post-pandemic Despite a drop in federal aid levels, Massachusetts hospitals are turning a profit again amid financial woes.
A preliminary report for fiscal 2021 released Thursday by the Center for Health Information and Analysis found that the overall profitability of the state’s hospitals was 6 percent — meaning hospitals earn 6 percent more than they spend — an increase of 2.9 percentage points from last year. . Of the 47 hospitals reporting data, 44 ended the year profitable. Every type of hospital—community hospitals, teaching hospitals, etc.—reported better financial results in 2020 than in 2020.
However, their operating margin — which reflects operating expenses, not the assets they own — was lower, with a profit of 1.2%, down 0.1% from last year.
Profits included the $405 million the hospital received from federal recovery funding. That’s a big number, but far less than the $1.8 billion in rehabilitation funding federal hospitals received in fiscal 2020.
The Massachusetts Health and Hospitals Association noted that lower operating margins are evidence that hospitals are still struggling. The association maintains that the 6 percent figure, which includes assets, is primarily “on paper” gains related to investments, while operating margins are a more accurate number because they reflect the hospital’s ability to make ends meet on a day-to-day basis.
“2021 has been a devastating year for the stability of the healthcare system, with providers under tremendous financial pressure as they navigate the pandemic,” said Danielle Daniel, vice president of healthcare finance and policy at the Massachusetts Health and Hospital Association McHale said. “Healthcare providers have spent every dollar they need to continue serving their communities, even as they incur huge losses during the rollback of planning procedures and other non-urgent care services.”
The Hospital Association said its survey of member hospitals found that the median operating profit margin fell to negative 10% in January, implying a loss for hospitals as a whole. After the time period covered by the CHIA report, Massachusetts hospitals lost more than $430 million in the first two months of the year, the association said.
McHale said the hospital “continues to rely on the support of our public officials” for additional funding related to the pandemic response and challenges for healthcare workers.
The CHIA report also found that 37 out of 45 hospital-affiliated physician groups lost money, a figure consistent with previous years.
The state’s largest health care system, Mass General Brigham, posted the state’s second-largest profit: $3.162 billion. The Health Policy Council recently asked Massachusetts Commander-in-Chief Brigham to develop a cost-cutting plan.
Trinity Health, the parent company of Mercy Medical Center, made more money, at $3.85 billion, due in part to $632 million in COVID relief payments.
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The only hospital system with a profit of more than $1 billion was Boston Children’s Hospital, with revenue of more than $1.088 billion.
Among these hospitals, operating margins, which reflect daily operating profit, are modest, with Trinity and Mass General below 3% and Boston Children’s in the red. The biggest gains come from assets, which include real estate values and investments, among others.
Hospitals’ finances have been battered by COVID-related shutdowns over the past few years, while federal aid has given them a boost. At the start of the pandemic and this winter, hospitals were asked to stop performing non-emergency procedures, and many people were hesitant to enter a hospital or doctor’s office for fear of contracting COVID, even as hospitals fully reopened.
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