Virginia Hospital profits in 2015: $1.89 billion

Virginia hospital profits remained stable in 2015, down only a smidgeon from the previous year.
Virginia hospital profits remained stable in 2015, down only a smidgeon from the previous year.

The Virginia hospital industry remained highly profitable in fiscal 2015, according to a report issued yesterday by the Thomas Jefferson Institute for Public Policy (TJI). Although profit margins were not as juicy as the previous year, the absolute level of profits remained stable, declining a mere 0.6% to $1.89 billion.

Thanks to the reinvestment of profits, or “surplus” in the case of non-profit enterprises, the combined net worth of Virginia’s hospitals increased by $1.1 billion to a total of $17.8 billion.

“Last year our report showed a year-over-year profit of 8.6% for our hospitals statewide,” states Michael W. Thompson, author of the report. “This is on top of the 10.7% profit in the previous year. Not bad for an industry bemoaning its financial troubles.”

TJI has been publishing the hospital data, compiled from the Virginia Health Information website, for several years. Hospital profits are an especially contentious issue in the 2017 General Assembly session as legislators push to roll back the Certificate of Public Need (COPN) law, which requires state approval of major capital investments by hospitals and surgical centers.

Critics say the law restricts competition and preserves monopoly profits. Hospitals say they need COPN in order to continue providing charity care to hundreds of thousands of Virginians. The question inevitably arises: Are Virginia hospitals profitable enough that they could continue providing charity care even without COPN protections?

The Virginia Hospital and Healthcare Association (VHHA) objects to TJI’s methodology for tabulating profits, arguing that the fiscally conservative/free market think tank skews its numbers by counting surgical centers and non-hospital affiliates of hospital companies. Also, the association contends that average profits obscure differences between hospitals, some of which are very healthy and others of which earn  less than the 4% profit margin to maintain reserves, cover depreciation and invest in growth. Half the state’s rural hospitals operate at margins below that level, according to the VHHA’s own spin on the Virginia Health Information numbers.

However, TJI has found that the number of money-losing hospitals has declined in recent years — from 42 in 2012 to 27 in 2015. “Clearly, when the numbers are reviewed, the hospital industry is once again substantially healthier than it was a year previously,” says Thompson.

The hospital association responds that the current level of profitability may not last. Congressional threats to repeal Obamacare, or at least to roll it back, create enormous uncertainty. “Cuts related to the Affordable Care Act … are forecast to deprive Virginia’s local hospitals and health systems of roughly $1 billion annually by 2022,” stated a VHHA press release commenting upon the 2015 numbers.

Bacon’s bottom line: Everybody wants profitable hospitals, even if they are “non-profits.” The HCCA says 4% operating profit margins is a reasonable standard for hospitals to maintain their financial health while continuing to invest in their operations. While many hospitals fall short of that goal, several exceed it — by a wide margin.

The public needs to know the level of hospital profits. It also needs to know what hospitals are doing with those profits. I have reviewed the annual reports of the big health care systems — Inova, Sentara, Carilion — and find them uniformly unhelpful. All corporate annual reports are P.R. pieces, but those of Virginia’s health care systems have more fluff than a down pillow.

We know that Virginia hospitals are plagued by hospital-acquired infections, which afflict one out of twenty-five patients entering a hospital nationally. How much money are Virginia’s big hospitals investing in controlling those infections? Hospital annual reports won’t tell you. By comparison, how many millions are hospitals pouring into prestige-building medical research programs like Inova’s center for personalized medicine that may be great for humanity but are being funded, at least in part, by profits derived from patients? The annual reports don’t tell us that either.

If you count only hospital profits over and above the VHHA’s recommended 4% margin, that still leaves about $1 billion sloshing around, mostly generated by non-profit hospitals. Where is that money going? What are hospitals doing to justify their non-profit status? Does anyone really know? Where’s the accountability?

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12 responses to “Virginia Hospital profits in 2015: $1.89 billion”

  1. LarrytheG Avatar

    How about the part of the report that does this:

    “The hospital association said Thompson’s annual report is misleading as it includes physician-owned practices that are not hospitals and touts totals of all hospitals rather than looking at the solvency of each hospital.”

