A new report from Arizona’s Medicaid program looking at hospital profitability and the levels of uncompensated care finds hospitals’ operating margins overall are getting healthier. But, at the same time, some facilities have seen big increases in the number of patients who can’t pay for their treatment.
Ann-Marie Alameddin, president and CEO of the Arizona Hospital and Healthcare Association, joined The Show to talk about the report and her main takeaways.
Full conversation
ANN-MARIE ALAMEDDIN: So I think the top line is that hospitals across Arizona have a net operating margin of about 6%. And I think this is important. I think we're looking for a minimum of between 4% and 6% net operating margin.
That's it to ensure that hospitals can really take those profits and reinvest in their increase facilities, improve technology, you know, to retain workforce. So there's just and to have cash on hand to make sure that they can weather, you know, whatever is coming ahead.
MARK BRODIE: So this would be then at the sort of the top of where you would ideally like hospitals to be is that different than where you have been over the past few years where hospitals have been?
ALAMEDDIN: Absolutely, you know, throughout COVID, with the suspension of elective surgeries, there's just a significant impact on hospital operations, being able to recruit and retain workforce. We just saw financials really plummet across the country, really, not just in Arizona and you know, Congress acted, there was a lot of supplemental funds that flowed to make sure that hospitals were able to stay fully operational to meet the incredible demand that was put upon both hospitals and our health care, workforce taking care of patients who needed needed that care.
BRODIE: Is that supplemental funding mostly responsible for where hospitals are now or are there other factors that have led them to maybe be a little more financially healthy?
ALAMEDDIN So I think all the all the supplemental sort of COVID dollars have gone away. And so this is really kind of standard operating work right now. I think hospitals have stabilized. I think workforce, although there is still a workforce shortage, we're not paying quite as much as we were for the temporary traveling nurses.
I think a lot of that has stabilized. But when you look at the margins and it's at an average of 6%, there are pockets that are much lower, you know, long term acute care hospitals, they have negative operating margins of 11%. Behavioral health hospitals, they have seen an increase in uncompensated care. That means patients who are coming to behavioral health hospitals who do not have health insurance. So, a significant increase of 50% for uncompensated care. So, although that's the average, there are different pockets. And I think particularly when you look at Arizona's health-care system, the behavioral health system is really fragile right now.
BRODIE: Do you find that there are differences between rural and urban hospitals as well? I know in the past, we've spoken about sort of the precarious financial state of rural hospitals. Are they still in that position or are they starting to come back up to where you'd like them to be?
ALAMEDDIN: You know, the average was I think 5% for rural hospitals versus acute care hospitals, which was 6%. So they have so many unique challenges that are unique to rural markets, but they are they on the positive side right now, which is really good.
MARK BRODIE: So you mentioned the uncompensated care in the behavioral health facilities up 50%. That's at the same time that overall uncompensated care was down by about 10%. Is it surprising to you? And I guess maybe what does it mean for those facilities that the level of uncompensated care, the number of patients who are coming in who can't pay is going up by that much?
ALAMEDDIN: It, it puts a tremendous strain. I mean, I think first we have to take a patient-centered approach to it. You know, what does it mean? We should have health care, insurance should be affordable to people because it's really important that people have insurance so they can access the care when they need it at the appropriate time.
But then it puts that pressure on behavioral hospitals when you do have these patients who don't have a payer source and where that hospital is just absorbing the cost of that care. So it is concerning. I was, I was really surprised to see that it was so high at 50% and we need to really kind of unpack that and understand what's really happening in the state.
BRODIE: You mentioned insurance and obviously we are in the the open enrollment period for the Affordable Care Act. What are your members saying about the kind of not so much the number of patients coming in with insurance, but maybe the kind of insurance that they are coming in with and the kinds of procedures and, and provider visits that that is covering and what that all means for the hospital's ability to get reimbursed for what they're doing and, and maintain their, their sustainability?
ALAMEDDIN: You know, I think we've seen great improvements since the Affordable Care Act in terms of more people using the exchange and really making sure that our uncompensated care numbers were lower. I think we've made great strides and we just need to continue that.
And I think as we look at a new presidential administration, you know, what are [President-election Donald] Trump's priorities going to be, is there going to be a attempted rollback of some of the Affordable Care Act provisions on pre-existing conditions or, I mean, it could be a whole host of things. So I think that's what we're looking ahead at in terms of, you know, how do we best develop our story and the current situation in terms of what's at stake.
BRODIE: What kinds of conversations are you having with your members and maybe them within themselves and you know, with your, your colleagues and counterparts across the country about what might be coming down? Come January when the new administration takes shape and maybe trying to read some of the tea leaves to, to get ready for what some of those changes might be.
ALAMEDDIN: Well, I think as we saw with the first Trump administration, you know, there was a, a kind of a scrutiny of health-care payments around supplemental payments that the federal government pays to various states through the Medicaid program.
And if you look at Arizona, you know, one of our really important programs is a healthy two payment program. And really if that supplemental payment went away, that would have a devastating impact on the whole health-care financing system in Arizona, really, we would be operating in the red.
So we have to make sure that hospitals are telling their story, you know, communicating to patients and their community and communicating to policymakers in terms of what's at stake.
BRODIE: So you alluded to the ongoing shortage of providers. I'm wondering if that's gotten any better for your members. Like, where are we in terms of having enough physicians and nurses and techs and all the people who make hospitals work?
ALAMEDDIN: Yeah, Arizona still is in a health care, a significant health-care worker shortage. We've been making some inroads, I think with some legislation that the Arizona Legislature passed a couple of years ago in terms of expanding nursing education and training and retention. But there's more work to be done.
You know, ultimately, you know, we need more GME slots for Arizona, graduate medical education, graduate medical education. You know, you can have a lot of medical schools and it's wonderful that we have so many medical schools here. But then the next step after that is a residency program.
And so if our Arizona medical school students are graduating and then going across the country to other states with more residency slots, they tend not to come back to Arizona, they stay where they've done their residency. So there's more work that we have to do, particularly on the physician side, but a lot of work has been done on the nursing side.
The Arizona Hospital Health Care Association has a nurse retention program that really helps with mentorship and preceptorship and development of new nurses who are at hospitals to really bridge that gap between nursing education and then being an actual nurse on a floor to make sure that people, nurses, new nurses feel supported and guided and that they spend their career in health care.
