Thin Margins, New Opioid Bill, Stalled Reform, and more...

State Report Shows Hospitals are Skating on Thin Ice

The state has released Massachusetts hospital financial performance data for all of 2017 and the picture is not at all rosy.

Nineteen of 62 hospitals that reported – or 31% -- had negative operating margins.  In 2016, 16 hospitals had negative operating margins.

The report from the state’s Center for Health information and Analysis (CHIA) found that the statewide median acute care hospital margin was just 1.6% -- plummeting from 2.8% in FY2016 for the same set of hospitals.  A hospital’s operating margin reflects the difference between its revenues and expenses from patient care. An operating margin of less than 3% is generally considered financially unhealthy by the lending agencies, meaning the cost of borrowing increases. (Half of Massachusetts acute care hospitals have an age of plant over 11 years—the older the average age, the greater the short term need for capital resources.) Sixty-five percent of hospitals in the CHIA report had operating margins below the 3% level.

All types of hospitals suffered in 2017 as compared to 2016. Median operating margins for community hospital dropped from 3% in 2016 to 0.9% in 2017, teaching hospitals went from 3.8% to 2.7%, academic medical centers from 1.9% to 1.8%, and what CHIA defines as “community high public payer” facilities dropped from 3.4% in 2016 to 2.9% in 2017.

The median statewide total margin – which includes investment income – was 3.2%, but more than a fifth of hospitals reported negative total margins.  Fifty-eight percent of hospitals had declining total margins compared to last year.

In the coordinated healthcare system, physician practices are owned or affiliated with hospital systems. The picture the CHIA report paints of the physician organization financial health is dire. Of the 42 physician organizations, only eight reported a profit in 2017. The median total margin for these physician organizations was negative 20.5%.

"Due to the increasing volume of public payer patients, the negotiating strength of commercial insurers, and steadily rising labor costs which account for two-thirds of a hospital’s expenditures, the bulk of the Massachusetts hospital community is operating on razor thin margins,” said Steve Walsh, MHA president & CEO. “Yet the most troubling financial threat is the Question One nurse staffing ballot question this November that would cost Massachusetts hospitals $1.3 billion to implement in the first year and $900 million annually after that. Apart from the scientific/patient care argument against ratios, the financial impact of the ballot question is enough to cause any reasonable proponent of our state’s impressive medical culture to vote No.”

Reform Bill Agreement Stalls at Final Hour of Session

The legislative effort to get Massachusetts community hospitals some much-needed financial relief failed last week as the House and Senate were unable to reach compromise on two similar but ultimately irreconcilable healthcare reform bills before the legislative session ended July 31.

The funding proposals in the bills were bitterly opposed by the health insurance industry and others.

Failure to pass a reform bill means that subsidiary parts of the bills that both sides agreed upon also went down to defeat. Among the initiatives in the bill that hospitals supported in the bill were efforts to advance and expand telemedicine in Massachusetts; to expand the scope of practice for dental therapists and advance practice registered nurses; and to bring more transparency to pharmaceutical pricing.

“It is unfortunate that a final deal could not be struck,” said MHA President & CEO Steve Walsh. “However, the legislative calendar will not stop our member hospitals, both community and teaching, from being excellent caregivers, employers, and neighbors to all that they serve.  While this is a temporary policy setback, we are thankful to have thoughtful and committed legislative leaders who will not stop working to develop comprehensive solutions to the most complex healthcare challenges.  To best protect patients across the commonwealth, it is imperative that we stabilize our high-value community providers and ensure their long-term viability. Although a resolution was not reached, we know for certain by the efforts of both the House and Senate that they share this common goal and we look forward to continuing our collaborative efforts.”

Opioid Bill Passes

Close to midnight on July 31, the Massachusetts Senate enacted and sent to Governor Baker HB4866 – the final text of legislation agreed to by the House and Senate to address the opioid epidemic.

A major component of the bill is its directive to acute care hospitals that deliver emergency services, as well as satellite emergency facilities, to have the capacity to initiate opioid treatment involving buprenorphine therapy, among other such “opioid agonists.” Hospitals would also be required to connect patients to continuing treatment. MHA was supportive of this language and convened a workgroup earlier this year to develop recommendations for hospitals to implement the requirements.

The bill was a priority for Governor Charlie Baker who met with the MHA Board of Trustees earlier this year to press for support of its passage. MHA and its membership have been involved in the fight against the opioid epidemic and worked with legislative sponsors on a variety of measures to strengthen the legislation, including: language to make it easier for hospitals to more smoothly integrate MassPAT (the state’s prescription monitoring program), partial fill of opioid prescriptions, and provisions allowing licensed certified social workers and other healthcare providers (including interns, residents and fellows) to perform substance use disorder evaluations in hospital emergency departments.

“MHA and the hospital community stand as committed partners to the legislature, Governor Baker and his administration, and all other healthcare stakeholders to implement this comprehensive legislation, which we believe will support the needs of patients and help defeat the scourge of opioid addiction,” said MHA President & CEO Steve Walsh.

Wellforce and South Shore Announce Expansion Plans

Wellforce – the system that includes Tufts Medical Center, Circle Health, and MelroseWakefield Healthcare (formerly Hallmark Health) – announced last week that it was adding Home Health Foundation to the system.

Home Health Foundation provides home health and hospice services in 110 cities and towns in Northeastern Massachusetts, Southern New Hampshire, and Southern Maine.

The agreement has to be approved by the state’s Health Policy Commission (HPC).

At the end of July, South Shore Health Express – which South Shore Health System acquired in February – submitted a material change notice to the HPC announcing that it would acquire “Health Express” – a limited liability company that operates physician offices providing walk-in urgent medical care in Abington, Kingston, Pembroke, Plymouth, Quincy, West Roxbury, and Weymouth. (A Health Express urgent care center in Raynham is not included in the transaction.)

MHA Emerging Leaders Program

It will take visionary leaders to transform healthcare organizations and to deliver services in the current dynamic environment. MHA’s Annual Emerging Healthcare Leaders program is tailored to hospital and healthcare professionals who seek to elevate their management skills and knowledge within this challenging atmosphere. Day One of the two-day program will help attendees understand the system in which they are working by providing a broad overview of national and local healthcare trends. During Day Two, attendees will gain the skills needed to become an effective and strong team leader and colleague.  The program runs on Tuesday and Thursday, September 18 and 20 from 8 a.m. to 3 p.m. each day. Class size is limited. Learn more about this important program, including cost and registration, by visiting here.


Jeffrey Welch, who has led Tenet Healthcare hospitals in Massachusetts and South Carolina since May 2017, is leaving his post to take over Tenet’s operations in the Miami area.  Tenet is the parent of Saint Vincent Hospital in Worcester and MetroWest Medical Center in Framingham.  Ava Jo Collins, Saint Vincent's chief operating officer, has been named the interim CEO.

John LoDico, Editor