    What the…..

    that’s tantamount to dishonesty …and misinformation… so much for the credibility of the report.. it fails that basic test of telling the simple truth.

    Equating Doctors profits as Hospital profits… really?

  2. Steve Haner Avatar
    Steve Haner

    Oh for goodness sake, Jimbo – shame on you if you rely on the published annual reports. If the hospital is a publicly traded entity, go to the SEC filings (10K) and if the hospital is not for profit, then review the IRS 990 forms. Of course the slick annual reports are going to be PR pieces….Granted, you may still be in the dark, but those reports have some force of law behind them (those pesky regulations, you know…)

    And this is not just about COPN, but also about Medicaid expansion.

    1. I’ll try checking the IRS 990 forms. I guess I expected annual reports from non-profits that resembled those of publicly held companies that at least published some basic numbers.

  3. Peter Galuszka Avatar
    Peter Galuszka

    Surprising, or maybe not so. Steve is right that there is no point to bash annual reports when serious alternatives are available. Always go to the 10-K or other documents and cut to the chase.

    Also, Jim, why do you keep citing stuff from the “Thomas Jefferson Institute” or “Americans for Prosperity” or some other right-wing, politically loaded group with a clear agenda? The aim of this report is to claim that hospitals are going gangbusters with profits and there’s no need for a COPN. Of course, they include for-profit, non-hospital outfits run by doctors.

    How can you compare a plastic surgery clinic for high-toned doctors with a rural mountain hospital that has to keep its emergency room opened to everyone and eat the cost?

    Why do you shoveling this crap?

    1. Peter, as usual, you dismiss what the Thomas Jefferson Institute says on the grounds that… it’s the Thomas Jefferson Institute. That’s not much of an argument.

      “How can you compare a plastic surgery clinic for high-toned doctors with a rural mountain hospital that has to keep its emergency room opened to everyone and eat the cost?”

      I hope by “you” you weren’t referring to me personally. I wasn’t the one making the comparison. I was the one who quoted Julian Walker as saying that the TJI methodology was flawed by including non-hospital entities.

      As usual, you miss seeing the forest for the trees. Several of Virginia’s “non-profit” hospitals are extraordinarily profitable — that is undeniable. Where is the accountability on how the money is spent? They don’t have a State Corporation Commission looking over their shoulder. Journalists in Virginia don’t seem to care. You don’t seem to care. Perhaps they don’t fit your profile of greedy, exploitative capitalists.

      One can make the argument that TJI should adopt a different methodology for adding up its numbers — that’s fair game. That argument goes to facts and methodology. But at least the group is asking questions no one else seems to be asking.

  4. LarrytheG Avatar

    re: ” why do you keep citing stuff from the “Thomas Jefferson Institute” or “Americans for Prosperity” or some other right-wing, politically loaded group with a clear agenda?”

    I think Peter is dead on. It’s bad enough that you go to those folks for your info, twice worse that you choose to reference it as if it was an objective study and thrice worse when you don’t acknowledge that it IS clearly agenda-driven..drivel with obvious problems pointed out by other legitimate players .!!!

    I give you CREDIT for allowing comments unlike some blogs – so that folks can bring you to account and put some balance in the discussion.

    And no.. it’s not just Peter and I.. other s – perhaps less direct and more subtle have observed the same….

    we want to discuss issues – ON THE MERITS – but we often start off so biased to the right that it boggles the mind.

    TJ basically seems to have grossly misrepresented the facts here – and those misrepresentations got repeated here in BR as if they were facts.. that supported the repeal of COPN.

    In some places in Va, the ONLY WAY the rural hospitals have to deliver care to some of it’s citizens is by making a “profit” on some services…

    When does TJ do an honest job with the issue?

    not here… !!!



    1. Larry, you have a standing invitation to submit an op-ed to Bacon’s Rebellion any time you’d like — and to be held accountable by the same standards you apply to others.

      1. It’s time to step up to the big-time and get on the front of the blog!

  5. LarrytheG Avatar

    What? I THOUGHT I was ALREADY doing Op Eds!

