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ST. LOUISHEALTH CARE

INDUSTRY OVERVIEW2012

Volume 1: Hospital Quality and Financial Overview

Board of DirectorsDebbie Hanlon*ESCO TechnologiesEd Keady*Schnuck MarketsMarla Langenhorst*AmerenEd Strouth*Barry-Wehmiller Cos, Inc.Carolyn Plummer*Monsanto CompanyJoe Sander*Laclede Gas CompanyJan BanschEmersonBeth BiggsCharter CommunicationsSandi BollerUS BankPatricia CanadaSt. Louis Public SchoolsDolores EnnicoOlin CorporationKim GrbacEdward JonesJulie NadolnyPeabody EnergyBarb ShepardThe Doe Run CompanyTim SutterBrown Shoe CompanyJeff WhiteThe Boeing CompanyBob KnowlesEx-OfficioBob WaldEx-Officio* BHC Foundation Executive

Committee member

BHC StaffKaren Roth, RN, MBA, CPA Author, Director of ResearchLouise Probst, RN, MBA Executive DirectorMary Jo Condon, BJ, Senior Director, Partnerships and ProjectsDave Heaton, BSBA,Product ManagerMelissa Hogan, MPH,Senior Director, Health Improvement and Member Svc.Becky James, MSW, LCSW,Member Svc. and Education ManagerHaley McCall, MPH,Information Svc. ManagerRuth Stewart, BS,Executive AssistantMelanie Watson, AAS,Operations ManagerMia WilliamsMedical Records Abstractor

BHC MembersAegionAmeren CorporationAmerican Railcar Industries, Inc.Anheuser-Busch InBevArch CoalBarry-Wehmiller Cos, Inc.Bass Pro ShopsBrown Shoe Company, Inc.BUNZL Distribution USA, Inc.Charter CommunicationsCity of St. LouisDrury Hotels Company, LLCEdward JonesEmersonEnergizer Holdings, Inc.ESCO TechnologiesGlobal Brass & Copper, Inc.Graybar Electric Company, Inc.Laclede Gas CompanyLaird Technologies, Inc.Maines Paper & Food Svc, Inc.MetroMississippi Lime CompanyMonsanto CompanyOlin CorporationPaneraParkway School DistrictPeabody EnergyRalcorp Holdings, Inc.RockTennSaint Louis CountySaint Louis Public SchoolsSchnuck Markets, Inc.Shelter InsuranceSigma-Aldrich CorporationSolae CompanySolutia, Inc.St. Louis Graphic ArtsThe Boeing CompanyThe Doe Run CompanyTheBANK of EdwardsvilleThermadyne Holdings Corp.US BankVi-Jon, Inc.Watlow ElectricWorld Wide Technology, Inc.YRC Worldwide Inc.

Sustaining MembersAon-HewittBuck ConsultantsMercerTowers Watson & Co.

Purchasing PartnersUniversity of Missouri

About the BHCThe St. Louis Area Business Health Coalition (BHC) represents leading St. Louis employers in their efforts to improve the health of their enrollees and enhance the overall value of their health benefit investments. BHC employers seek a transparent health care market where comparative information about quality, cost and outcomes is used to achieve high-quality, patient-centered, and affordable care for all people in the region.

The BHC Foundation is a separate non-profit subsidiary organization to BHC. The BHC Foundation purpose is to provide pertinent health care information to the community.

About this ReportThis report analyzes, summarizes, and presents information and trends on the St. Louis area hospital industry for fiscal year 2010 with limited data for fiscal year 2011. The report includes data from the following sources: Health Insights (QIO), Centers for Medicare and Medicaid Services (CMS) Medicare Cost Reports and Hospital Compare, audited hospital financial statements, the American Hospital Association (AHA) and Missouri Hospital Association (MHA) annual licensing surveys and Community Benefit data, the Missouri Department of Health and Senior Services (DHSS), and the Internal Revenue Service Form 990 Schedule H as well as additional information voluntarily submitted by providers. This report may be downloaded from the BHC website, at www.stlbhc.org.

Data Limitation and CautionsBHC has made every effort to provide accurate information. Each hospital was given the opportunity to verify its financial and utilization data. As with any analysis of hospital industry data, a note of caution is recommended. BHC depends upon the accuracy of the data sources and cannot guarantee the complete accuracy of all the data in this report. For example, hospital data from Medicare Cost Reports may contain a level of error. In this case, data inaccuracies that may remain for individual hospitals would have minimal impact on weighted average values and virtually no impact on the overall conclusions regarding St. Louis hospital performance.

Please read and become familiar with the technical discussion while reviewing or interpreting the data detailed in this report.

AcknowledgmentsBHC would like to acknowledge the hospital representatives who voluntarily provided BHC with financial and utilization information. Hospital representatives and their staff worked extensively with BHC to verify the accuracy of the data. The additional time and effort spent analyzing and verifying the data was invaluable to the project’s success.

BHC wishes to acknowledge the following organizations that contributed to this report by providing certain data, analysis, recommendations or consultation: Health Insights (QIO), DHSS, and the Missouri Department of Social Services.

BHC especially thanks its members and other St. Louis organizations that provided funding to the BHC Foundation to make this publication possible.

