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Study: Mayo hospitals among most profitable

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A new study from Health Affairs says that two Mayo Clinic not-for-profit hospitals based in Rochester were among the most profitable in the country, according to 2013 data.

Methodist and Saint Marys finished No. 14 and No. 17 in the recent report that ranked the Top 100 medical facilities across the United States for profitability. Methodist had a patient-service surplus of $148.3 million, while Saint Marys' surplus was $141.6 million, according to the report that focused on patient-care services rather than overall profit margins.

That equates to a surplus or profit of $1,676.35 and $1,224.87 per patient in the Rochester hospitals.

The two Mayo hospitals have since merged into Mayo Clinic Hospital.

Gunderson Lutheran Medical Center in La Crosse, Wis., topped the list with a surplus of $302.5 million as one of seven not-for-profit hospitals to finish among the Top 10 in Health Affairs' study. Its per-patient surplus was $4,240.80, which was among the highest of the 3,000 hospitals included in the study.

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The study conducted by Johns Hopkins Bloomberg School of Public Health and Washington and Lee University and published in this month's "Health Affairs" medical journal has not been well received by the industry. It was compiled by examining Medicare cost reports.

Gunderson officials have criticized the report, saying the numbers "look kinda crazy" and are off base with its reported profit margin of 5 percent in 2013, according to Brian Potter, senior vice president of finance for the Wisconsin Hospital Association.

"This article does not reflect our costs — as an integrated health system — for the care we provide in a multi-state, largely rural region with a high Medicare patient mix, and does not analyze data on quality of care," said Gunderson Chief Financial Officer Dara Bartels.

Mayo Clinic also offered a critique of the Health Affairs report. Like Gunderson, it noted that its operating margins have routinely been around 5 percent and that "it's important to note that, for Mayo Clinic or any integrated medical group, to separate financially one hospital from its system does not give an accurate picture. In addition, as an academic medical center, Mayo Clinic channels funds back into major health research and educational efforts."

"Mayo Clinic is made up of multiple clinics and hospitals in five states, operating as a single, integrated system," Mayo said via statement. "Our Rochester hospitals, for example, offer specialized care not available at many other hospitals. The intensity of complex services raises net revenue higher than many hospitals that do not offer similar services. Hospital financial performance must be considered as part of its overall system, which includes critical-access care in rural communities, outpatient clinics serving large government and underserved populations, home health care and other low-revenue services."

Sutter Health also weighed in to say the study "isn't a constructive or relevant exercise" because of the way it was set up, noting its 2.6 percent profit margin was fully reinvested in the community.

Despite those defenses and critiques of the new study, some are now wondering if the dramatic numbers have revealed the need for an industry overhaul. The loudest voices calling for change or additional oversight were the co-authors of the study, Gerard Anderson and Ge Bai.

A news release issued with the study notes that "while the majority of U.S. hospitals lost money caring for patients, a small percentage earned large profits." More than half of the 3,000 hospitals lost money, with a median loss of $82 per patient — which makes the local numbers stand out even more.

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"A small subset of nonprofit hospitals are earning substantial profits," Anderson said. "Either they're doing something right or they are taking advantage of a flawed payment system. …The Federal Trade Commission needs to take a look at whether there is unfair competition."

Bai, an assistant accounting professor at Washington and Lee University in Virginia, echoed Anderson's thoughts with even stronger language.

"All hospitals should make a little profit, but some hospitals are obtaining outrageous profits," Bai said.

The Associated Press contributed to this report

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