Study: Norton Hospital one of "most profitable" in United States - WDRB 41 Louisville News

Study: Norton Hospital one of "most profitable" in United States

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Norton Hospital in downtown Louisville Norton Hospital in downtown Louisville

LOUISVILLE, Ky. (WDRB) --  Norton Hospital in downtown Louisville is the fourth-most profitable hospital in the country, according to a recently published academic study.

Norton Healthcare, however, disputes the study’s findings and conclusions.

Researchers from the Johns Hopkins Bloomberg School of Public Health and Washington and Lee University examined reports in which hospitals that treat Medicare patients are required to list their revenues and expenses. The study was reported Monday by The Washington Post.

In 2013 – the only year examined – Norton Hospital earned $211 million in profits, or $1,162 per patient discharged, according to the study, published in the May issue of the health policy journal Health Affairs.

Only three hospitals – Gunderson Lutheran Medical Center in La Crosse, Wisconsin; Sutter Medical Center in Sacramento, California; and Stanford Hospital in Palo Alto, California – were more profitable, and all are significantly smaller than Norton, according to the study.

Study co-author Ge Bai, an assistant accounting professor at Washington and Lee, said in an interview with WDRB News that the reports cover revenue and expenses for all patients, not just Medicare beneficiaries. And the information comes from the hospitals themselves, she said.

“The numbers are absolutely from what they reported. It’s not like we made it up,” she said. “The rules are strict. Everybody has to follow the reporting rules.”

But Michael Gough, the chief financial officer of Louisville-based Norton Healthcare, said the study is flawed in several ways.

For one, the information reported to Medicare and reflected in the study covers not only the downtown hospital but all five in the Norton system (the others are Audubon, Brownsboro, Norton Women's and Kosair Children's Hospital in St. Matthews and Kosair Children’s Hospital downtown).

Norton also erred when it first reported the data to Medicare, Gough said, and he provided WDRB with a copy of an amended report filed last August, in which Norton listed $101 million – not $211 million – in “net income” for patient services in 2013.

“If (the study authors) used the correct information, we wouldn’t be in the top 10,” Gough said.

Gough also said the Medicare data doesn’t paint an accurate financial picture because a lot of hospital “support” expenses are not included. For example, in 2013 Norton had $38 million in costs related to a new electronic medical records system, he said, but it’s a system-wide expense not allocated to any hospital.

He added that Norton-employed physicians are another expense not shown in the data, and “obviously we need physicians to run our hospitals.”

Gough instead point to Norton’s audited financial statement for 2013, which shows the entire Norton system lost $4.1 million on “patient services.” That’s not only hospitals but all of Norton’s businesses, such as urgent care centers.

Bai said it’s possible that hospital expenses like the ones Gough describes are not included in the analysis because of the limitations of the Medicare data. Those questions are “out of the scope of this study,” she said.

Of the 10 most profitable hospitals listed in study, seven have nonprofit status, including Norton. The designation exempts the hospitals and their parent companies from taxes on the basis of healthcare as a community service.

But for hospitals like Norton, “this kind of profit, in our opinion, is not consistent with their charitable mission,” Bai said.

She said the charges these hospitals bill to insurers and the government show vast power in their respective regional markets. For every $1 in patient care costs, the 10 most-profitable hospitals charged $5.20 on average, according to the study. (Norton Hospital charged $4.30, she said.)

By comparison, the median hospital charged $3.70 for every $1 in costs, according to the study.

“Our question is, if you guys are a nonprofit, why do you charge that high?” she said.

Gough countered that the hospitals’ revenues are based on negotiated prices with insurers or payments dictated by government programs like Medicare.

“Very few payments are based off of charges,” he said. “…Whatever that ratio is, it is really meaningless.”

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