The Wisconsin Hospital Association’s latest annual financial report highlights ongoing challenges for health care providers amid a “sustained period of low margins” as well as higher profits for hospitals.
WHA yesterday released its “Guide to Wisconsin Hospitals, Fiscal Year 2023” report, which shows hospitals in the state saw a 40.8% decline in operating margins between fiscal years 2021 and 2023. Fiscal years vary by hospital, but the most common time frame is the calendar year, used by 90 of the 167 reporting hospitals.
Nearly half — 82 of 167 — are reporting a decline, according to figures in the report. And 55 hospitals, or about one-third of the state’s total, were operating at a negative total margin.
Meanwhile, health systems had a 117.8% decline in operating margins, falling to -0.8% in fiscal year 2023.
And 32 of the state’s 84 “safety net” hospitals, which serve groups with higher rates of Medicaid coverage, reported financial losses for the fiscal year. The share of these hospitals seeing losses, 38.1%, is greater than the 33.7% seen in the prior year, according to WHA.
Still, these declines have happened as profits for non-specialty hospitals have more than doubled over the year.
WHA reports Wisconsin hospitals had $2.07 billion in net income in fiscal year 2023, up from $0.94 billion in the prior fiscal year. For general medical-surgical hospitals, that figure rose to $2.08 billion from $0.94 billion over the fiscal year. Specialty hospitals — including long-term acute care and psychiatric hospitals — together reported net income of -$10.2 million, compared to $6.7 million in the prior fiscal year.
Brian Potter, senior advisor for WHA, explains net income includes non-operating income, which can include things like the sale of buildings but is primarily made up of investment returns.
“A lot of these hospitals have been around for 100 years, or 80 years … so their balance sheets over that time have created some investment portfolios that, in a year like this where the stock market has been incredibly strong, and last year as well kind of rebounding from the COVID crash, that’s where you’re seeing that net income versus operating margin, that’s the difference,” he said yesterday in an interview.
While he said the net income figure is “not an insignificant component,” it’s largely unrelated to the cost of operating a hospital and providing care. Potter noted supply and service costs have risen 16.6% since fiscal year 2021, while salary and “fringe” expenses have risen by 11.3%.
He also said cost-shifting between hospitals is playing a role in the financial landscape in Wisconsin. Some hospitals that take care of Medicare and Medicaid patients are reimbursed at less than cost, and try to make it up through commercial reimbursement, according to Potter.
“There’s sort of cross-subsidization,” he said. “So in other words, there’s more money-losing hospitals, but many of those are part of [health systems] and so they can be subsidized by some of the hospitals that gain.”
At the same time, “continuum of care” elements that don’t show up in hospitals’ financial statements appear on the health systems’ statements, such as clinics, nursing homes and assisted living facilities that tend to lose money, Potter said.
“Not-for-profit health systems are really dedicated to providing the continuum of care to make health care quality much better,” he said.
He added: “Having a margin in 2023 is important, because the environment isn’t getting any easier. It’s getting more difficult.”
See the full report and release.
