Hospital profits pick up in 2021, mostly on asset values

Operating margins remain low, down from last year

AFTER PANDEMIC-RELATED financial struggles, Massachusetts’ hospitals are again turning a profit, despite reduced levels of federal aid. 

A preliminary report by the Center for Health Information and Analysis on fiscal 2021, released Thursday, finds that overall hospital profitability in the state was 6 percent – meaning hospitals’ revenue was 6 percent higher than their expenses – an increase of 2.9 percentage points over last year. Of 47 hospitals that reported data, 44 finished the year with a profit. Every type of hospital – community hospitals, teaching hospitals, etc. – reported having a better year financially than in 2020. 

However, their operating margin – which reflects expenses on operations but not assets that they own – was lower, representing a profit of 1.2 percent, a 0.1 percent decrease from last year. 

The profits include $405 million that hospitals received from federal recovery money. That number is significant but far less than the $1.8 billion in federal recovery money hospitals received in fiscal 2020. 

The Massachusetts Health and Hospital Association pointed to the lower operating margin as proof that hospitals continue to struggle. The association maintains that the 6 percent number that includes assets is mostly “paper” gains related to investments, while operating margins are a more accurate number to use since they reflect the hospitals’ day-to-day ability to break even. 

“2021 was a devastating year for the stability of the healthcare system, with providers enduring intense financial pressures in order to respond to the pandemic,” said Daniel McHale, vice president of healthcare finance and policy for the Massachusetts Health and Hospital Association. “Healthcare providers have spent every dollar needed to continue serving their communities, even as they incurred tremendous losses during rollbacks of planned procedures and other non-emergent care services.” 

The Hospital Association said its own survey of member hospitals found median operating margins dropped to negative 10 percent in January, meaning hospitals overall lost money. The association says Massachusetts hospital lost more than $430 million in the first two months of this year, after the time period covered by the CHIA report.  

McHale said hospitals “continue to rely on the support of our public officials” for additional funding related to the pandemic response and healthcare workforce challenges. 

The CHIA report also found that 37 of 45 hospital-affiliated physician groups lost money, a figure that is consistent with previous years.  

Mass General Brigham, the state’s largest health care system, posted the second largest profit in the state: $3.162 billion. The Health Policy Commission recently required Mass General Brigham to develop a plan to cut costs. 

Trinity Health, the parent of Mercy Medical Center, made even more money, $3.85 billion, driven in part by $632 million in COVID relief money.  

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Shira Schoenberg

Reporter, CommonWealth

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

The only other hospital system that exceeded $1 billion in profit, measured by excess revenue over expenses, was Boston Children’s Hospital, which took in $1.088 billion. 

With each of those hospitals, the operating margin, reflecting the profit from daily operations, was modest, below 3 percent for Trinity and Mass General and a loss for Boston Children’s Hospital. The largest gains came in assets, which includes things like property values and investments.  

For the last couple of years, hospitals have seen their finances devastated by COVID-related shutdowns, only to be boosted by federal aid. Hospitals were required to stop performing non-urgent procedures at the beginning of the pandemic and again this winter, and even when hospitals were fully reopened, many people have hesitated to enter a hospital or doctor’s office out of fear of contracting COVID.