Connecticut Hospitals Still Experiencing Financial Crunch

NEW HAVEN (AP) — The 2002 fiscal year was a grim one for Connecticut’s 31 acute care hospitals, which collectively saw expenses top revenues and investment income drop, according to the state Office of Health Care Access.

The agency reported Tuesday that the hospitals had a median operating margin of 0.6 percent in the year that ended September 30, 2002 — the same margin as in 2001. Operating margin is revenue from patients minus costs.

Analysts say hospitals need operating margins of three percent to five percent to remain fiscally healthy, the New Haven Register reported Wednesday.

“Many hospitals have increased revenue, but their expenses have gone up. These are expenses they cannot control,” OHCA Commissioner Cristine Vogel said.

The OHCA’s annual report on hospital finances says the 31 facilities have been hurt by staff shortages, increased malpractice insurance costs, rising pharmaceutical costs, rising wages, and increased costs for collecting bills.

While revenue from patients increased to $4.8 billion in fiscal 2002 from $4.3 billion the year before, total expenses rose to $4.9 billion in 2002 from $4.3 billion in 2001, the newspaper reported.

Losses on investments, reflecting the sinking stock market, drove total income margins down from 3.1 percent in 2001 to 0.1 percent in 2002. Total income includes patient services income and earnings from investments and donations.

As a result, net assets — the total worth of all the state’s hospitals — declined by $222 million in 2002, to $3.8 billion. In 2001, net assets fell $68 million.

Hospital finances have been eroding for years, said Ken Roberts, spokesman for the Connecticut Hospital Association in Wallingford.

“There are two major dynamics: less ability to cover the cost of private payers (insurance companies), and fundamental underfunding by government payers (federal programs like Medicaid and Medicare),” he said.

Hospitals traditionally have subsidized the cost of patients who receive government subsidies, which only partially pay the cost of their care, by charging more to private insurers and managed care firms. But private payers have been demanding more discounts, and that is reflected in the bottom line of many hospitals, Roberts said.

Yale-New Haven Hospital’s net assets, for example, rose to $436 million in 2002 from $424 million the year before, and its net patient revenues increased to $557 million from $509 million in the same time frame. But total expenses climbed to $559 million in 2002 from $524 million the year before.

Yale-New Haven Hospital’s 2002 bottom line was helped by continuing increases in patient demand and by one-time events, said Vin Petrini, vice president of public affairs.

He said the one-time events included a $20 million cost-cutting effort, an insurance settlement to cover flood damages and a successful appeal of government reimbursement.

“In Connecticut, the critical issue for all hospitals is the Medicaid reimbursement,” said William Powanda, vice president of services at Griffin Hospital in Derby.