While academic medical centers have the best financial performance of any group of New York City hospitals, they had significantly lower margins than their peers in other states, concludes a new United Hospital Fund report.
“Financial reimbursement of hospitals is sure to change as the result of public policies at the state and federal levels and in response to commercial insurance practices,” says James R. Tallon, Jr., president of the United Hospital Fund. “This report shows that changes in hospital payment methods, even those affecting New York’s best-performing hospitals, must consider the unique characteristics of the New York market.”
The report The Financial Condition of the Leading Academic Medical Centers in New York City and the Nation compares data from four New York City academic medical centers to seventeen academic medical centers elsewhere in the country, drawn from U.S. News and World Report’s “Honor Roll of American Hospitals.” Examining the performance both of each academic medical center hospital and of the health system of which each is a part, the report identifies multiple reasons for the difference in financial performance:
• Length of stay: The study looked at four tiers of hospitals, grouped by closeness of operating margin. The tier of New York City’s academic medical centers had the longest length of stay—25 percent longer than that seen within the best-performing tier of national academic medical centers and even 20 percent longer than that seen within the third tier. (A longer length of stay increases the cost of caring for each patient and limits the number of patients who can be treated in any given period, both of which constrain margins.)
• Payer mix: New York City’s academic medical centers treat proportionately more patients covered by Medicaid (which often reimburses below the cost of care) and fewer patients covered by commercial insurance (which, according to a Congressional advisory commission, pays hospitals, on average, 132 percent of cost).
• Service mix: The proportion of surgical admissions (generally more-profitable patient cases) among New York City academic medical centers is 15 to 39 percent less than the proportion seen among their national peers.
• Marketplace competition: Unlike most academic medical centers nationally that have a near monopoly on tertiary and quaternary services in their markets, New York City’s academic medical centers operate in a much more competitive market, which the report’s analysts believe may translate to pricing pressures and lower commercial margins.
“While some important factors contributing to the financial performance of academic medical centers, such as efficiency, are within their control, others appear to be dictated solely by their location, such as the demographics of their community or the level of competition from other centers,” says Sean Cavanaugh, director of health care finance. “Policymakers and the public need to know much more about these complex organizations because they are clearly strengthening their role in New York City’s hospital industry.”
Written by Steven Fass, senior financial analyst, and Sean Cavanaugh, the full report is available.
The academic medicals centers included in the report:
New York City
1. Montefiore Medical Center
2. Mount Sinai Hospital
3. NYU Hospitals Center
4. NewYork-Presbyterian Hospital
National Comparison Group
1. Barnes-Jewish Hospital, St. Louis, Mo.
2. Cleveland Clinic, Cleveland, Ohio
3. Duke University Hospital, Durham, N.C.
4. Hospital of the Univ. of Pennsylvania, Philadelphia, Pa.
5. Johns Hopkins Hospital, Baltimore, Md.
6. Massachusetts General Hospital, Boston, Mass.
7. Ohio State University Medical Center, Columbus, Ohio
8. Ronald Reagan UCLA Medical Center, Los Angeles, Calif.
9. Saint Mary’s Hospital, Rochester, Minn.
10. Stanford Hospital, Palo Alto, Calif.
11. University of Washington Medical Center, Seattle,Wash.
12. UCSF Medical Center, San Francisco, Calif.
13. University of Chicago Hospitals, Chicago, Ill.
14. University of Michigan Hospitals, Ann Arbor, Mich.
15. UPMC Presbyterian, Pittsburgh, Pa.
16. Vanderbilt University Medical Center, Nashville,Tenn.
17. Yale-New Haven Hospital, New Haven, Conn.
Please note: This report was updated on March 10, 2010, to correct a technical error in the calculation of operating margins. The numbers in the release above have been corrected.
About the United Hospital Fund: The United Hospital Fund is a health services research and philanthropic organization whose mission is to shape positive change in health care for the people of New York.
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