  6. LarrytheG Avatar


    from the VHHA (December 8, 2016)

    RICHMOND, VA – Newly released figures from Virginia Health Information (VHI), show that 27 percent of Virginia’s acute care, critical access, and children’s hospitals, and more than 43 percent of rural hospitals, operated in the red during 2015. Those figures show roughly 25 percent of overall hospitals, and 42 percent of rural hospitals, with negative operating margins.

    From 2008-2015, the overall annual rate of Virginia hospitals operating in the red has ranged from 25 percent to 37 percent. Among rural hospitals, the range is 42 percent to 63 percent.

    Hospital operating margins are a key measure of profitability which should not be conflated with other hospital assets and investments such as property and complex equipment.

    …. from the Roanoke Times:

    ” During a conference call hosted by the Thomas Jefferson Institute for Public Policy to discuss hospital profitability, …. comments by Del. John O’Bannon, R-Henrico, on Tuesday that he plans to push for major reforms to Virginia’s regulatory process, called the Certificate of Public Need, during the General Assembly session that begins Wednesday.

    He said the TJ institute’s report, “Virginia Hospitals: Doing Well in a Sluggish Economy,” would be “helpful to legislators and policymakers as we continue to reform COPN in Virginia.” The report’s author, Michael Thompson, said that although hospitals’ year-over-year profits were flat, the net worth of Virginia’s hospitals increased by $1.1 billion during fiscal year 2015, and the number of hospitals operating at a deficit decreased.

    The hospital association said Thompson’s annual report is misleading as it includes physician-owned practices that are not hospitals and touts totals of all hospitals rather than looking at the solvency of each hospital.”

  7. Peter Galuszka Avatar
    Peter Galuszka

    I keeping wondering why the Thomas Jefferson Institute and other groups like it always seem to be the jumping off spot for discussions. That group has a history of pitching info that is way off. Remember when one of their reports said Virginia has a “renewable portfolio standard” for green energy when it is completely voluntary–unlike in other states that have RPS values set in law.

    It’s like reading the Times Dispatch op ed section — they don’t identify the authors until way back inside and you come to find out that it’s written by someone for a trade group or is a lobbyist. One such guy actually axed elo quent about what a wonderful person Rex Tillerson is and the writer is some paid hack.

    BR readers may not agree, but they tend to be fairly bright and can spot this stuff a mile away. It makes you not want to bother clicking on it. You can call me any name you want but please don’t insult my intelligence or bore me.

  8. LarrytheG Avatar

    yes.. the problem with TJ and “Americans for Prosperity” and The Institute for Justice and quite a few others is that they are purveyors of biased data even as they have chosen high-sounding names and mottos on their websites.

    they trade in , at the least, a tilted focus on their agenda and often represent it as “objective” … at the worst – they trade in disinformation and misinformation as they cherry-pick data… and synthesize data by mixing real data with their own manipulated data, which they often reference as if it came direct from the attributed credible source.

    They’re really not interested in discussion on the merits .. at all.

    they exist primarily to influence people and policy – who can reference them as if they are a credible source of a “study” – LIKE the one from TJ that purposely distorts the reality that a good number of Virginia hospitals are not only not profitable, they are in the Red and they’re getting pushed further from folks like John O’Bannon, R-Henrico who is citing the TJ study as “proof” that the COPN should be “reformed”.

    I seriously don’t know what the dooda people like O’Bannon are seriously thinking… do they really want to see hospitals in rural Va forced to close and other hospitals in Va on the margins pushed further to Red numbers?

    O’Bannon is doing this in the context of the GOP seriously discussing reducing funding to Medicare and MedicAid which already don’t reimburse even at cost.. and now we’re headed for even bigger shortfalls.

    All of this because folks like O’Bannon and TJ think we should have a “free market” in health care and that if we did … apparently somehow.. folks in rural Va would then get access to good health care.

    what are these folks thinking? Are they that disconnected from reality with their ideology?

    what have we really gained from reading that TJ report ? Have we looked at the truth of rural Va. Does TJ care about that? How about O’Bannon?

    I have zero confidence that these folks have a clue…

    sick and old people in poverty are not going to be shopping for healthcare bargains… what planet is O’Bannon and TJ on?

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