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1st - Washington State Department of Health (DOH) Home Page


    Volume 2002-3 June 2002

    purpose of this series of reports is to provide all

    concerned parties with information describing ANNOUNCEMENTS

    emerging hospital utilization and financial trends.

     Instead of focusing on individual quarters, the If you are currently receiving this report on data in this report are aggregated into twelve month paper via postal mail, you could be receiving it up periods consisting of four calendar quarters each. to a week earlier by electronic mail attachment. This aggregation reduces the impact of seasonal However, if you want electronic mail delivery, you fluctuations, which could distort actual trends must ask for it. Please call (360) 236-4215 or send occurring within the hospital industry. an electronic message to

     This report includes the first calendar quarter to change the form

    of 2002. The report provides the first preview of the of delivery of your hospTRENDS report.

    direction that hospital financial and utilization trends Visit the Department of Health web site at

    are headed in 2002. However, this preview is for a variety

    subject to change. The quarterly reports submitted of hospital data and reports. In addition to

    by hospitals contain interim data which have not yet hospTRENDS, the site also contains copies of

    been subjected to audit review. Future adjustments Hospital Patient User Guide, Pregnancy and

    and/or revisions as a result of both the hospital’s Childbirth Guide to Hospital Charges, Hospital internal accounting system review and the formal Comparative Screens, Hospital Summary Reports, procedures of outside auditors may result in Charity Care in Washington Hospitals, CHARS

    changes to previously submitted data. These future Standard Reports, CHARS Public Data Set Order revisions will be reflected in the hospital’s year-end Forms, CHARS Reporting Manual, and Directory of reports. The year-end reports not only reflect audit Washington Hospitals. Furthermore quarterly and

    adjustments but also provide substantially greater year end financial data are also available.

    detail, which allows analysis of the information Your opinions are important to us. Please let provided in greater depth. us know what you like or don’t like about the

     content and presentation of the hospTRENDS

    SUMMARY report. Postal and Internet addresses as well as

     telephone and FAX numbers are listed on the back

     Annual growth rates for the four quarter period page of this issue.

    ended March 31, 2002 were 14.8% for total patient

    service revenue and 21.7% for deductions from PREFACE

    revenue. This resulted in an increase of 9.8% in net

    patient services revenue. Summary financial and utilization data are

     Charity care reached a new high of $173.1 submitted to the Department of Health on a

    million. This was 1.32% of total patient service quarterly basis by hospitals in the state of

    revenue, which was the highest recorded since the Washington. Reported data are edited, summarized, four quarter period ended September 30, 1999. and analyzed by Hospital and Patient Data

    The increase of 9.0% in operating expenses Systems staff. Specific data elements are defined combined with a growth of 1.4% in adjusted in the Department’s Accounting and Reporting

    discharges resulted in operating expenses per Manual for Hospitals. Utilizing these data, various

    adjusted discharge that were 7.5% over the year financial and utilization rates and ratios are earlier level. This is considerably higher than the calculated to enhance the description of the

    1.5% advance in the overall consumer price index financial condition of hospitals in the state. The but still below the 8.1% jump in the hospital

    services component of the index.

    Page 1 hospTRENDS June 2002

     Net operating income for the four quarter for Medicare and Medicaid reflect the difference period ended March 31, 2002 was 53.0% over the between billed charges and the amounts that are corresponding period one year earlier, but slightly actually paid. The difference between billed below calendar year 2001. The increase was charges and the payment rates negotiated with sufficient to also pull net income per adjusted major health insurers, managed care plans, HMO’s, discharge up to $185.50 and operating margin up and other contractual payers is included in to 2.21%. contractual adjustments for other payers. Charity

     For the fifth consecutive quarterly reporting care leapt by 43.9% from the year ago total to a period inpatient days have grown more rapidly than new high of $173 million in the twelve month period inpatient admissions. As a result, average length of ended March 31, 2002. This was 1.32% of total stay has crept upward to 4.34 days, which is the patient service revenue, which was the highest highest point this indicator has reached since the recorded since the four quarter period ended twelve month period ended March 31, 1996 September 30, 1999.

