More CT hospitals end 2016 in the black but fiscal picture mixed

Twenty of the 28 hospitals in Connecticut had positive total margins — meaning they were in the black — in the 2016 fiscal year, up from 17 the year before, according to a report by the state Office of Health Care Access.

Despite the clear majority with positive margins, however, some hospitals still struggled in the fiscal year that ended on Sept. 30, 2016.

Overall hospitals took in $864 million more than they spent in 2016 — an increase from the $421.1 million earned in 2015. However the bulk of that increase was from a large spike in revenue from non-operating sources, which include investments, endowments and donations.

But, the report noted, more than half of that increase was related to transfers from UConn Health to John Dempsey Hospital in Farmington — the largest transfer was for the new hospital tower that opened at Dempsey last year.

Additionally, statewide hospital income from operations declined for the second year in a row.

“While non-operating income is helpful to hospitals during times of decreased operating revenue, it may be considered risky to expect these gains to continue indefinitely,” the OHCA report said.

The Connecticut Hospital Association pointed out that the statewide average operating margin was 2.95 percent in 2016 — down from 3.9 percent in 2015. 

CHA spokeswoman Michele Sharp said hospitals require a minimum 4 percent operating margin to remain viable and to have sufficient resources to attract new employees and to invest in technology and equipment.

As in previous years, the financial performance of hospitals varied greatly. The top performer was Dempsey with a 43.3 percent total margin, but that was inflated by the one-time transfer for the new hospital tower. Backus Hospital in Norwich, a strong performer over the last few years, had a 20.3 percent margin.

Sharon Hospital reported a -38.3 percent margin because of a one-time accounting adjustment. This summer, Sharon joined Health Quest Systems, a non-profit health system that owns and operates several hospitals in New York. 

The next-worst margin was Rockville’s at -20.5 percent. Last October, Eastern Connecticut Health Network — which included Rockville and Manchester hospitals — was purchased by Prospect Medical Holdings, a for-profit company in Los Angeles. Prospect also bought Greater Waterbury Health Network last year, which includes Waterbury Hospital.

Six hospitals — Danbury, Day Kimball, Hospital of Central Connecticut, Milford, St. Francis and St. Vincent’s — reported positive total margins in 2016 after having negative margins the year before.

Milford reported its first positive total margin — 1.1 percent — after reporting a negative total margin for eight years.

Windham — with a total margin of -19 percent — reported negative total margins for eight years in a row.

The report also tracked uncompensated care charges, which totaled $663.3 million in 2016 across the state, increasing $19.7 million or 3.1 percent over the previous year.

There are two components of uncompensated care — charity care and bad debt. Charity care occurs when a hospital knows in advance that the care provided will not be reimbursed. Bad debt occurs when services aren’t paid for, with no forewarning.

Bad debt accounted for $401.6 million and charity care for $261.7 million.