About the BHC and this Report

St. Louis Area Business Health Coalition St. Louis Health Care Industry Overview, 2012

Table of Contents

1

MESSAGE TO THE COMMUNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

SECTION ONE: QUALITY AND PATIENT SAFETY Hospital Compare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Table: Hospital Compare, 2009 – 2010, Frequency St. Louis Hospitals Provide Recommended Care and National Rankings

Putting the patient at the center of care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Graph: St. Louis Area Hospitals HCAHPS Composite Score and National Percentile Ranking 2010

Readmission reductions a quality and value priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Graph: St. Louis Area Hospitals Heart Attack 30-Day Readmission Rates 2007 – 2010

CMS aligns financial incentives to eliminate infections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Table: Central Line-Associated Bloodstream Infection by Hospital, By Intensive Care Unit Type, Rates per 1,000 Line-Days

Table: Central Line-Associated Bloodstream Infection by Hospital, Medical/Surgical ICU, Rates per 1,000 Line-Days

Frequency of heart surgeries and infections decline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Graph: Coronary Artery Bypass Graft (CABG) Surgical Site Infection Rates per 100 Procedures, 2010

Government will align rewards with patient safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Graph: Vascular Catheter-Associated Infections, Rate per 1,000 Discharges, October 2008 – June 2010

Patient safety ratings now available to consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Graph: Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicator (PSI) 90 Composite,

St. Louis Area Hospitals Rate per 1,000 Discharges, October 2008 – June 2010

SECTION TWO: FINANCIAL PERFORMANCE Aggregate Charges, Revenues, and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Graph: Aggregate Charges, Revenues, and Expenses, St. Louis Area Hospital Industry, Shown in 2010 Dollars

Summary of Aggregate Financial Statements and Financial Indicators for St. Louis Area Hospitals, 2001 – 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Profits robust despite difficult economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Graph: Total Profit Profile, St. Louis Area Hospital Industry, 2001 – 2010

2010 Individual hospital and system results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Market dominance results in wide variation in payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Table: Medicare Losses, Operating Margins and Medicare Subsidies, St. Louis Hospitals, 2010

Table: Contribution Margins for Medicare and Privately Insured Patients In Concentrated and Competitive Markets

Operating margin trends, St. Louis Area Hospital Industry, 2001 – 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Profit margin trends, St. Louis Area Hospital Industry, 2001 – 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Excess beds decrease to lowest level in five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Graph: Excess Available Beds in 2010 by Network

Table: Inpatient Hospital Utilization Trends 2001 – 2010

Public Sector Financing

Hospitals’ charity and community benefit information now reported to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Graph: Charity Care as a Percentage of Operating Revenue 2001 – 2010

Charity care profile and Disproportionate share payment (DSH) by network 2009 – 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Fiscal Year 2011 Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Technical Notes

St. Louis Health Care Industry Overview, 2012 St. Louis Area Business Health Coalition

U.S. health care spending rose less than 4% in 2010, the slowest growth in the last 51 years according to the Centers for Medicare and Medicaid Services (CMS). Most of the slowdown was due to the recession as health coverage declined from high unemployment and consumers postponed medical care. Yet the slowdown was sharper than expected indicating other factors besides the recession may be responsible.

Sustainability questioned Some health experts predict growth in health spending will pick up in the future as the population ages and health reform moves forward. Others are cautiously optimistic that efforts to slow spending over the last decade may have caused changes in consumer and provider behavior in ways that bend the cost curve. The implications of a sustained slowdown in cost growth could be enormous. The rising burden of health care costs is the central barrier to U.S. economic recovery and a drag on household incomes. If Medicare cost growth could be held to one percentage point faster than our country’s economic growth per year, the projected long-term federal budget deficit would fall by more than one-third.1

Will the new CMS Hospital Value-Based Purchasing (VBP) Program help sustain the slowdown? The VBP program is finally moving forward and has the potential to be transformational in aligning incentives to improve quality and drive sustainable cost growth. After September 2012, hospitals will be rewarded by CMS for how often they follow certain clinical best practices and achieve patient satisfaction (pgs. 3-4). In addition, hospitals with high rates of readmissions will be penalized (p. 5). In the St. Louis region, providers have already begun working in partnership with others to reduce readmissions communitywide. While patient safety measures were scheduled to be included in the VBP program in 2014, CMS delayed implementation (pg. 8-9).

To fulfill the promise of a value-driven health system and support needed economic recovery, employers must be fast followers of the CMS VBP program. The most recent moderation in medical cost growth was not shared equally. Employers, who continued to pay more for health care, had benefit increases on average of 6.9% in 2010 according to Mercer’s National Employer Survey. Large, self-insured employers experienced a much sharper increase of 8.5%. Using the VBP program as a model to align incentives could help drive improvements in quality and sustainable medical cost growth.

Wage growth fell to a historic low as health benefit costs grew more than three times as fast as worker’s earnings and overall inflation. Although workers may not realize it, rising medical costs have been a constant drain on their income that has effectively wiped out any gains earned over the last decade.2

In a positive development, aggregate St. Louis hospital charges grew 3.1% in 2010, about the same as overall inflation, the slowest growth since 1996 (p. 10). As hospital admissions and emergency department visits declined, expenses grew less than 1% and revenues were flat.Record profits In 2010, profit margins at the nation’s hospitals reached a record-breaking 7.2%, the highest in 30 years. Despite flat revenue growth, the aggregate profit margin at St. Louis

hospitals reached 7.6%, the second highest in 15 years (p. 12). This success was not shared equally across hospitals in the region. If St. Louis hospitals are providing fewer services why are profits increasing? While one would hope this is the result of efficiency improvements, the data is unclear. Medicare losses increased again in 2010 which some would suggest is an indicator of continuing inefficiency.

In 2009, the Medicare Payment Advisory Commission (MedPAC) that sets Medicare payment rates for U.S. hospitals released a landmark study that found hospitals in more competitive markets were efficient enough to earn a profit on Medicare payments. The study also found that hospitals in the least competitive markets lacked the cost pressure over time to force efficiencies. They lost money on Medicare while realizing positive profits overall as a result of higher private sector payments (p. 12).

Private payers have long known they pay more for health care services than government payers. Yet the MedPAC study raises an interesting question. Is too much or too little money the problem? Have insufficient Medicare payments been the problem or have on-going high payments from private payers enabled too much capital investment and related cost in some communities?A growing body of evidence supports MedPAC’s findings. A new study released last year evaluated the profitability of procedures performed in hospitals located in competitive markets and also in markets where care was concentrated in only a few hospital systems. The study found that private insurance payments for procedures at hospitals in less competitive markets had a two-fold higher profitability than hospitals in competitive markets (p. 14). Medicare losses in St. Louis were $195.6 million in 2010 or about 2.9% of operating revenue. These studies suggest there is a tremendous opportunity to reduce costs if St. Louis hospitals focus on becoming efficient with Medicare.