     Accounts receivable averaged 70.5 days of

     Net Patient Service Revenue revenue for the four quarter period ended March 31,

    2002. This was 9.2 days less than the year earlier Net patient service revenue is defined as the period. Over the past year Medicare accounts amount of revenue actually realized by hospitals. In receivable declined by 5.8 days, Medicaid accounts the four quarter period ended March 31, 2002 net receivable dipped by 1.9 days, and accounts patient service revenue reached $7.2 billion, which receivable for other payers plummeted by 12.9 was an increase of $642 million, or 9.8%, over the days. corresponding period a year ago. When

     deductions from revenue grow more rapidly than

    total patient service revenue, the rate of increase FINANCIAL INDICATORS

    for net patient service revenue is less than the rate

    of increase for total patient service revenue. This Total Patient Service Revenue

    has been the case in each four quarter period since Total patient service revenue, which is the sum

    the period ended March 31, 1996. of billed charges for all hospital services, advanced

     by $1.7 billion to $13.1 billion, which was an

     Operating Expenses increase of 14.8%. This was more than any annual

     Growing by 9.0%, or $584 million, operating percentage increase in total patient services

    expenses approached $7.1 billion in the twelve revenue since calendar year 2000. For the fourth

    month period ended March 31, 2002. Operating consecutive time inpatient revenue grew more

    expenses are the costs of providing health care rapidly (15.5%) than outpatient revenue (13.9%).

    services to hospital patients. Increases in the The growth in inpatient revenue was the largest

    volume of patient service utilization only account for increase recorded since calendar year 1991.

    an increase of 1.4% in operating expenses. The Medicare revenue grew by 18.7%, which was the

    increase in operating expenses not related to largest increase recorded since 1982. With an

    patient volume is 7.5%. The volume adjusted increase of 19.2%, Medicaid revenue again

    increase substantially exceeds the 1.5% annual expanded faster than total patient service revenue,

    increase in the consumer price index for the same as it has done every reporting period since

    period, but is slightly below the 8.1% annual calendar year 1999.

    increase in the hospital services component of the

    index. Deductions from Revenue

     For the twelve months ended March 31, 2002

     Net Operating Income total deductions from revenue reached $5.9 billion.

     During the four quarters ended March 31, 2002 Growing by 21.1%, contractual adjustments

    net operating income advanced to $168 million, reached $5.7 billion. By payer group contractual

    which was 53.0% over the year ago level. Although adjustments were up by 24.6% for Medicare, 29.6%

    this was slightly below the calendar year 2001 level, for Medicaid, and 16.2% for other payers.

    it was still higher than any other four quarter period Medicare and Medicaid contractual adjustments

    since the period ended September 30, 1998. The have grown more rapidly than the corresponding

    increase was sufficient to also pull net income per patient service revenue every reporting period

    adjusted discharge up to $185.50 and operating since calendar year 1997. Contractual adjustments

    margin up to 2.21%. While net operating income is

hospTRENDS June 2002 Page 2

an important source of funding for replacement of is the highest point this indicator has reached since

    buildings and equipment as well as the acquisition the twelve month period ended March 31, 1996.

    of modern medical technology, it is not the only

     Adjusted Discharges source. Many hospitals also have income from

    activities other than the provision of patient care Adjusted discharges continued to climb,

    services. This other income is not included in reaching a total of 908,108 adjusted discharges in

    quarterly reports to the Department of Health. the four quarter period ended March 31, 2002. This

     was an increase of 12,456 adjusted discharges, or

    1.4%, over the four quarter period ended March 31, UTILIZATION INDICATORS

    2001. Adjusted discharges are utilized as an

    aggregate indicator of hospital activity. To Discharges, Patient Days, and Length of Stay

    calculate adjusted discharges, inpatient discharges Inpatient activity is primarily measured by

    are multiplied by the ratio of total patient service discharges and patient days. Discharges from

    revenue to inpatient revenue (excluding skilled Washington hospitals continued to grow, reaching a

    nursing facility revenue). With this adjustment, total total of 513,580 discharges during the four quarter

    patient service revenue per adjusted discharge is period ended March 31, 2002. This was a gain of

    equal to inpatient revenue (excluding skilled 11,078 discharges, or 2.2%, over the

    nursing facility revenue) per inpatient discharge. corresponding year ago period. During the same

    Adjusted discharges are necessary for computing interval patient days expanded by 74,179 days, or

    average rates, since total patient service is the only 3.4%. This is the fifth consecutive reporting period

    financial indicator that can be split into inpatient and in which inpatient days have grown more rapidly

    outpatient componentsthan inpatient admissions. As a result, average

    length of stay has crept upward to 4.34 days, which


     Rates per Adjusted Discharge

    Rates per adjusted discharge relate hospital financial indicators to the “average” patient. Total patient service revenue per adjusted discharge is the total bill for the average patient stay. Deductions from revenue per adjusted discharge is the portion of this average bill that is not paid by Medicare, Medicaid, or health insurers, or is written off as charity care. Net patient service revenue per adjusted discharge is the amount of revenue the hospital actually receives from the average patient visit. Operating expense per adjusted discharge is the cost of providing services to the average patient. Net operating income per adjusted discharge is the amount of money the hospital is able to earn from the average patient visit. Rates per adjusted discharge for the twelve month periods ended March 31, 2001 and March 31, 2002, and the percentage changes were:

