Most Massachusetts hospitals were profitable last year, even as they faced pressures to control expenses and become more efficient in a fast-changing health care market.
A report set to be issued Thursday by the state’s Center for Health Information and Analysis, or CHIA, showed that 80 percent of the state’s 65 hospitals ended 2015 with a net profit.
Hospitals posted a median operating margin of 3 percent of revenue. Total profit margin, which includes investment income, was a median of 3.7 percent. Those results were similar to how hospitals have performed over the past few years.
“Profitability declined slightly relative to the previous year,” CHIA spokesman Andrew Jackmauh said in an e-mail. “The majority of hospitals, however, remained profitable.”
CHIA reports on hospitals’ financial performance annually as part of its role to study the health of the state’s health care industry. Most Massachusetts hospitals are structured as nonprofits but still must produce some income to sustain their operations.
Among the most profitable hospitals were Massachusetts General and Brigham and Women’s, which are the state’s largest academic medical centers and are both owned by Partners HealthCare. Mass. General ended the year with $201.1 million in net income, while Brigham had net income of $60.8 million.
Net income was $76.8 million at Baystate Medical Center of Springfield, $60.1 million at Worcester’s UMass Memorial Medical Center, and $87.2 million at Southcoast Hospitals Group of New Bedford.
But some hospitals had significant net losses, including North Shore Medical Center, which is also owned by Partners and lost $36 million. Tufts Medical Center lost $18.2 million, and the long-struggling Carney Hospital in Dorchester, which is owned by Steward Health Care System, posted a net loss of $8.3 million. The numbers are for the 2015 fiscal year, which for most hospitals ended last September.
Overall, the figures show that most hospitals were able to stay in the black despite challenges. State and federal laws require them to control rising costs. At the same time, hospitals are seeing smaller increases in payments from private insurers as well as the government insurance programs Medicare and Medicaid.
The market has been especially tough for some community hospitals, which face strong competition from bigger and better known medical centers. Two hospitals, Quincy Medical Center and North Adams Regional Hospital, closed in 2014. Many other hospitals have pursued mergers and other partnerships to try to remain viable.
“Managing through this period of transition is difficult,” said Timothy F. Gens, executive vice president of the Massachusetts Hospital Association, a trade group. “It’s a tremendous challenge.”
Gens said the CHIA report includes some useful information but does not fully reflect what hospitals are experiencing. For example, hospitals often have to use their profits to subsidize related businesses, such as physician practices, he said.
This year alone, he added, hospitals are bracing for a $110 million cut in Medicare payments, largely because of a math error in paperwork submitted by Partners that federal officials declined to correct. And state officials are proposing rule changes that could result in more than $100 million in cuts to Medicaid payments, Gens said.
The CHIA report does not account for the financial performance of hospitals’ parent companies, which can lose money even if the hospitals they own are profitable.Priyanka Dayal McCluskey can be reached at firstname.lastname@example.org. Follow her on Twitter @priyanka_dayal.
Correction: An earlier version of this story gave the incorrect profit ranking for Brigham and Women’s Hospital among Massachusetts hospitals. It is among the most profitable. The story also overstated the impact of a paperwork error by Partners HealthCare on Medicare payments to hospitals in the state. They face a $110 million reduction largely because of the error.