Non-profit hospitals are required to provide community benefit in exchange for not paying taxes. Charity care provided by St. Louis hospitals reached 2.29% in 2010, up from 1.99% in 2009 as a result of the difficult economy. New IRS reports available this year provide more transparency on hospitals’ financial assistance policies and will provide more information on community benefit in the future. Considering the tax revenue forgone and severity of the fiscal crises that state and local governments face, this issue will continue to receive intense scrutiny.

Our nation is at a crossroads. With the historic slowdown in medical costs in recent years, we have been given a choice. We can choose to sustain the momentum to truly achieve a value-driven health care system that is sustainable, allowing our country to achieve economic prosperity and provide quality health care for all. Or, we can revert back to the unsustainable path of escalating health care costs that drags down the economy and reduces the standard of living for all Americans. 1 A Lowrey, “In a Hopeful Sign, Health Spending is Flattening Out”, New York Times, April 28, 2012.2 D Auerbach, A Kellerman, “A Decade of Health Care Cost Growth Has Wiped Out Real Income

Gains For An Average US Family, Health Affairs, September 2011 30:9

2

Message to the Community - Are we at a tipping point?

St. Louis Area Business Health Coalition St. Louis Health Care Industry Overview, 2012 3

Section One: Quality and patient safety

Hospital Improvements in Quality to be Rewarded by Medicare For the first time, Medicare’s Hospital Value-Based Purchasing (VBP) program will pay incentives to hospitals based on how often they follow certain clinical best practices and satisfy patients. Incentives will reward hospital improvement over time and as compared to peers. Interestingly, Medicare reports the more than $850 million in incentives will be deducted from money previously spent on inpatient care. Incentives will be paid for discharges occurring after September 2012.

VBP bases 70% of the score on 12 Hospital Compare measures related to how often hospitals follow practices linked to better outcomes (shown in bold white type in the box below). Comparative performance of St. Louis hospitals on these and all other recommended care measures are listed in the table below. This information is provided by HealthInsights, a Medicare-certified, quality improvement organization. Patient experience, the second component of the VBP score, is discussed on the following page.

In 2010, performance fell for 17 of the 29 St. Louis hospitals listed. In aggregate, Hospital Compare recommended care scores for hospitals in the St. Louis region ranked in the 59th percentile nationally. While St. Louis’ hospitals’ scores are improving, hospitals nationally are improving their scores more quickly. BHC would like to congratulate Gateway Regional, St. Louis University, St. Clare and St. Joseph-West hospitals for achieving composite scores in the 80th percentile and above.

2010 2009 Heart Heart Pneu- Surgical Nat’l Nat’l Hospital Attack Failure monia Infection Rank Rank

Frequency (%) that St. Louis Hospitals Provide Recommended Care andNational Performance Rankings: Jan. – Dec. 2010

Frequency of Recommended Care(Goal = 100%)

NationalPerformance

Ranking

Gateway Regional Med. Ctr. 100% 97% 99% 98% 90th 95thSt. Louis University Hosp. 99% 99% 96% 98% 87th 76thSt. Clare Health Center 99% 97% 96% 98% 83rd 63rdSt. Joseph Hospital-West 98% 97% 97% 98% 83rd 81stSt. Joseph Health Center 98% 97% 95% 98% 77th 83rdSt. Mary’s Health Center 100% 99% 94% 97% 75th 68thMercy Hospital St. Louis 99% 96% 95% 98% 75th 67thDes Peres Hospital 99% 96% 98% 97% 74th 76thBarnes Jewish W. County 96% 94% 97% 98% 74th 64thMissouri Baptist Med. Ctr. 100% 96% 97% 97% 71st 78thMissouri Baptist Sullivan 100% 99% 97% 94% 71st 79thDePaul Health Center 98% 94% 96% 97% 70th 70thSt. Joseph Hospital Breese 90% 96% 98% 97% 68th 49thBarnes-Jewish St. Peters 99% 99% 98% 95% 67th 60thMercy Hospital Washington 97% 97% 95% 97% 62nd 81stChristian Hospital 99% 93% 96% 97% 56th 59thAnderson Hospital 97% 96% 96% 96% 54th 60thMemorial Hospital 99% 93% 97% 96% 53rd 76thJefferson Regional Med. Ctr. 99% 97% 96% 94% 52nd 68thAlton Memorial 100% 93% 95% 96% 51st 54thProgress West HealthCare 100% 93% 97% 95% 50th 74thBarnes Jewish Hospital 99% 96% 92% 95% 49th 72ndSt. Luke’s Hospital 100% 97% 92% 95% 42nd 41stSaint Anthony’s Health Ctr. 91% 91% 95% 96% 39th 43rdSt. Elizabeth Hospital 99% 90% 94% 93% 34th 39thSt. Anthony’s Med. Ctr. 96% 79% 93% 93% 28th 38thLincoln County Medical Ctr. N/A 91% 93% 90% 24th 21stSt. Alexius Hospital 89% 88% 93% 89% 22nd 36thTouchette Regional Med. Ctr 92% 87% 91% 89% 18th 16thSt. Louis Hospital Average 98% 94% 95% 96% 59th 61st

Recommended Care MeasuresHeart Attack (Acute Myocardial Infarction or AMI)•Aspirinatarrival•Aspirinatdischarge•ACEInhibitorforLeftVentricularSystolicDysfunction(LVSD)•BetaBlockeratdischarge•Thrombolytic agent within 30 minutes of arrival•PCI within 90 minutes of arrival•SmokingcessationadviceHeart Failure•AssessmentofLeftVentricularFunction(LVF)•ACEInhibitorsforLVSD•Discharge instructions•SmokingcessationadvicePneumonia•InitialAntibioticTiming•PneumococcalVaccination•InfluenzaVaccination•Blood culture prior to first antibiotic received•Smokingcessationadvice•Appropriate antibioticSurgical Infection Prevention•Antibiotic 1 hour prior to surgical incision•Antibiotics stopped within 24 hours after end of

surgery•Appropriate Antibiotic•Glucose controlled for cardiac patients after surgery•Appropriatehairremoval•Blood Clot Prevention Ordered•Blood Clot Prevention Treatment•Beta Blockers before & after surgery to designated

patients•Urinarycatheterremovedwithin2daysaftersurgeryAnalysis MethodologyThescoreforeachclinicalarea(frequencyofrecommendedcare)representsthehospital’scombinedperformanceforall measures.Tocomputenationalrankings,eachhospital’sperformanceoneachmeasurewasrankedona0–1scale(similartogradingeachmeasureonacurve).Anaveragerankwascomputedacrossall26measuresforeachhospitalincontrast to the national comparison group and expressed as a percentile.

