A new report labeling the former Gundersen Lutheran Medical Center in La Crosse as the most profitable hospital in the country needs an asterisk before it goes into the record books — because statistics don’t always tell the whole story.
The study of 3,000 hospitals in the United States in 2013, when “Lutheran” still was part of the name of what now is Gundersen Health System, chronicled the hospital’s profit as $302.5 million — an eye-popping $4,241 a patient.
But a state hospital association official and a Gundersen representative questioned the findings Monday, saying the calculations don’t factor in the full gamut of Gundersen’s expenses.
The research from the Johns Hopkins Bloomberg School of Public Health in Baltimore, Md., and Washington and Lee University in Lexington, Va., was released Monday, as reported in the May issue of the journal Health Affairs.
The report posed questions without answering them, as well as providing a head-scratcher for Brian Potter, senior vice president of finance for the Wisconsin Hospital Association.
“I don’t quite understand” the calculations in the study, Potter said during a phone interview Monday. “The numbers for Gundersen look kinda crazy.”
The figures appear to be a mash-up of statistics from the hospitals, clinics and other services the La Crosse-based Gundersen system provides in the 19 counties where it operates in Wisconsin, Minnesota and Iowa, then applied only to the system’s main campus in La Crosse.
“I’m pretty skeptical of the figures,” Potter said. “I know that, in 2013, the (profit) margin for Gundersen was about 5 percent.”
The WHA does hospital finance analyses that differentiate between how figures are computed for multi-facility systems as opposed to single-hospital entities, he said.
The calculations in the research study don’t take into account systemwide administrative expenses and other costs such as home health services, which skews the tallies, Potter said.
“A lot of expenses for a hospital might go through the system,” while income would appear on the hospital’s ledger, making it look like it is making a lot more money than it is, he said.
The report casts aspersions not only on Gundersen but also the six other nonprofits in the study’s top 10, Potter said.
“A small subset of nonprofit hospitals are earning substantial profits,” said study leader Gerard Anderson, a professor in the Health Policy and Management Department at the Bloomberg School.
“Either they’re doing something right or they are taking advantage of a flawed payment system,” Anderson said in the press release. “Perhaps the most important question is what are they doing with all of that money?”
Gundersen Chief Financial Officer Dara Bartels can answer that, saying that, in part, the money goes to provide other services not only in La Crosse but also throughout the Gundersen network.
“This article does not reflect our costs — as an integrated health system — for the care we provide in a multi-state, largely rural region with a high Medicare patient mix, and does not analyze data on quality of care,” Bartels said.
The authors analyzed finances of about 3,000 acute-care hospitals, of which 59 percent were nonprofit, 25 percent were for-profit and 16 percent were public. Overall, their research found that more than half of all hospitals incurred small losses from patient care services, with a median loss of $82 a patient.
The findings “show that, while the majority of U.S. hospitals lost money caring for patients, a small percentage earned large profits,” according to a press release on the study.
“The results raise questions about whether peculiarities in the payment systems or some other factors are creating these outsized winners,” the release said.
While the study acknowledges that hospitals that are part of a hospital system are more profitable, it suggested the reason as being that they “use their weight to negotiate higher prices from insurers” rather than noting the income-vs.-expense gap.
Study co-author Ge Bai, an assistant accounting professor at Washington and Lee University in Lexington, Va., said, “All hospitals should make a little profit, but some hospitals are obtaining outrageous profits.”
Bartels disputed the insinuation, saying, “The portion of the cost report the authors used excludes administrative and shared costs per Medicare rules, with results varying between organizations. We would rank much differently if these costs were considered.”
Bartels likened the study’s methodology to analyzing a family’s income based only on the breadwinner’s salary without factoring in the broader scope of the family’s expenses, such as the mortgage, utilities, college costs and other bills.
The overall income appears larger when the full bill doesn’t include such expenses, she said.
Bartels cited Gundersen’s multi-year pattern of keeping annual rate increases as low as possible, in the 3 percent to 4 percent range for the past several years.
The devil is in the details, Bartels indicated, saying, “Analyzing Medicare cost reports of a single care center may have been relevant 20 years ago, but using the same methodology now for an integrated health system network isn’t constructive.”
That echoed a similar assessment from Potter, representing a neutral perspective.
Bartels also referred to a Dartmouth Atlas analysis tabbing Gundersen as the market leader in a region that has the lowest cost of care per Medicare beneficiary in the nation.
“We are also a national leader in providing care in the last two years of life by spending less per patient episode of care, shortening patients’ length of stay in the hospital, having fewer patient complications and making fewer patient safety errors,” she said.