Profits rise while outlook not all good

Increase expected to be short-lived

A recent American Hospital Association survey shows that American community hospitals saw profits rise by more than 50 percent in 2010, a trend projected to be somewhat short-lived.

According to the survey, hospitals posted more than $50 billion in total profits in 2010, taking into consideration net revenues, operating revenues, spending, payrolls and benefits.

But, according to Caroline Steinberg, the AHA’s vice president of trends analysis, the improved margins really reflect hospitals’ intensive efforts to manage costs as they are bracing themselves for tough times ahead.

“As you go into 2011 we’ve got a number of key policy changes, like Medicare reductions that were mandated as part of the Affordable Care Act,” said Steinberg. “We’ve got a lot of pressures on states on the Medicaid program because of state budget shortfalls so we’ve seen a lot of payment cuts.”

Steinberg said there is anticipated trouble on the horizon because of pressures from private payers as well as public cuts. There is also a lot of general pressure to move things out of hospitals to respond to healthcare reform.

“They’re going to see pressures from the reimbursement side, and volumes are going to continue to be flat to declining, particularly on the inpatient side,” she said.

Hospitals are also being driven to improve their information technology systems, facing penalties from the Medicare program if they don’t meet standards for meaningful use.

However, Steinberg notes that as hospitals prepare for these cuts and reductions, cost management has been well maintained. In 2010, cost growth was held to only 2.7 percent, which is significantly below historical averages, according to the AHA.