St. Louis Health Care Industry Overview, 2012 St. Louis Area Business Health Coalition4

Putting the patient at the center of care

Consumers’ opinions about their care will soon be tied to hospitals’ reimbursement. As mentioned previously, Medicare’s Hospital Value-Based Purchasing (VBP) program includes measures of patient satisfaction. VBP bases 30% of its incentive payments on eight measures of patient experience from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey (shown in bold white type in the box below). Similar to recommended care incentives, a hospital’s score is based on improvement over time and how achievement compares to peers. Hospitals may earn additional points for maintaining patient satisfaction scores consistently above the peer average.

In 2010, performance improved for 11 of the 29 St. Louis hospitals in the graph below. In aggregate, HCAHPS scores ranked in the 46th percentile nationally, down from the 52nd percentile in 2009. Despite St. Louis hospitals’ improvement, hospitals nationally improved at a faster rate, according to HealthInsights, which also provided these data.

Patient Experience of Care (HCAHPS) Survey Questions

•NurseCommunication•DoctorCommunication•HospitalStaff

Responsiveness•PainManagement•Medication

Communication•HospitalCleanliness

& Quietness•DischargeInformation•OverallHospitalRating• PatientWouldDefinitely

Recommend Hospital

W BHC congratulates St. Joseph Hospital of BreeseforachievingthehighestrankforpatientsatisfactioninSt.Louisfor the third year.

St. Louis Area Hospitals HCAHPS Composite Score andNational Percentile Ranking 2010

St. Joseph’s Hospital (Breese) Missouri Baptist Hospital - Sullivan

St. Clare Health Center Alton Memorial Hospital

Christian HospitalsBarnes-Jewish West County

Barnes-Jewish St. PetersProgress West HealthCare Center

St. Luke’s Hospital Lincoln County Medical Center

Mercy Hospital St. LouisSt. Joseph Health Center

Mercy Hospital WashingtonMemorial Hospital

U.S. AverageSt. Louis Average

Missouri Baptist Medical CenterSt. Joseph Hospital West

Depaul Health CenterSt. Louis University Hospital

St. Anthony’s Health Center (Alton)St. Mary’s Health CenterBarnes-Jewish Hospital

Des PeresAnderson Hospital

JeffersonRegionalMedicalCenterSt. Anthony’s Medical Center

St. Alexius HospitalGateway Regional Medical Center

Touchette Regional Medical CenterSt. Elizabeth’s Hospital

0.00

96th 86th 85th 81st 81st 79th 79th 76th 66th 59th 58th 55th 51st 51st 50th 46th 45th 43rd 43rd 42nd 41st 35th 34th 29th 26th 22nd 19th 17th 14th 8th 7th

0.20 0.40 0.60 0.80

W

Source: HealthInsight CMS Quality Improvement Organization. Ranking is similar to the method used by HealthInsight for Hospital Compare process of care measures (see page 3).

0.900.700.500.300.10

Patient experience improvement may also reduce readmission rates, according to a recent study at Duke University. Researchers analyzed HCAHPS data paying particular attention to whether hospital staff asked patients if they received written information regarding health problems to look out for and would have help after leaving the hospital. Hospitals that scored highly on patient satisfaction with discharge planning tended to have the lowest readmission rates. In fact, patient satisfaction was more closely linked to lower readmission rates than recommended care measures.1 In the future, the VBP program will include readmission rates in a hospital’s score.

Improving patient satisfaction means changing hospital culture to focus on the patient as a customer. Yet, it is more than a guest relations program. Patient experience incorporates all aspects of the patient’s interaction with the health care system including satisfaction, engagement, and the quality of care. Hospital leadership must emphasize how every person’s job contributes to this goal.

St. Louis hospitals are investing resources to improve patient experience. Memorial Hospital recently launched the SHHH (Silent Hospitals Help Healing) campaign, a program used by hospitals nationwide to reduce noise levels. Reducing noise can make a difference for patients. Loss of sleep can lead to high blood pressure, fatigue and depression, according to a University of Chicago study.2

1 Boulding W, Glickman S, Manary M, Schulman K, Staelin R, Relationship Between Patient Satisfaction With Inpatient Care and Hospital Readmission Within 30 Days, Am J Manag Care. 2011;17(1): 41-48.2 Bernhard B, “Shhh! Belleville hospital trying to keep quiet”, St. Louis Post-Dispatch, October 12, 2011.


Readmission reductions a quality and value priority

High rates of readmissions across conditions were a major contributing factor to St. Louis scoring in the lowest quartile for potentially avoidable hospital use and cost in a March 2012 report by the Commonwealth Fund. The report, which is described in more detail in the box below, used 2008 Medicare claims data analyzed by the Institute of Medicine.

More recent data showing readmissions for Medicare patients finds St. Louis hospitals improving. Fourteen of the region’s 23 hospitals’ 30-day heart attack readmission rates improved in the most recent Hospital Compare data. Despite this improvement, area hospitals do not seem to be gaining much ground on their peers nationally. Readmission rates for 15 of 23 hospitals in the region were worse than the national average, about the same as their previous performance.

