March 2007

New Financial Report Shows Hospitals Posted Record Profits in 2006

Topping $1 Billion for the First Time – Nearly Doubling Since 2004

During the Same Time Period, Studies Show There Has Been No Improvement in RN Staffing Levels, Causing Patients to Suffer While Hospitals’ Coffers Grow

View Financials

CANTON, Mass.—At a time when patient safety is being endangered by RN understaffing, the state's hospitals have once again posted record profits totaling an astonishing $1 billion for the past fiscal year - a 10 percent increase over the previous year, and a 94 percent increase in profits since 2004.

The numbers are particularly striking given the fact that almost all the major hospitals in the Commonwealth are non-profit institutions. According to the numbers posted this week by the Massachusetts Department of Health Care Finance and Policy (www.mass.gov/dhcfp), total hospital profits for 2006 were $1,010,578,000, compared to $916,661,000 in 2005, and $519,857,000 in 2005. Of the hospitals reporting, only nine reported losses during 2006, compared to 14 in 2005.

“Massachusetts hospitals definitely put the ’profit’ in ’non-profit,’” said Donna Kelly-Williams, RN, vice president of the Massachusetts Nurses Association, one of 104 leading health care and consumer organizations supporting legislation to set safe RN staffing limits. "This year’s profits could pay for the staffing needed to protect patients many times over, yet the safety of patients is being sacrificed to high industry profits and seven-figure CEO salaries."

The bill, The Patient Safety Act (H. 2059) would dramatically improve care by setting a safe limit on the number of patients assigned to a nurse. The measure, which is co-sponsored by State Rep. Christine Canavan (D-Brockton) and Senator Marc Pacheco (D-Taunton), calls upon the Department of Public Health to set a safe limit on the number of patients a nurse is assigned at one time. In addition, the bill calls for staffing ratios to be adjusted based on patient needs. It also bans mandatory overtime, and includes initiatives to increase nursing faculty and nurse recruitment. During the last legislative session, the Massachusetts House of Representatives passed a similar bill by a vote of 133-20.

Not surprisingly, the biggest profit margins were recorded by the state’s major teaching hospitals. Massachusetts General Hospital, which recently made front-page news for its near failure of an unannounced safety survey by the Joint Commission, posted a whopping $294 million profit in 2006; Children’s Hospital ranked second with $101 million; and Brigham & Women's Hospital came in third with a $69 million profit. UMass Memorial Medical Center in Worcester scored more than $45 million in profits and Baystate Medical Center in Springfield topped $44 million.

In perhaps a more dramatic turnaround, all but one of the 24 hospitals in the Mass Council of Community Hospitals reported profits - rebutting the community hospitals’ claims that they could not afford to comply with the Patient Safety Act. For example, Falmouth Hospital’s profits jumped from $3.3 million to $8.1 million; Berkshire Medical Center more than doubled its surplus from $11.4 million in 2005 to $24.4 million in 2006. A number of other hospitals also multiplied their surpluses: Holyoke Hospital

almost quadrupled its profits; Hallmark Health Systems (Lawrence Memorial and Melrose-Wakefield hospitals) jumped from $2.5 million to $7 million); and even small Fairview Hospital in Great Barrington went from a slim profit in 2005 to $2 million this past year.

The $1 billion profit margin comes at a time when the new health reform law, which was passed by the legislature last year, could yield the industry another $300 million. At the same time, the industry has been in the midst of a massive building boom, with expansion projects completed or in the works totaling more than $500 million. Hospital CEOs have also reaped significant benefits, with most earning high six-figure, and a number receiving seven-figure salaries.

While Profits and CEO Salaries Grow
Hospitals Refuse to Invest in Safer Nursing Care

While the hospital industry has been making enormous profits and spending lavishly on new projects, the quality of patient care in Massachusetts hospitals has been deteriorating because registered nurses are being forced to care for too many patients at once. Instead of investing in better staffing to protect patients, the industry has responded by spending hundreds of thousands of dollars to defeat the Patient Safety Act.

Between 2004 and 2006, when the industry’s profits doubled, a study of actual RN staffing levels in the state's hospitals conducted by the Massachusetts Nurses Association and Andover Economic Evaluation found:

• There was no statistically significant difference in hospital staffing levels between 2004 and 2006.
   
• More than half of the hospitals reported regularly assigning more than five patients per nurse and every hospital reported an assignment of more than four patients per nurse on the medical/surgical floor. A study in the Journal of the American Medical Association finds that for each patient over four assigned to an RN there is a 7 percent increase in risk of injury, harm and death to patients.
   
• In a shocking 36 percent of observations hospitals failed to meet the accepted minimum standard of no more than two patients per nurse in the intensive care unit, a standard recommended by the Institute of Medicine.
   
• Most alarming of all, more than 45 percent of hospitals had, on occasion, assigned eight patients or more to their nurses, a staffing level that according to research published in the Journal of the American Medical Association, placed those patients at a 31 percent increased risk of death.

During this time period, surveys of past patients and physicians conducted by Opinion Dynamics Corp., a leading Cambridge-based research firm, found a dramatic deterioration in the safety and quality of patient care in our state's hospitals. A 2005 survey of past patients in Massachusetts’ hospitals found that one in four patients (an estimated 235,000 patients a year) reported their safety was compromised during their hospital stay due to their nurse having to care for too many other patients. A 2005 survey of Massachusetts’ physicians found 82 percent of doctors agree that the quality of care in Massachusetts hospitals is suffering due to the understaffing of RNs.

Kelly-Williams says now is clearly the time to act. "These profits show that the resources are available to hospital administrators to improve RN staffing levels to comply with the Patient Safety Act so that nurses can provide the safe, quality care our patients deserve."