Overall Profitability of State’s Hospitals Slipped in 2016

Overall Profitability of State’s Hospitals Slipped in 2016

But most hospitals in the state finished in the black with some enjoying big double-digit margins.

As 2017 closed, the Minnesota Hospital Association closed the books on its member’s financial performance in 2016. For many hospitals and health systems, it was a very good year.
The MHA released the financial results in a 10-page issue briefThe Financial Health of Minnesota Hospitals and Health Systems in Fiscal Year 2016.
The report includes aggregated operating profit margins and net profit margins for 71 individual acute-care hospitals and hospital systems in Minnesota. The report also includes individual financial results for the same hospitals and hospital systems.
Overall, hospitals’ median operating profit margin here slipped to 1.7 percent in 2016 from 2.4 percent in 2015. Operating profit margins are a measure of profitability from patient care and related revenue only. Hospitals’ median net profit margin dropped to 1.8 percent in 2016 from 3 percent in 2015. Net profit margins include all forms of revenue, including investment income and donations.
“The decline in net margin may be attributed to a variety of factors,” the MHA said. “Certainly, investment performance can be a leading indicator; while the investment market was relatively stable in 2016, some hospitals may have experienced other financing activities that produced negative results, such as disposing of assets, refinancing bonds or paying increased pension obligations.”
Still, of the 71 individual hospitals and health systems listed in the report, 51, or nearly 72 percent, finished in the black in 2016. Fifty-one hospitals or health systems posted positive net profit margins in 2016, while 20 posted negative net profit margins.   
The five hospitals or health systems with the highest net profit margins in 2016 were:

  • Regency Hospital of Minneapolis at 17.1 percent
  • Lake View Hospital at 13.7 percent
  • Johnson Memorial Health Services at 12.3 percent
  • LifeCare Medical Center at 11.2 percent
  • Olmsted Medical Center at 11 percent

The five hospitals or health systems with the highest net profit in dollars in 2016 were:

  • Mayo Clinic with $519 million
  • Fairview Health Services with $221.2 million
  • Sanford Health with $142.2 million
  • HealthPartners with $112.2 million
  • Children’s Minnesota with $83.4 million

How much of their 2016 earnings hospitals and health systems gave away in charity care will be the subject of another MHA report this year, typically released in March. Charity care is the cost of care provided to patients with no expectation of payment.
In 2015, hospitals and health systems here provided $172.6 million in charity care, up from $163.9 million in 2014, according to the MHA’s latest annual Community Benefit Report.