BHC would like to congratulate Christian, St. Luke’s and St. Louis University hospitals for showing the greatest improvement. BHC also would like to congratulate Missouri Baptist Hospital Sullivan, Alton Memorial Hospital, Mercy Hospital Washington, Gateway Regional Medical Center and Des Peres Hospital for consistently showing performance better than the national average.

The Commonwealth Fund Scorecard on Local Health System Performance, 2012

The Scorecard tracks 43 indicatorsspanningfourdimensionsofhealthsystemperformance.St.Louisrankedinthe3rdquartileacrossindicatorsinthefourdimensions:• Access• Quality• PotentiallyAvoidableHospital

Use and Cost• HealthOutcomes

According to Kaiser Health News, Barnes-Jewish Hospital was oneofeighthospitalsnationallyto report among the worst readmission rates on all three health conditions Medicare tracks – heart attack, heart failureandpneumonia.

St. Louis Area Hospitals Heart Attack 30-Day Readmission Rates, 2007-2010Missouri Baptist Hospital (Sullivan)

Alton Memorial Hospital

Mercy Hospital Washington

Des Peres Hospital

St. Luke’s Hospital

Mercy Hospital St. Louis

Barnes-Jewish St. Peters

Gateway Regional Medical Center

National Average

St. Louis University Hospital

St. Elizabeth’s Hospital

Missouri Baptist Medical Center

St. Louis Average

JeffersonRegionalMedicalCenter

Memorial Hospital

St. Anthony’s Medical Center

St. Clare Health Center

St. Joseph Hospital West

St. Mary’s Health Center

St. Joseph Health Center

Anderson Hospital

St. Anthony’s Health Center (Alton)

Depaul Health Center

Christian Hospitals

Barnes-Jewish Hospital

0%

18.5%

18.8%

19.3%

19.6%

19.7%

19.8%

19.8%

19.8%

19.8%

20.2%

20.2%

20.2%

20.7%

20.8%

21.2%

21.2%

21.4%

21.6%

21.6%

21.8%

21.9%

21.9%

22.2%

22.3%

22.4%

5% 10% 15% 20% 25%

Source: Center for Medicare and Medicaid Services (CMS) Hospital Compare. Due to the low number of cases, the rates for Barnes-Jewish West County, Lincoln County Medical Center, Progress West HealthCare, St. Alexius, St. Joseph Breese, and Touchette Regional hospitals were not reported by Hospital Compare. Readmission rates are adjusted for illness severity.

Payment reform targets preventable hospital readmissions to improve quality and reduce waste. After September 2012, Medicare will penalize hospitals for higher than expected readmission rates for heart failure, pneumonia and heart attack. These conditions were chosen in part due to their high volumes, cost and readmission rates. Medicare could withhold up to 1% of a hospital’s aggregate inpatient Medicare payments in the first year, 1.25% in the second and 1.5% in the third year. Penalties during the first year will be based on care provided from 2008 to 2011. While the penalty is capped at 1%, it is assessed on all discharges, not just the conditions measured. On average, Medicare represents 42% of inpatient discharges at St. Louis hospitals so readmission penalties could add up quickly.

Looming penalties have hospitals’ attention. Making progress, particularly in urban areas where readmission rates tend to be higher, may require strong community partnerships to improve patients’ health literacy and connections to resources. Several area hospitals, physicians and community partners are collaborating to ensure patients understand how to care for themselves when they leave the hospital and receive necessary follow-up care. Home health, meal delivery, and transportation to physician visits are among the services provided.

A recent program by The Institute for Healthcare Improvement asks hospitals to interview readmitted patients and their families about their experiences after their initial discharge. The State Action on Avoidable Rehospitalizations (STAAR) program also focuses on communication among multidisciplinary groups of outpatient and inpatient clinicians and organizations. This knowledge helps a hospital and the entire care team understand where lapses in care occur so they can better collaborate and provide a more streamlined transition of care after discharge.1 The ultimate goal will be better integrated, coordinated and lower cost care.

Ellis J, Razavi A, “Reducing Hospital Readmissions with a STAAR Approach”, Healthcare Finance News, October 3, 2011.


Central Line-Associated Bloodstream Infection (CLABSI) by Hospital Compared with State and National RatesBy Intensive Care Unit (ICU) Type, Rates per 1,000 Central Line-Days

CMS aligns financial incentives to eliminate infections

Hospital 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 <=750 <=750 751- 751- 1001- 1001- 1501- 1501- >2500 >2500 1000 1000 1500 1500 2500 2500 Barnes-Jewish Hospital 2.5 2.1 2.3 1.0 0.7 1.6 N/A * * * * * * * * * * *Cardinal Glennon Hospital * * * * * * 4.3 3.0 3.1 1.3 0.0 0.0 0.9 0.0 0.0 0.0 0.4 0.3Des Peres Hospital * 0.0 * * * * * * * * * * * * * * * *Mercy Hospital St. Louis 0.0 0.8 * * * * 0.7 1.8 0.9 2.2 0.0 0.5 0.0 0.9 0.0 1.1 2.8 3.2Missouri Baptist Medical Center * * * * * * 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 * *St. Anthony’s Medical Center * * 2.7 0.0 1.1 0.8 * * * * * * * * * * * *St. Louis Children’s Hospital * * * * * * 2.2 2.2 1.5 2.6 0.6 0.8 0.5 0.5 1.1 1.4 2.4 2.7St. Louis University Hospital * * 4.0 1.2 * * * * * * * * * * * * * *St. Lukes Hospital * * * 0.0 * 0.4 * * * * * * * * * * * *St. Mary’s Health Center * * 3.7 1.6 2.6 2.5 0.0 0.0 5.2 0.0 2.1 0.0 5.2 0.0 0.0 7.5 * *Missouri Rate 1.0 0.6 1.8 0.7 1.0 1.1 2.4 1.9 1.9 1.4 1.0 0.4 0.5 0.5 0.8 0.5 1.8 1.9National Rate 2.1 2.0 2.4 2.2 2.3 1.9 4.0 4.0 3.0 3.3 2.3 2.3 1.7 2.1 1.4 1.7 2.8 2.9

Hospital-acquired infections (HAI) are among the leading causes of death in the U.S. The Department of Health and Human Services (HHS) reports one in every 20 admitted patients has an infection related to their hospital care, which leads to $28 to $33 billion in costs annually. In 2009 HHS developed the National Action Plan to Prevent Healthcare-Associated Infections: Roadmap to Elimination that aligns financial incentives to encourage reductions in infections in hospitals and other healthcare settings for everyone, not just Medicare beneficiaries. This Action Plan aligns with the Partnership for Patients, a public-private partnership launched in 2011 (see p. 8).

