Beaumont Health and the Detroit Medical Center experienced their strongest profits ever in 2015, according to an analysis of Michigan’s hospital market released Tuesday.
Beaumont and Detroit Medical Center (DMC) had profit margins of 8.6 percent and 7.9 percent, respectively, in 2015, for a banner year. Detroit’s Henry Ford Health System fared less well with a profit margin of .3 percent, which was an improvement over recent years.
“Taking the Detroit hospitals as a group ... in 2013 they had a loss on their patient care operations of $278.1 million and they turned that around to a profit of $132.6 million in 2015,” said Minneapolis-based analyst Allan Baumgarten, author of the Michigan Health Market Review 2016. “That’s a swing of about $411 million in a two-year period.”
Some of the financial success at Beaumont Health, which was formed in the 2015 merger of Beaumont Health System, Oakwood Healthcare and Botsford Hospital, could be attributed to that merger, Baumgarten noted. The system benefited from its strong presence in Metro Detroit’s wealthier suburbs, where patients often are healthier and better insured, he added.
With eight hospitals in Dearborn, Farmington Hills, Trenton, Taylor, and Wayne, Beaumont Health had net income of $301.6 million in 2015, up from $276 million in 2014.
DMC hospitals had net income of $133.7 million in 2015, up from $45.3 million in 2014. Owned by Tenet Healthcare, a Dallas-based for-profit, the DMC system includes five hospitals in Midtown Detroit, Huron Valley-Sinai Hospital in Commerce Township, and an array of surgery centers and specialty clinics in Troy, Farmington Hills, Oak Park, Novi and other Metro communities.
“DMC has worked very hard to try and expand its reach into those same suburbs where Beaumont is prospering,” Baumgarten said. “That’s part of the explanation for how DMC has turned around its financials in the last five years.”
In addition to a hospital on Grand Boulevard in Detroit, the Henry Ford Health System has hospitals in Clinton Township, West Bloomfield Township, Wyandotte and Jackson.
The system had a net income of $7.9 million in 2015 compared with $2 million in 2014.
“Henry Ford is doing a little better,” Baumgarten said, noting the health system serves a disproportionate number of patients who are either uninsured, or insured by Medicaid.
Baumgarten, who has been publishing these reports annually since 1997, said Michigan’s expansion of Medicaid contributed to the record year for Detroit hospitals. Called the Healthy Michigan Plan, the program provides insurance for more than 600,000 low-income Michigan residents.
Much of the data on hospital finances and inpatient utilization, according to the report, comes from the Medicare facility cost report that each Michigan hospital files with its fiscal intermediary. The report analyzes data from the Centers for Medicare and Medicaid Services on initiatives to reward hospital performance while penalizing hospitals for excessive rates of readmissions and hospital-acquired conditions. The report also updates data on health plan enrollment and financial results through the third quarter of 2016.
“Detroit hospital systems have benefited from Michigan’s expansion of Medicaid because a lot of those patients may have been coming to those hospitals without health coverage,” Baumgarten said.
“The expansion of Medicaid eligibility has given them a boost to the revenues and to their bottom line. (Loss of the federal program) would be a severe blow, in particular, for some of the systems that have a high proportion of Medicaid patients.”