Becker's Hospital Review

58 Financial Management I n 2012, the average Medicare margin for a U.S. hospital stayed steady at -5.4 percent, according to the latest data analyzed by the Medicare Payment Advisory Commission. MedPAC released its 2014 report to Congress in March, which included several recommendations and research data related to Medicare payments to hospitals and health systems. Hospitals are usually underpaid by Medicare, which reimburses organizations under the in- patient and outpatient prospective payment systems. The most recent figure of -5.4 percent means that hospitals, on average, are paid a little less than 95 cents for every dollar they spend tak- ing care of a Medicare patient. Medicare margins were better for critical access hospitals, which are paid 101 percent of allowable costs and are not on the IPPS and OPPS. Major teaching hospitals also continued to fare bet- ter than most other hospitals, as their Medicare margins were -2.6 percent in 2012. In 2007, the average major teaching hospital had a Medicare margin of -0.5 percent. For-profit hospitals actually made a positive margin on Medicare patients, on average, in 2012. Those fa- cilities posted a 1.5 percent Medicare margin, com- pared with -7.1 percent for nonprofit hospitals. Looking at MedPAC's data, hospitals that typi- cally lose the most on Medicare patients are nonprofit, urban hospitals without a teaching program. Hospitals that perform the best are for- profit, rural hospitals and some major teaching hospitals. However, MedPAC noted that although most hospitals continued to lose money on Medi- care patients, the average all-payer margin for hospitals reached a 20-year high in 2012. The to- tal margins for hospitals increased to 6.5 percent in 2012, meaning hospitals posted solid operating profits thanks in part to higher reimbursements from commercial payers. Here are 54 statistics on hospital Medicare mar- gins from 2007 to 2012, based on MedPAC's data. Note: MedPAC defined a Medicare margin as Medicare payments minus "allowable costs" of treating Medicare patients, divided by Medicare payments. MedPAC excluded Maryland hospitals, which are paid on their own unique system. n 54 Statistics on Hospital Medicare Margins By Bob Herman Type of hospital 2007 2008 2009 2010 2011 2012 All hospitals -6.1% -7.3% -5.4% -4.7% -5.5% -5.4% Urban -6.3% -7.5% -5.5% -4.9% -5.8% -5.8% Rural (excluding CAHs) -5.2% -6.1% -4.6% -2.8% -2.9% -1.9% Rural (including CAHs) -3.7% -4.3% -3.2% -1.8% -1.6% -0.3% Nonprofit -7% -8.5% -6.7% -6% -6.8% -7.1% For-profit -3.5% -2.9% -0.3% 0% -0.3% 1.5% Major teaching -0.5% -2.4% -1.1% -0.5% -2% -2.6% Other teaching -6.5% -7.3% -5.3% -4.8% -5.1% -5.2% Nonteaching -9.4% -10.2% -8.2% -7.3% -7.9% -7.2% SuBSCRIBE TODAy! Becker's Hospital Review CEO Report E-Weekly Guidance, analysis and best practice information on hospital leadership, operations and management issues for top hospital and health system executives Each E-Weekly, sent every Tuesday, contains the most popular feature articles covering business and legal issues, CEO profiles and benchmarking and statistical data to immediately inform your decision-making To subscribe to the FREE E-Weekly, visit www.BeckersHospitalReview.com and click on the "E-Weekly" tab or call (800) 417-2035

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