Phase I of the Action Plan addresses the most common infections in acute care hospitals and sets nine HAI reduction goals for 2013. A 50% decrease in the national incidence rates of central line-associated bloodstream infections (CLABSI) in the intensive care unit (ICU) is an initial target. In January 2011, CMS required hospitals to begin reporting ICU CLABSI rates and will tie them to reimbursement in 2013.

The tables list St. Louis hospital CLABSI rates reported to the Missouri Department of Health and Senior Services (DHSS). Statewide CLABSI rates decreased from 2009 to 2010 yet varied widely within hospitals with multiple ICUs and across hospitals. St. Louis hospitals with more ICUs are shown in the table above. Hospitals having only one Medical Surgical ICU are shown in the table to the right. CLABSI rates above the national average are shown in bold black type. From 2009 to 2010, approximately one-third of St. Louis hospitals reduced CLABSI rates in at least one ICU.

Measurement Should Be Standardized and The Goal Should Be Zero Consumer advocates and health care safety experts have criticized how national and state governments measure CLABSIs, saying they adjust for too many risks including some that should not influence whether a patient contracts an infection. Another concern is that not all patient infections are counted. Currently, CLABSIs are not counted if they occurred during a non-ICU admission. There is also variation in the interpretation of guidelines such as those that establish how long Missouri patients must be in the ICU for CLABSIs to be included in the state’s rate. Interestingly, CDC experts do not believe a minimum time in the ICU is necessary to distinguish hospital-acquired versus community-acquired infections. It is encouraging that a growing number of hospital leaders believe CLABSI rates should be measured using a simple count or rates per 1,000 and also have embraced “zero” infections as their measure of success.

Coronary Medical Surgical Neonatal (reported by birth weight in grams) Pediatric

Central Line-Associated Bloodstream Infection (CLABSI) by Hospital Compared with State and National Rates

Rates per 1,000 Central Line-Days**Medical Surgical ICUMissouri Hospitals

Source: Missouri DHSS and Illinois Department of Public Health (IDPH). An asterisk (*) indicates a facility was not required to report, did not provide the service, or the sample size was too small. ** IDPH reports hospital Standardized Infection Ratios (SIR) yet no state average. SIR values greater than one exceed the expected rate.

6

2009 2010Barnes-Jewish St. Peters 2.2 0.0Barnes-Jewish West County 0.0 0.0Christian Hospitals 1.3 1.0DePaul Health Center 2.1 0.8Des Peres Hospital 3.1 2.5Jefferson Regional Medical Center 2.6 0.5Lincoln County Medical Center 0.0 N/AMissouri Baptist Hospital, Sullivan 0.0 0.0Missouri Baptist Medical Center 0.7 0.3Progress West HealthCare 3.5 5.0St. Alexius Hospital Broadway Campus 2.0 0.9St. Clare Health Center 0.0 0.5Mercy Hospital St. Louis 1.4 2.1Mercy Hospital Washington 0.0 0.0St. Joseph Health Center 2.1 0.6St. Joseph Hospital West 1.1 2.0Missouri Rate 1.0 1.0IllinoisRate** N/A N/AAlton Memorial Hospital** 0.0 0.0Anderson Hospital** 0.0 N/AGateway Regional Medical Center** 0.0 N/AMemorial Hospital** 0.3 0.0St.Anthony’sHealthCenter(Alton)** 0.0 0.0St. Elizabeth’s Hospital** 0.5 1.6Touchette Regional Hospital** 0.0 N/ANational Rate 1.7 1.7


Frequency of heart surgeries and infections decline

Source: Missouri Department of Health & Senior Services (DHSS). Due to low numbers of patients, results are not shown for hospitals providing care to patients in the lowest risk category (0). Surgical site infection (SSI) rates for this risk category were zero in 2010.

In the United States, studies estimate that surgical site infections (SSI) occur in 4% to 25% of patients who undergo major surgery. These infections result in 8,000 deaths and cost about $10 billion annually. Yet, only eight states require hospitals to publicly report SSIs and there is wide variation in the types of surgical procedures reported.1 As a result of the Infection Control Act of 2004, Missouri hospitals are required to report SSI rates to the Missouri DHSS for three procedures: abdominal hysterectomy, coronary artery bypass graft, and hip repair. Ambulatory surgical centers are required to report SSI rates for breast surgery and hernia repair.

Fewer Coronary Artery Bypass Graft (CABG) procedures have been performed in St. Louis since 2008, decreasing at an average rate of 9% annually. CABG SSI rates also declined an average of 6% per year over the same time period. Variation in SSI rates remains among hospitals, especially for patients at lower risk. Infection rates for patients in the highest risk category have fallen significantly, an average of 32% annually since 2008. As the graph shows, seven St. Louis hospitals had infection rates of zero for high-risk patients in 2010. The previous year only two hospitals had rates of zero. This success reinforces the power of public reporting to improve care quality. BHC commends St. Louis hospitals for making care safer for high-risk patients undergoing CABG surgery.

Payments on the Line Beginning in January 2012, hospitals were required to report SSI rates for abdominal hysterectomy and colon surgery to the National Healthcare Safety Network (NHSN), the Centers for Disease Control and Prevention’s secure, web-based surveillance system or face a 2% cut in their Medicare payment update in 2014. As part of the same program, hospitals have been reporting their CLABSI rates to NHSN since January 2011. Benefits of NHSN enrollment include instructional webcast sessions that cover patient safety and healthcare personnel safety. Medicare’s program also aligns with the HHS National Action Plan to Prevent Healthcare-Associated Infections (p. 6). If NHSN protocols are enforced, it will introduce much-needed measurement standardization in infection reporting. This is vitally important to ensuring fairness of facility comparisons when the data is publicly reported in the future.

