With profits down, future of Mass. hospitals questioned

As they brace for an era of shrinking government funds and mounting pressure to cut prices for medical services, Massachusetts hospitals face growing financial strains.

Two dozen — more than a third of the state’s total — lost money last year, including rural community hospitals, urban safety net hospitals, and even affiliates of renowned academic medical centers, according to a new report from the Division of Health Care Finance and Policy.

Among the biggest money losers were Boston Medical Center, which posted a $25.1 million deficit, Steward St. Elizabeth’s Medical Center in Brighton, which lost $20.9 million, and Quincy Medical Center, which was $18.5 million in the red.

The industry’s performance was worse than in 2010, when 16 hospitals posted losses, and in 2009, when 13 were unprofitable. Overall, profit margins for the state’s 65 acute care hospitals fell to a razor thin 2.1 percent in 2011, compared with 2.6 percent the prior year, the state report said.

Those numbers provide a financial snapshot of a health care market that was scrambling to adjust to rapid changes even before the Massachusetts Legislature passed a law this summer designed to rein in soaring medical costs.

With the state’s intensified focus on affordable care and additional cuts projected for Medicaid and Medicare, the government health insurance programs for low-income residents and seniors, the future of many hospitals across the state is uncertain. In some cases, their survival may be in doubt.

“It’s going to be musical chairs,” said Donald J. Thieme, executive director of the Braintree-based Massachusetts Council of Community Hospitals. “When the music stops, I think we’re going to be short a couple of teaching hospitals and maybe a few community hospitals.”

But unlike an earlier period of consolidation in the 1980s and early 1990s — when dozens of small hospitals were shuttered — Massachusetts health care leaders say a more likely scenario this time will be for hospitals to specialize in some services, abandon others, and join integrated networks to strengthen their financial foundations.

“Everybody has to decide who they want to be and how they fit into the larger scheme,” said Ron Bryant, chief executive of Noble Hospital, an independent 75-bed facility in Westfield that lost $1.7 million last year. Bryant said Noble is focusing on community health services, referring more complex cases to nearby Bay State Medical Center in Springfield.

“We’re going to provide the services people need close to home — whether it’s radiation, blood work, day surgeries — and we’re going to do it better than anyone else,” Bryant said. “But we don’t pretend to do everything.”

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But the biggest economic factor for many hospitals, especially those serving low-income communities, is Medicaid funding cuts. In essence, the state is prodding hospitals to control expenses even as the government reduces funding critical to their medical operations.

“Massachusetts health care reform will advance cost control, but it doesn’t address the underpinnings of Medicaid, which will worsen in 2013,” said Kate Walsh, chief executive of Boston Medical Center. Medicaid payments typically don’t cover the entire price of health care provided by Boston Medical Center, where roughly half of the patients are covered by Medicaid or other low-income health insurance programs.

Read article in entirety at The Boston Globe.