Hospital profit report ranks some North Texas centers high, some low; findings draw challenges

12:00 AM CDT on Thursday, September 2, 2010
By JASON ROBERSON / The Dallas Morning News

North Texas is home to hospitals with the nation’s best and worst operating margins.

Medical Center Plano and Medical City Dallas Hospital, both owned by Nashville-based Hospital Corporation of America, have profit margins between 26 and 28 percent. They rank among the top 25 in the nation, according to an American Hospital Directory report that Forbes magazine published this week.

However, John Peter Smith Hospital in Fort Worth has the nation’s third-worst profit margin at minus 204 percent. Parkland Memorial Hospital in Dallas ranks 14th-worst with minus 74 percent. Both are county hospitals.

“A lot of this comes down to how they do the analysis,” said John Dragovits, executive vice president at Parkland.

After crunching the data from Forbes’ list, Dragovits realized that the hospital’s tax revenue – more than $400 million annually – had been omitted from the calculations.

A hospital’s operating margin is its income divided by revenue, expressed as a percentage. It’s an important measuring stick for ranking efficiency among competitors.

A higher operating margin tends to indicate a lower cost of running a hospital. It says the hospital can deliver health care to patients more cheaply than competitors can and make money.

But in an era of rising health care costs and assigning blame, being recognized for high operating profit margin is not necessarily a compliment.

Some top-ranking hospitals took issue with the report.

“We’re not clear how the numbers were derived, but our margin is significantly lower than what is stated in Forbes,” said Mark Whitley, a senior vice president of the North Texas division for Hospital Corporation of America.

“We are proud that the Medical Center of Plano and Med City Dallas Hospital, as well as our other HCA North Texas hospitals, have strong clinical and administrative teams who run great hospitals.”

Flowers Hospital in Dothan, Ala., No. 1 on the list with an operating margin of 53 percent, is disputing its ranking, according to the Dothan Eagle. The hospital says that its revenue was misreported and that the actual operating margin is 12 percent.

Hospitals with stronger operating margins do not necessarily provide better care.

In a U.S. Department of Health and Human Services measurement of hospital death rates among heart-failure patients, hospitals with lower operating margins, such as Parkland and JPS, were in line with the national average, as were Medical City Dallas and Medical Center Plano, with higher margins.

Most of the hospitals with the worst operating margins are county hospitals in states with high percentages of uninsured residents. Texas, which leads the nation with a 25 percent uninsured rate, has six hospitals on the list.