1 Makary, M. A., Aswani, M. S., Ibrahim, A. M., Reagan, J., Wick, E. C. and Pronovost, P. J. (2012), “Variation in Surgical Site Infection Monitoring and Reporting by State”. Journal for Healthcare Quality. doi: 10.1111/j.1945-1474.2011.00176.x

Coronary Artery Bypass Graft (CABG)Surgical Site Infection (SSI) Rates per 100 Procedures, 2010

Hospital Name (Case count by Risk Group: 2,3 /Risk Group: 1)

Mercy Hospital St. Louis (28,176)

Des Peres Hospital (26,62)

St. Joseph Health Center (60,86)

DePaul Health Center (33,58)

Christian Hospitals (78,93)

St. Anthony’s Medical Center (33,159)

Barnes-Jewish Hospital (93,210)

JeffersonRegionalMedicalCenter(23,42)

Missouri Baptist Medical Center (39,378)

St. Lukes Hospital (70,199)

St. Clare Health Center (6,163)

St. Mary’s Health Center (14,85)

0.0 2.0 6.0 8.0

10.75.1

3.80.0

1.23.3

1.73.0

9.1

1.9

2.4

11.9

1.6

2.5

2010 Missouri RateRisk Group 1 = 2.0

2010 Missouri RateRisk Group 2,3 = 2.3

2.21.3

0.0

0.0

0.0

0.0

0.0

0.60.0

1.20.0

4.0 10.0 12.0


Government will align rewards with patient safety

In 2008, Medicare’s groundbreaking decision to stop paying for certain hospital-acquired conditions (HAC) was among the first in a series of transparency and payment reforms aimed at eliminating harm and aligning incentives. Medicare began publicly reporting HAC rates in 2011. Additional payment incentives will occur in 2014 (see p. 3, 4, and 5).

Many hospitals, including some in the St. Louis region, have eliminated or significantly reduced hospital-acquired infections. Still, variation remains. Results for one of the HAC measures are shown below. While eight area hospitals reported rates of zero, four reported more than twice the national rate.

Referred to as “Blood Infections from Catheters in a Large Vein” on Hospital Compare, rates are for all vascular catheters including central lines. Rates are measured across inpatient settings, not just in the intensive care unit, according to Patrick Romano, MD, a UC Davis professor who assisted in validating the data and risk-adjustment process for Medicare.1

Through transparency and incentives, CMS has leveraged its purchasing power to improve care safety. The Partnership for Patients (PfP), an HHS initiative, aims to connect private sector purchasers and patient advocates with providers in a shared effort to decrease preventable HACs by 40% and reduce all hospital readmissions by 20% by 2013. BHC is proud to support this effort as a signer of this pledge.

Source: CMS Hospital Compare. Hospital-acquired condition (HAC) measures are not risk-adjusted.

Medicare Hospital-Acquired Conditions (HAC)

• Retentionofforeignobjectaftersurgery or other procedure

• Stage3or4ulcers(bedsores)acquired after admission to the facility (may not result in death)

• Incompatiblebloodorbloodproducts administration

• AFall• Intravascularairembolism• Catheter-associatedurinarytract

infections• Vascularcatheter-associated

infections• *Mediastinitisaftercoronaryartery

bypasssurgery*• *Electiveorthopedicandbariatric

surgicalsiteinfections*• *Deepveinthrombosisorpulmonary

embolism following a knee or hip-replacement*

• Severecomplicationsfrompoorcontrol of blood glucose

* Medicare did not release hospital scores for these HACs.

The National Quality Forum released the initial list of reportable adverse health care events aka “Never Events” in 2002. The first four HACs highlighted above in blue are also part of the NQF never events list. To learn more, go to the NQF website via this link:

http://www.qualityforum.org/Topics/SREs/Serious_Reportable_Events.aspx


St. Alexius Hospital



Memorial Hospital





St. Anthony’s Health Center



Des Peres Hospital






Christian Hospitals



Progress West Healthcare Center

Missouri Baptist-Sullivan

Barnes-Jewish West County

Touchette Regional Hospital

St. Joseph Hospital-Breese

Anderson Hospital


.95

.90

0.84

0.81

0.71

0.60

0.57

0.37

0.32

0.32

0.28

0.27

0.27

0.24

0.23

0.22

0.21

0.19

0.19

.12

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.2 0.4 0.6

Lower scores are better

NationalAverage

0.37

0.0 0.8 1.0

St. Louis Area Hospitals Vascular Catheter-Associated Infections Rate per 1,000 discharges

October 2008 - June 2010

1 Payers and Providers, October 27, 2011


AHRQ PSI 90 – What’s Included: •PressureUlcer(bedsore)•IatrogenicPneumothorax

(lung collapse)•Central-LineCatheterInfections•PostoperativeMeasures: −Hipfracture − Pulmonary embolism or deep vein thrombosis(lungorlegbloodclot) −Sepsis(seriousbloodinfection) −Wounddehiscence(surgicalincision reopens)afterabdominalsurgery

− Accidental puncture or lacerationWhy use composite measures? AHRQ considers composite measures to be an easier way to monitor health care provider performance over time. Some potential benefits include the abilityto:•Summarizequalityacrossindicators•Improveabilitytodetectdifferences•Identifyimportantdriversofquality•Prioritizeactionforquality

improvement•Makecurrentdecisionsaboutfuture

health care needs

9



Des Peres Hospital





St. Joseph Hospital-Breese





St. Anthony’s Health Center

Christian Hospitals

Memorial Hospital


Progress West HealthCare Center


Barnes-Jewish West County




Anderson Hospital



0.0

0.27

0.29

0.30

0.36

0.38

0.38

0.39

0.39

0.41

0.42

0.44

0.45

0.45

0.48

0.48

0.49

0.50

0.52

0.53

0.53

0.61

0.64

0.67

0.78

0.81

0.2

In October 2011, Medicare provided consumers new information on patient safety at hospitals when it began posting information on how often patients experienced certain serious complications during medical treatment on its Hospital Compare website. These inpatient patient safety/complication indicators (PSI) were developed by the Agency for Healthcare Research and Quality (AHRQ). While AHRQ patient safety events are considered to be rare, some of them result in high rates of mortality. For example, while post-operative sepsis accounted for only 2% of hospitalizations, it resulted in 17% of in-hospital deaths according to the CDC. These complications have the potential to be prevented if hospitals follow safe practices.

