Micucci Worcester Business Journal Staff Writer Margin growth is near-universal for Central Mass. hospitals Source: Center for Health Information & Analysis, September 2015 *Data for Nashoba Valley Medical Center in Ayer was available Source: U.S. Census Bureau: 2014, 2013, 2012 and 2011 American Community Surveys, one-year estimates. Health insurance coverage: 2014 Private 74.4% 73.5% 66.4% Employment-based 65.4% 63.7% 54.2% Direct purchase 11.1% 12.2% 12.8% TRICARE/military 1.0% 1.1% 2.6% Public 35.1% 35.5% 33.2% Medicare 14.9% 16.2% 16.3% Medicaid means-tested public 23.4% 22.8% 19.2% VA health care 1.3% 1.5% 2.2% Uninsured 2.7% 3.3% 11.7% Hospital adjusted expenses per inpatient day across eastern states: 2013 Source: The Henry J. Kaiser Family Foundation, State Health Facts Note: Includes all operating and non-operating expenses for registered U.S. community hospitals (nonfederal short-term general and other special hospitals whose facilities and services are available to the public). 0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Mass. R.I. N.J. Conn. N.H. Maine N.Y. VT. U.S. $2,633 $2,596 EXPENSES PER INPATIENT DAY $2,427 $2,425 $2,380 $2,238 $2,194 $2,156 $2,157 Health Care The ranks of uninsured in the U.S. has had its largest drop since the Affordable Care Act took effect. That figure was 11.7 percent in 2014, compared with 14.5, 14.8 and 15.1 percent, respectively, in 2013, 2012 and 2011. Worcester County Mass. U.S. In 2013, Massachusetts nonprofit hospitals reported higher adjusted expenses per inpatient day ($2,795) than either state government hospitals ($1,878) or for-profit hospitals ($1,762). Current hospital margins Most Central Mass. hospitals have seen an increase in their operating margins through June 30 this year, compared with their fiscal year through June 30, 2014. Athol Memorial Hospital -1.8% -8.8% MetroWest Medical Center, Framingham 7.3% -2.4% Saint Vincent Hospital, Worcester 15.3% 16.5% Heywood Hospital, Gardner 4.3% 1.9% Clinton Hospital -4.9% -4.1% HealthAlliance Hospital, Leominster 3.9% 0.7% Marlborough Hospital 3.4% -2.3% UMass Memorial Medical Center, Worcester 2.4% 0.1% Harrington Memorial Hospital, Southbridge 6.2% 0.2% Milford Regional Medical Center 2.5% 2.5% FY 2015 FY 2014 margin margin