Providence Health & Services saw an improvement in its operating margin in 2014 as it treated more patients and reduced its bad debt, particularly in states that expanded their Medicaid rosters.
The Renton, Wash.-based provider operates in five states, three of which expanded eligibility for Medicaid. Its hospitals saw a 26% increase in Medicaid patients overall, and gross revenue coming from Medicaid increased 47% in Washington and 52% in Oregon, Chief financial officer Todd Hofheins said.
Although the cost of unpaid care for Medicaid beneficiaries increased to $444 million in 2014, up from $404 million the previous year, the system provided less charity care for patients who were unable to pay.
The amount of charity care provided fell to $205.6 million in 2014, down from the prior year’s $312.8 million, and more than offset the Medicaid shortfall.
“It was, for us, financially a net positive because the expansion has increased coverage for many who didn’t have it before,” Hofheins said.
Self-pay patients now represent only 2% of its patient mix, below even the 5% that the system had budgeted.
Volume from patients with health plans purchased through the Affordable Care Act’s insurance exchanges, meanwhile, grew only minimally. Providence expects more growth this year, particularly through a plan it offers on the Oregon exchange, Hofheins said.
In total, Providence reported an operating surplus of $219.2 million on $12.5 billion of revenue for 2014, compared with an operating surplus of $37.7 million on $11.1 billion in revenue the previous year. Its operating margin improved to 1.8% from 1.1%.
The system also is seeing a greater amount of revenue coming from value-based contracts. It is working directly with large employers such as Boeing in Washington and Intel in Oregon to offer an accountable care organization product, Hofheins said. In its medical groups, 44% of its patients are now in a risk-based contract, up from 31% in 2013. And 26% of net-service revenue is now coming from a contract with at least some form of upside or downside risk.
Original article published by Beth Kutscher of Modern Healthcare on April 30, 2015. Read the Full Article here.
