08/11/04 — Hospital rates: Charges are increasing, but relatively, they are low

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Hospital rates: Charges are increasing, but relatively, they are low

Wayne Memorial Hospital isn’t going to be quite the bargain for patients that it has been, but it still won’t be a bad deal.

Starting in October, average rates at the hospital will be 6.3 percent higher. The hospital is hoping to generate 8 percent more revenue during the new fiscal year than in the current year.

According to the budget adopted Tuesday, it would show a projected operating profit of 4.5 percent of its revenue. That is a small margin, and to try to trim it further would have been dangerous.

Wayne Memorial is a nonprofit corporation, so the 4 1/2 percent, or around $6.9 million, won’t be split between shareholders, as with private companies. Instead, it will be added to the hospital’s reserve.

The reserve is invested. Its income, added to operating profit, will put the total profit at more than $10 million this year.

That helps to (1) keep room rates down, and (2) give the hospital a good credit rating when it has to borrow money, which will be necessary in the next few years for continued renovations.

The total expense budget for the year starting Oct. 1 will be $147,684,153. That is up $8.7 million over the current year with more than half of the increase going to salaries and employee benefits.

As always, charity cases and bad debts account for a big part of the expense, more than $16 million. This is largely because government programs like Medicare, Medicaid and Tricare don’t pay their bills in full. Hospitals cannot collect the difference in their costs and what the government pays on these bills.

Hence, their posted rates are higher so the hospitals can collect enough revenue to operate and show a small margin.

Even with the new rates, though, patients at Wayne Memorial will get off easier than those at most hospitals. Of the 51 hospitals for which the state collects data on rates, Wayne Memorial ranks 46th, and the five hospitals that are cheaper are small institutions in poor, rural areas.

Published in Editorials on August 11, 2004 11:07 AM