MHA: Hospitals’ Financial Condition Deteriorating

BOSTON — Massachusetts hospitals experienced a dramatic decline in their financial condition during the first half of fiscal year 2008, according to a new Massachusetts Hospital Assoc. (MHA) report. The report, which includes data from all 65 acute-care hospitals for the period Oct. 1, 2007 through March 31, 2008, reveals that 37% of hospitals had negative operating margins, and 37% had negative total margins. In the second quarter of 2008, 66% of hospitals experienced a decline in operating margins, and 69% saw a decline in total margins. After several years of improving finances, current-year margins for Massachusetts hospitals have taken a turn for the worse, according to MHA President and CEO Lynn Nicholas, FACHE. The median operating margin for Massachusetts hospitals for the period ending March 31, 2008 was 0.9%, while the median total margin was 1.8% — both declines from the second-quarter 2007 medians of 2.2% and 3.5% respectively. “This is very troubling since positive margins are essential for hospitals to be able to continue investing in critical health care services needed by their communities,” said Nicholas. “National experts agree that for hospitals to remain financially healthy, margins should be at least 3%.” According to the MHA, the shrinking margins are due to the growth in hospital expenses far outpacing the increase in revenue from insurers and government programs. Acute-care hospital total expenses increased by 7.6% in the aggregate from the second quarter of 2007 to the second quarter of 2008, with payroll and benefit expense — the largest component of hospital expenses — growing by 8.2%. By contrast, the Medicare hospital inflationary update for 2008 was only 3.3%. In addition, net patient service revenue increased by 7.5% during the same period, according to the MHA. “Clearly, hospitals are operating in a challenging environment,” said Nicholas. In Western Mass., three hospitals reported losses to the state Division of Health Care Finance and Policy — Baystate Franklin Medical Center in Greenfield, Holyoke Medical Center, and Noble Hospital in Westfield. In Springfield, Mercy Medical Center reported a loss for the first three months of 2008. Mercy officials noted that their fiscal year corresponds with the calendar year. Among the area hospitals reporting operating surpluses were Baystate Medical Center in Springfield, Cooley Dickinson Hospital in Northampton, Wing Memorial Hospital and Medical Centers in Palmer, and Baystate Mary Lane Hospital in Ware.

Manufacturers Address Concerns With State Leaders

CHICOPEE — During a recent roundtable discussion, more than a dozen local manufacturers met with state officials and a legislative panel to air their concerns about employee health insurance, job training, and the rising cost of utilities. Sponsored by the Chicopee Chamber of Commerce’s Manufacturers Coalition and Government Affairs Committee, the business owners urged the state representatives to alert Boston to what their issues and needs are. Daniel O’Connell, state secretary of Housing and Economic Development, noted that funding is available for employee training, but that employee health insurance remains a challenge. O’Connell also noted that it is expensive to do business in the state, but that Massachusetts has a reputation of having one of the highest workforce-productivity rates in the country. As the state launches its $1 billion, 10-year life-sciences and biotechnology initiative, O’Connell noted that funding will be available for capital, research, and tax incentives for certified life-sciences projects. Local manufacturers pressed O’Connell to ensure that the manufacturers are included in the biotechnology discussion loop for future projects.

GSA Considers Purchase of Federal Building

SPRINGFIELD — The General Services Administration is considering the purchase of the federal courthouse building on Main Street, according to officials of the Mass. Development Finance Authority (MassDevelopment). With the primary tenants relocating to the new $70 million federal courthouse on State Street, the fifth floor is now empty and could be rehabbed for new tenants. MassDevelopment, which helps redevelop commercial real estate across the state, is serving as consultant for the city for the future of the property. Federal agencies remaining as tenants at the 1550 Main St. site include military recruiting offices; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and the Internal Revenue Service’s civil and criminal divisions. At press time, both sides were working to determine a fair market value for the site.