Virginia’s Hospitals’ Financial Strength Improves
Two major healthcare issues confront the General Assembly now meeting in Richmond. One is the expansion of Medicaid and the other is whether hospitals should have more competition for the services they provide.
And both of these issues find the Virginia Hospital Association and many of its hospital members weighing in with support for expanding Medicaid and maintaining monopoly control of healthcare delivery services.
The hospital lobby and the members it represents want legislators to believe they need expanding government programs such as Medicaid and continuation of monopoly controls because they are in a difficult financial position.
However, a new study by the Thomas Jefferson Institute for Public Policy shows that the overall finances of Virginia hospitals have substantially improved between the numbers published in 2016 (for FY 2015) and those in December 2017 (for FY 2016). The study can be found on the Jefferson Institute’s website.
As the hospitals “cry wolf” about their financial condition, the facts clearly show that they are doing quite well and, as a whole, are not in financial trouble.
Posted on the Virginia Heath Information website (www.vhi.org ) are 158 hospitals in the state and their financial numbers. The Jefferson Institute uses these numbers in its annual study to challenge the contention that our hospitals can’t afford competition and need more government dollars. What the published numbers show are that hospital profits increased by 13.86% between FY 2015 and 2016 (the most recent numbers available) and their net worth increased 8.1%.
Since 2012, hospital profits increased from $1.58 billion to $2.15 billion, hospital net worth rose from $14.75 billion to $19.3 billion, and the number of hospitals operating at a deficit fell from 42 to 28 – a decrease of fully 1/3 in four years! Looked at another way, 28 hospitals running “in the red” out of 158 hospitals statewide reporting to the VHI website is only one out of six hospitals showing an operating deficit. This is not an industry facing financial trouble. Indeed, the numbers clearly show it is an industry growing stronger each year.
Some hospitals are struggling and this Jefferson Institute report clearly shows that. But the industry as a whole is doing quite well. In all regions of the state, the hospitals remain profitable, and their net worth continues to increase. Even the hospitals in Southwest Virginia, where some real financial struggles exist in our economy, show profits improving by 36%.
Our elected officials need to understand these numbers and not simply listen to the hospital lobbyists who complain about how “bad off” the hospitals are today and that continued monopoly control of healthcare services is needed to protect them financially.
The rising costs of monopoly healthcare could be substantially reversed with dramatic reforms, or even the elimination of the monopoly protection process called Certificate of Public Need (COPN). This is the state process where competing healthcare services are denied by a regulatory board in Richmond too often influenced by the “big boys” in the hospitals and in their well-financed lobby. More competition will reduce the price of healthcare just as it has in one industry after another. Where healthcare delivery competition does exist, the prices in non-hospital medical facilities are significantly less.
And today the hospitals are begging our General Assembly to expand Medicaid by saying they need it because their finances are threatened, but their own number show just the opposite.
Medicaid is one of the three federal entitlement programs that is in great need of reform or our nation could end up like Greece – bankrupt and cutting truly needed program just to keep from drowning in red ink. Expanding Medicaid to those up to 138% of the poverty line will not guarantee better health services to these folks and will be a huge drain on our state budget.
Today, over 20% of the state’s budget goes to Medicaid and this program is growing by 9% a year. Adding folks making up to 138% of poverty, who are basically healthy, makes little sense. Today vast number of doctors refuse to take Medicaid patients because the federal government does not reimburse them for their actual costs. So we are being asked to add 400,000 or more to the Medicaid rolls here in Virginia as fewer and fewer doctors are taking Medicaid patients. Clearly, this makes little sense.
As the Virginia Hospital Association begs for more government involvement in the delivery of healthcare, and as it complains that the hospital industry is struggling financially so it can’t afford competition in healthcare delivery, this new study by the Thomas Jefferson Institute shows that our hospitals are, overall, doing well financially. More competition and less government involvement is what is needed to lower healthcare costs.
