The American Hospital Association says its surveys show that hospital profit margins in 1984 averaged 6.2 percent nationwide, not the 14.12 percent recently reported by Health and Human Services Inspector General Richard P. Kusserow.
The 6.2 percent margin, AHA officials said yesterday, includes revenues from outside ventures, parking lots, cafeterias and similar nonpatient sources. If these extra revenues are excluded and only revenues from treating patients are counted, the profit margins on gross revenues were only 2 percent in 1984, according to AHA statistics.
Kusserow, in an internal HHS memorandum on Oct. 29, reported on a survey by his office of 892 hospitals under the Medicare prospective payment system, about a fifth of all hospitals in the system in 1984, its first year of operation. Under the prospective payment system, a fixed fee in set in advance for each hospital stay.
The survey found that on the Medicare portion of their operations, 81 percent of the hopsitals made profits and that profit margins averaged 14.12 percent. This was far higher than anyone had suspected, and Kusserow said it raised questions as to whether the prospective payment system provided "excess payments" to hospitals.
The AHA surveys and Kusserow's survey are not identical. The AHA includes both Medicare and non-Medicare operations in its figures, while Kusserow included only Medicare operations. And Kusserow excluded some items that the AHA includes. But the discrepancy in profit margins found is so great that these differences would not account for it.
AHA officials said yesterday that they are not disputing Kusserow's figures but rather are stating that their figures are different and that it will be necessary to find out why.
One explanation, according to some AHA officials, is that AHA normally uses a larger sample on profit margins, at least 2,400 to 2,600 hospitals. Its sample, they said, is intended to be representative of the whole nation, while Kusserow's memo said he did not use a random sample.
Moreover, AHA Vice President Edmund B. Rice said yesterday, although many hospitals are doing well, the use of profit margin averages masks the fact that large numbers of smaller and rural hospitals, which often are the sole source of care in their communities, "are in real financial trouble."
A recent memo from Rice to Jack W. Owen, executive vice president of the AHA, said that in 1984 AHA surveyed 4,141 hospitals, about two-thirds of all the community hospitals in the country, and found that 2,163, or 52 percent, lost money or made nothing on patient operations.
Moreover, the Rice memo said, if certain proposed changes in prospective payment rates for hospitals go forward, at least 1,214 of the hospitals already losing money will be even worse off than they are now. The bulk are in rural areas.