Loma Linda Heads Profits List : U.S. Audit on Money Made Off Medicare Challenged

Loma Linda University Medical Center heads a list of 14 California hospitals, including Cedars-Sinai Medical Center and St. Vincent Medical Center in Los Angeles, that made more than $5 million in profits on Medicare services in 1984, according to a U.S. Department of Health and Human Services audit of 214 hospitals in the state.

Loma Linda earned $22.3 million on revenues of $51.8 million, according to the audit, a copy of which was obtained Friday. But Loma Linda and other hospitals criticized the study.

The report also showed that seven California hospitals lost more than $200,000 in caring for Medicare patients in 1984, including City View Hospital in Los Angeles, which closed last year.

The study of California hospitals is part of a continuing series of reports from the department’s inspector general’s office that show that many hospitals increased their profits during 1984, the first full year of the prospective payment system that was introduced in October, 1983, and designed to control Medicare costs.

The hospitals surveyed, which represent about 40% of California’s 550 acute-care hospitals, had an average profit margin of 15.6% during 1984, compared to a national figure of 15.0%. Comparable statistics on hospitals in the 17 other states studied are to be released next week.

Many hospital officials Friday criticized the federal figures, saying that they are often inaccurate, vastly overestimate true profits and ignore cost-cutting measures taken in anticipation of the program.

“There is nothing wrong with rewarding high quality and efficiency,” said Vincent Guinan, president of St. Vincent Medical Center, which the report stated made more than $10 million in 1984. “That is the way the government set up (the reimbursement system),” he said.

Hospital officials also said profit margins had dropped in 1985 and the first half of 1986, when Medicare reimbursement rates have been nearly frozen.

2% Overall Profit Margin

In 1985, the overall profit margin for all California hospitals was only 2%, according to John Ferman, senior vice president of the California Hospital Assn. “On average, hospitals did well in 1984,” he said. “But some hospitals that were making a profit then are now losing money.”

The Department of Health and Human Services study said 185 of the 214 California hospitals surveyed earned an average profit of $1.7 million in 1984, with the largest earnings recorded by for-profit hospitals, teaching hospitals and urban hospitals.

It said Loma Linda’s profit margin was 42.97%, one of the largest of the 2,099 hospitals surveyed nationwide.

But that figure was immediately disputed by Ron Anderson, Loma Linda’s vice president for finance, who claimed that the medical center had actually lost $5.2 million in caring for Medicare patients between July, 1983, and June, 1984.

“There is obviously a major discrepancy between what I am looking at and what they are looking at,” Anderson said in as telephone interview, adding that federal officials had not contacted Loma Linda before releasing the report to seek to reconcile the differences. “The damage is done.”

Richard P. Kusserow, the department’s inspector general, was not available for comment Friday. But his study stated that its figures are based on “unaudited Medicare cost reports which were certified by hospital representatives as being true, correct and complete.”

West Hollywood Hospital, a 44-bed, investor-owned hospital affiliated with Hollywood Community Hospital, had the largest profit margin, according to the study. It earned 45.71% on Medicare revenues of $4,058,261. Other hospitals that earned more than 30% include Western Medical Center in Anaheim (39.69%) and White Memorial Medical Center in Los Angeles (34.80%).

By contrast, 29 hospitals, including 20 with less than 100 beds and 10 rural hospitals, incurred an average loss of $156,000.

Sharp Cabrillo Hospital of San Diego was listed with the largest loss, $879,188. But that figure was disputed by Robert Kelly, associate director of finance for Sharp Health Care, the parent company. He said Sharp Cabrillo earned a profit in 1984 and is still owed $400,000 by Medicare.

Under the prospective payment system, Medicare pays hospitals a fixed rate for each patient admission for a particular disease, called a DRG or “diagnosis related group,” instead of an individual rate based on each hospital’s regular charges.

CALIFORNIA HOSPITAL PROFITS AND LOSSES--1984

Highest Medicare Profits

Inpatient Profit Hospital and Location Revenue Profit Margin Loma Linda University Med. Ctr. $51,785,720 $22,253,060 42.97% Cedars-Sinai Med. Ctr., Los Angeles 96,562,542 15,411,282 15.96 St. Vincent Med. Ctr., Los Angeles 34,043,861 10,084,813 29.62 Huntington Mem. Hosp., Pasadena 33,409,927 7,920,667 23.71 Daniel Freeman Mem. Hosp., Inglewood 33,911,621 7,748,931 22.85 Mt. Zion Med. Ctr., San Francisco 26,903,098 6,247,630 23.22 White Mem. Med. Ctr., Los Angeles 17,568,526 6,113,516 34.80 UC Med. Ctr., San Francisco 40,142,643 5,962,396 14.85 Eisenhower Mem. Hosp., Rancho Mirage 27,573,494 5,818,514 21.10 St. Agnes Med. Ctr., Fresno 26,598,642 5,500,983 20.68 Hemet Valley Hosp., Hemet 25,303,880 5,496,040 21.72 Glendale Adventist Med. Ctr. 27,931,747 5,207,040 18.64 Santa Barbara Cottage Hosp. 26,963,185 5,156,413 19.12 Northridge Hosp. Med. Ctr. 21,018,245 5,052,742 24.04

Highest Medicare Losses

Inpatient Loss Hospital and Location Revenue Loss Margin Sharp Cabrillo Hosp., San Diego $8,212,067 $879,188 10.71% Community Hosp., Santa Rosa 4,703,036 618,039 13.14 City View Hosp., Los Angeles 869,216 553,819 63.71 Needles-Desert Communities Hosp. 505,674 337,045 66.65 Century Community Hosp., Los Angeles 2,606,321 294,316 11.29 Marshall Hale Hosp., San Francisco 7,454,935 238,863 3.2 Indian Valley Hosp., Greenville 230,075 223,766 97.26

Source, Office of Inspector General, U.S. Department of Health Services