     Rate per Adjusted Discharge FYE 3/31/01 FYE 3/31/02 Percent Change

     Total Patient Service Revenue per Adjusted Discharge $12,755.73 $14,445.09 +13.2%

     Deductions from Revenue per Adjusted Discharge $5,404.35 $6,487.56 +20.0%

     Net Patient Service Revenue per Adjusted Discharge $7,351.37 $7,957.53 +8.2%

     Operating Expenses per Adjusted Discharge $7,228.48 $7,772.03 +7.5%

     Net Operating Income per Adjusted Discharge $122.90 $185.50 +50.9%


     Financial ratios are utilized to reflect the relationship between selected financial indicators. The financial ratios selected for this report are not all encompassing, but represent financial indicators that can be readily calculated from the data available through the quarterly reporting process as currently designed without requesting supplemental data from the reporting hospitals.

     Days in Accounts Receivable

Page 3 hospTRENDS June 2002

     During the twelve month period ended March 31, 2002 accounts receivable averaged 70.5 days, which was 9.2 days less than the year earlier period. Accounts receivable averaged 57.0 days for Medicare, 80.1 days for Medicaid, and 76.7 days for other payers, which were decreases of 5.8 days, 1.9 days, and 12.9 days, respectively from the previous year.

     Over a three year period accounts receivable days decreased in all geographic areas, except Puget Sound. As a result the Puget Sound region moved from second lowest to highest in average days in accounts receivable. In contrast, the Southwest region moved from highest to lowest in average days in accounts receivable.

     Although days in accounts receivable for proprietary hospitals increased over three years while average days in accounts receivable for district hospitals and not-for-profit hospitals were dropping, the proprietary hospital group still retained the lowest average days in accounts receivable in the twelve month period ended March 31, 2002.

     Frontier hospitals, which are the most isolated of the rural hospitals, experienced an increase in average days in accounts receivable over the past three years, while remote hospitals, less remote hospitals, and urban hospitals all experienced reductions in average days in accounts receivable. As a result the frontier hospital group moved from lowest to highest over the three year span.

     In the four quarter period ended March 31, 2002 average days in accounts receivable for individual hospitals ranged from 21 days to 128 days.

Days in Accounts Receivable Twelve Months Ended Change from Change from

     March 31, March 31, March 31, March 31, 1999 March 31, 2001

     1999 2001 2002 Total Percent Total Percent

Statewide Total 81.9 79.7 70.5 -11.3 -13.9% -9.2 -11.5%

    By Payer:

     Medicare 62.1 62.8 57.0 -5.1 -8.2% -5.8 -9.2%

     Medicaid 97.6 82.0 80.1 -17.6 -18.0% -1.9 -2.3%

     Other 90.1 89.6 76.7 -13.4 -14.9% -12.9 -14.4%

    By Region:

     King County 89.2 86.6 72.1 -17.0 -19.1% -14.4 -16.6%

     Puget Sound 75.3 75.6 75.9 +0.5 +0.7% +0.3 +0.4%

     Southwest Washington 80.8 76.6 60.3 -20.5 -25.4% -16.3 -21.3%

     Central Washington 78.2 72.2 63.3 -15.0 -19.2% -8.9 -12.4%

     Eastern Washington 73.7 71.7 68.1 -5.6 -7.6% -3.6 -5.0%

    By Type of Ownership:

     District 77.0 75.0 66.8 -10.2 -13.3% -8.2 -10.9%

     Not-for-Profit 83.2 84.5 74.5 -8.7 -10.5% -10.0 -11.8%

     Proprietary 53.6 64.0 56.0 +2.4 +4.5% -8.0 -12.5%

    By Population Density

     Frontier Rural 72.8 79.6 78.1 +5.3 +7.3% -1.5 -1.8%

     Remote Rural 81.6 82.3 76.9 -4.7 -5.8% -5.4 -6.5%

     Less Remote Rural 76.7 68.9 57.7 -19.0 -24.8% -11.2 -16.2%

     Urban 82.6 80.9 71.8 -10.8 -13.1% -9.1 -11.3%

     Operating Margin as well as the acquisition of new medical

     Operating margin compares net operating technology.

    income to total operating revenue. In the twelve

     Deductible Proportion (Including Component month period ended March 31, 2002 operating

