Houston Medical Journal June 2017

LEGAL AFFAIRS: ACA’s nondiscrimination provision and the shifting tides of healthcare regulation, see page 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Leading Source for Healthcare Business News June 2017 • Volume 14, Issue 3 • $3.50 INSIDE ▼ How an old cookie factory is driving life science startup growth in Houston see page 5 INDEX ▼ Financial Perspectives.......3 Legal Affairs......................4 Technology.......................5 THA...............................6 Integrative Medicine.........7 Breaking Ground..............8 Hospital Headlines.........9 Moving On Up..............10 The teaching kitchen: Practical nutrition in action see page 7 . . . . . . . . . . . . High net patient revenue doesn’t necessarily bring high margins BY WILL FOLTZ, Definitive Healthcare Looking at the table showing the top 25 Greater Houston hospitals by net patient revenues on page 14 and 15, it’s clear that just because a hospital ranks highly in the list, the facility may not have had a strong operating margin in 2016. In fact, a hospital’s margin appears more closely associated with several other factors besides revenues. Generally, nonprofit and state-owned hospitals with unfavorable payor mixes and smaller inpatient revenue shares had lower operating margins than for-profit facilities with better corresponding characteristics in the Greater Houston area. The first-ranked hospital on the list is a good example of how high net patient revenue doesn’t guarantee a positive margin. The case of University of Texas MD Anderson Cancer Center suggests that its exceptionally low inpatient revenue component of its total revenue depressed its margins. Its share, 33% is considerably lower than the top 25 median, 55%. Past studies have shown that hospitals that profited from inpatient Medicare admissions had a much larger margin per case than those with profitable outpatient Medicare cases. A hospital with a large outpatient revenue component may face tighter cost constraints, limiting profit per case. Taken as a whole, the top 25 hospitals do show a slight correlation between operating margins and inpatient revenue share, even when eliminating the Ben Taub General Hospital outlier. Other contributing factors could be expenses related to MD Anderson’s large workforce, which dwarfs many of the other hospitals on the list, and its comparatively longer length of stay, which in some cases can reduce the Please see ANNUAL SURVEY page 14 PRSRT STD US POSTAGE PAID HOUSTON TX PERMIT NO 13187