Houston Medical Journal June 2017 MJHNews_June2017finallo
LEGAL AFFAIRS: ACA’s nondiscrimination provision and the shifting tides of healthcare regulation, see page 4
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The Leading Source for Healthcare Business News
June 2017 • Volume 14, Issue 3 • $3.50
INSIDE
▼
How an old cookie factory is
driving life science startup
growth in Houston
see page 5
INDEX
▼
Financial Perspectives.......3
Legal Affairs......................4
Technology.......................5
THA...............................6
Integrative Medicine.........7
Breaking Ground..............8
Hospital Headlines.........9
Moving On Up..............10
The teaching kitchen:
Practical nutrition
in action
see page 7
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High net patient revenue doesn’t
necessarily bring high margins
BY WILL FOLTZ, Definitive Healthcare
Looking at the table showing the top 25 Greater
Houston hospitals by net patient revenues on
page 14 and 15, it’s clear that just because a
hospital ranks highly in the list, the facility may
not have had a strong operating margin in 2016.
In fact, a hospital’s margin appears more closely
associated with several other factors besides
revenues.
Generally, nonprofit and state-owned hospitals
with unfavorable payor mixes and smaller
inpatient revenue shares had lower operating
margins than for-profit facilities with better
corresponding characteristics in the Greater
Houston area.
The first-ranked hospital on the list is a good
example of how high net patient revenue
doesn’t guarantee a positive margin. The
case of University of Texas MD Anderson
Cancer Center suggests that its exceptionally
low inpatient revenue component of its total
revenue depressed its margins. Its share, 33% is
considerably lower than the top 25 median, 55%.
Past studies have shown that hospitals that
profited from inpatient Medicare admissions had
a much larger margin per case than those with
profitable outpatient Medicare cases. A hospital
with a large outpatient revenue component may
face tighter cost constraints, limiting profit per
case. Taken as a whole, the top 25 hospitals do
show a slight correlation between operating
margins and inpatient revenue share, even when
eliminating the Ben Taub General Hospital
outlier.
Other contributing factors could be expenses
related to MD Anderson’s large workforce,
which dwarfs many of the other hospitals on
the list, and its comparatively longer length
of stay, which in some cases can reduce the
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