    Parts) margin was 2.21%, which was 40.5% greater than

    the year earlier period. While slightly below the Total deductions from revenue and each of its

    calendar year 2001 level, the operating margin was major component parts are compared to total

    still higher than any other four quarter period since patient service revenue to arrive at the deductible,

    calendar year 1999. Operating margin is a major total contractual, and charity care proportions. The

    source of funding for expansion and replacement Medicare contractual, Medicaid contractual, and

    other contractual proportions are computed by

hospTRENDS June 2002 Page 4

    comparing each payer group’s contractual March 31, 2002, the outpatient revenue percentage adjustments to the corresponding total patient dropped from 43.1% to 42.8%, while the ratio of

    total revenue to inpatient revenue slipped from 1.76 service revenue for the same payer group. The

    deductible proportion reached 44.9% and the to 1.75. These ratios are now at their lowest levels contractual proportion reached 43.6%, which were since calendar year 1999. These declines are the new highs, during the four quarter period ended result of inpatient revenue growing at a faster rate March 31, 2002. With the deductible proportion at than outpatient revenue.

    44.9%, hospitals must bill $1.82 in order to realize

     Medicare and Medicaid Revenue $1.00 of net patient service revenue. The Medicare

    contractual proportion of 47.2% and the Medicaid The primary payers of hospital bills are the contractual proportion of 46.9% are well above the Medicare and Medicaid programs. The Medicare contractual proportion for other payers of 40.3%. and Medicaid revenue percentages indicate the This is a direct result of the rapid increase in proportion of total hospital business that these Medicare and Medicaid contractual adjustments programs represent. In the twelve month period over the past year. The charity proportion jumped ended March 31, 2002 the Medicare percentage by 25.3% to 1.32% in the four quarter period ended was 33.9% and the Medicaid percentage was March 31, 2002. This is the highest level recorded 14.7%. The Medicare percentage reached a low of for this indicator since the twelve month period 32.5% at the end of calendar year 2000 and has ended September 30, 1999. been increasing since that time. After reaching a

     low of 12.9% in the four quarter period ended

     Inpatient and Outpatient Revenue September 30, 1999 the Medicaid percentage has

     The proportion of total revenue to inpatient registered increases in each reporting period since revenue and the outpatient revenue percentage are that time. With 48.6% of total patient service alternate ways of looking at the relationship revenue, the Medicare and Medicaid programs between inpatient and outpatient revenue. Between have a major influence on the financial health of the annual periods ended March 31, 2001 and hospitals.


    Washington State

    Hospital Financial and Utilization Trend Update

    Quarter Ended March 31, 2002

    For additional information, comments, and suggestions, or to request extra copies of this report, please contact:

    Center for Health Statistics

    Hospital and Patient Data Systems

    1102 South Quince Street

    Post Office Box 47811

    Olympia, WA 98504-7811

    Telephone: (360) 236-4215

    FAX : (360) 664-8579


    Mary Selecky, Secretary

    Department of Health

    Joangeles (Jac) Davies, Assistant Secretary

    Epidemiology, Health Statistics, and Public Health Laboratories

    Teresa Jennings, State Registrar and Director

    Center for Health Statistics

    Authors: Thomas Muller and Richard Ordos

    Page 5 hospTRENDS June 2002


    12.0Patient B

    Service i 9.0lRevenue l6.0iTotal o3.0n Other

    sPayers 0.0Medicare

    MarJunSepDecMarJunSepDecMarJunSepDecMar Medicaid1999199919991999200020002000200020012001200120012002

     Twelve Months Ended

     3000Contractual 2500 Adjustments

     2000M i Other1500l Payersl Medicare1000i

    o 500Medicaidn

    s 0 MarJunSepDecMarJunSepDecMarJunSepDecMar 1999199919991999200020002000200020012001200120012002

     Twelve Months Ended


     OPERATING 160


     M120 i l

    80ls i


    0 MarJunSepDecMarJunSepDecMarJunSepDecMar


    Twelve Months Ended

    hospTRENDS June 2002 Page 6

    14,000Rates Per




    6,000Tot Rev Per

    Adj Disch4,000Deductions

    Per Adj Disch2,000Net Revenue

    Per Adj Disch0Oper Expense

    Per Adj DischMarJunSepDecMarJunSepDecMarJunSepDecMar


    Twelve Months Ended


    Utilization2.0 M1.6i


    1.2 l

    i o0.8Patient Daysn s0.4Adjusted Discharges0.0


    1999199919991999200020002000200020012001200120012002 Twelve Months Ended


    4.45 Length 4.40 of Stay4.35


    4.25 D4.20a y4.15


    4.05 4.00


    1999199919991999200020002000200020012001200120012002 Twelve Months Ended

    120 Days In

    Accounts100 Receivable


    Medicaid 60


    All Payers20

    0 MedicareMarJunSepDecMarJunSepDecMarJunSepDecMar 1999199919991999200020002000200020012001200120012002

    Twelve Months Ended

    Page 7 hospTRENDS June 2002

     90.0DAYS IN 80.0ACCOUNTS



    50.0NOT-FOR- 40.0PROFIT






    Twelve Months Ended


    Operating 2.40%

    Margin 2.00%







    1999199919991999200020002000200020012001200120012002 Twelve Months Ended

    50% Contractual

    45% Proportion


    Medicaid35% Total 30%

     Other25%Payers MarJunSepDecMarJunSepDecMarJunSepDecMar


    Twelve Months Ended

    hospTRENDS June 2002 Page 8



    1.4% Proportion

    1.2% 1.0%



    0.4% 0.2%


    MarJunSepDecMarJunSepDecMarJunSepDecMar 1999199919991999200020002000200020012001200120012002

     Twelve Months Ended



    44% Outpatient






    1999199919991999200020002000200020012001200120012002 Twelve Months Ended


    45% Financial

    40%Ratios 35%


    25% Deductible20%Proportion15%

    10%Medicare Rev 5%Percent0%

    MarJunSepDecMarJunSepDecMarJunSepDecMarMedicaid Rev 1999199919991999200020002000200020012001200120012002Percent

     Twelve Months Ended

    Page 9 hospTRENDS June 2002

     HOSPITAL PERFORMANCETwelve Months EndedTwelve Months Ended Total Percent

    Mar 31, 2001Mar 31, 2002ChangeChange Total Patient Revenue

    Inpatient6,497,243,7507,504,377,0941,007,133,34415.50% Outpatient4,927,447,8975,613,321,764685,873,86713.92%Total11,424,691,64713,117,698,8581,693,007,21114.82%

    Medicare3,741,587,0084,441,225,637699,638,62918.70% Medicaid1,619,849,3521,931,398,331311,548,97919.23%Other6,063,255,2876,745,074,890681,819,60311.25%

     Deductions From Revenue

    Contractual Adjustments Medicare1,680,695,7502,093,953,648413,257,89824.59%

     Medicaid699,527,393906,342,612206,815,21929.56% Other2,339,906,1842,718,028,704378,122,52016.16%

     Total4,720,129,3275,718,324,964998,195,63721.15%Charity120,291,405173,079,33152,787,92643.88%Total4,840,420,7325,891,404,2951,050,983,56321.71%Net Patient Revenue

    Medicare2,060,891,2582,347,271,989286,380,73113.90%Medicaid920,321,9591,025,055,719104,733,76011.38%Other3,603,057,6983,853,966,855250,909,1576.96%Total6,584,270,9157,226,294,563642,023,6489.75%Total Operating Expenses6,474,198,1437,057,844,746583,646,6039.01%

    Net Operating Income110,072,772168,449,81758,377,04553.03%Days in Accounts Receivable



    Other Payers89.676.7-12.9-14.40%

    Statewide Total79.770.5-9.2-11.55%



    Patient Days2,155,0132,229,19274,1793.44%

    Length of Stay4.294.340.051.21%

    Adjusted Discharges895,652908,10812,4561.39%Rates

    Tot Rev Per Adj Disch12,755.7314,445.091,689.3613.24%Deductions Per Adj Disch5,404.356,487.561,083.2020.04%Net Revenue Per Adj Disch7,351.377,957.53606.168.25%Oper Expense Per Adj Disch7,228.487,772.03543.567.52%Net Income Per Adj Disch122.90185.5062.6050.94%Financial Ratios

    Operating Margin1.57%2.21%0.64%40.53%

    Deductible Proportion42.37%44.91%2.54%6.00%Contractual Proportion - Total41.32%43.59%2.28%5.51%Contractual Proportion - Medicare44.92%47.15%2.23%4.96%Contractual Proportion - Medicaid43.18%46.93%3.74%8.67%Contractual Proportion - Other38.59%40.30%1.70%4.42%Charity Proportion1.05%1.32%0.27%25.31%

    Total Rev/Inpat Rev1.761.75-0.01-0.59%

    Outpat Rev Percent43.13%42.79%-0.34%-0.78%

    Medicare Rev Percent32.75%33.86%1.11%3.38%

    Medicaid Rev Percent14.18%14.72%0.55%3.84%

    hospTRENDS June 2002 Page 10

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