Source: CMS Office of Strategic Operations and Regulatory Affairs (OSORA). Indicators used in this measure are risk-adjusted and the margin of error at a 95% confidence interval is shown at the end of each bar. Due to low case counts, the rates for Missouri Baptist Sullivan, St. Alexius and Touchette Regional hospitals are not listed.

St. Louis hospitals’ most recent scores on the AHRQ PSI 90, a composite of the indicators shown in the box to the right above, are shown in the graph. BHC would like to congratulate SSM DePaul and St. Mary’s health centers for improving their performance. Performance was statistically worse than the national average for the four hospitals with the highest rates. Yet, better performance is possible. Based on data from Hospital Compare, 2.6% of the nation’s hospitals performed statistically better than the U.S. average on this composite measure. Unfortunately, none of these hospitals were located in the St. Louis region.

Medicare’s Hospital Value-Based Purchasing (VBP) Program, described on page 3, was scheduled to include the AHRQ PSI 90 composite measure for fiscal year 2014. However, the law requires Medicare to post measure results on Hospital Compare for one year prior to the start date of the measurement period, which was set for March 3, 2012. As posting was delayed until October 2011, the requirement could not be satisfied. Medicare has said it intends to include this measure in the VBP payment incentives in the future.

AHRQ Patient Safety Indicator (PSI) 90 is a composite of selected indicators of inpatient complications and patient safety.

Lower scores are better

NationalAverage

0.46

Patient safety ratings now available to consumers

0.1 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

St. Louis Area Hospitals, Rate per 1,000 DischargesOctober 1, 2008 - June 30, 2010


Charges increased 3.1% in 2010.

Expenses increased 0.9% in 2010.

Revenues wereflatin 2010.

Source: Centers for Medicare and Medicaid Services Medicare Cost Reports and audited financial statements.

10

Inflation adjustments are based on the U.S. Labor Department’s St. Louis area CPI (including medical component); consolidated hospital organizations may not report all of their non-operating revenue and expenses by individual hospital. The cumulative effect of this may not be fully reflected in these results.

Charges grew 3.1% in 2010, about the same as overall inflation, to more than $21 billion. The proportion of inpatient care continued to shrink while outpatient care grew at St. Louis hospitals, reaching 44% in 2010. In recent years, CMS and health plans replaced the charge-based outpatient payments of the past with a fixed fee schedule to control costs. Yet, there are exceptions to the fixed reimbursements. For example, CMS pays more for some services, new technologies, and unusually costly patients. Children’s, rural and cancer hospitals’ payments remain at previous levels.

Expensesgrewlessthan1% in 2010, the smallest increase in ten years. Falling inpatient admissions and emergency department visits contributed to the slowdown in expense growth. In addition, depreciation expense remained steady in 2010, a welcome break from the increases of recent years spurred by regional health care building projects and information technology infrastructure improvements.2

Revenues were flat in 2010 after the historic increase from the prior year. The slowdown in revenue was expected given the decline in hospital admissions and service use. Non-operating revenue decreased due to weakness and volatility in the financial markets. Despite this, aggregate revenues remained at more than $8 billion keeping health care prices high for patients and payers in the St. Louis region.

Billions$25

$20

$15

$10

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Revenue

Nationally, medical cost growth in 2010 edged higher yet remained close to the historic low that was set in the previous year. High unemployment, declining rates of health coverage, stagnant wages, and future financial uncertainty associated with the recession were among the factors responsible for the slowdown.

Employerspaymore Despite slower medical cost growth, employers’ health benefit costs increased 6.9% in 2010 compared to 5.5% in 2009 according to Mercer’s National Survey of Employer-Sponsored Health Plans. This increase was not shared equally. Large, self-insured employers that pay the actual costs of medical care experienced a much sharper increase of 8.5%.

Workers get less Health benefit costs grew more than three times as fast as worker’s earnings and overall inflation in 2010.

Wage growth fell to a historic low. Median inflation-adjusted household income was the lowest recorded since 1996. As a result, consumers continued to postpone medical care or seek lower cost alternatives resulting in fewer inpatient admissions, elective procedures and emergency services. This contributed to a marked deceleration in hospital and prescription drug spending. Growth slowed slightly in the use of physician services.1

Although the recession officially ended in June 2009, the slow economic recovery has had a lingering impact on the health care sector. While St. Louis area hospitals experienced a similar decline in service use as their peers nationally, aggregate revenue and financial performance remained solid as demonstrated in the following section of the report.

1 A Martin, D Lassman, B Washington, A Catlin, “Growth in US Spending Remained Slow in 2010; Health Share of Gross Domestic Product Was Unchanged From 2009”, Health Affairs, January 2012, 31:1.2 A Mueller, “Health-care highway, $2.6 million in projects on the drawing board for 64/40’s medical miles”, St. Louis Business Journal, October 14, 2011.

Aggregate Charges, Revenues and ExpensesSt. Louis Area Hospital Industry, Shown in 2010 Dollars

$5

ExpensesExpenses MinusDepreciation

Charges

Allowances

Section Two: Financial Performance


All figures are in millions of dollars. 2001 2002 1 20031 20041 20051 20061 20071 20081 2009 2010

INCOME SUMMARY Total Gross Charges 10,165 11,348 12,739 14,024 15,334 16,616 17,842 19,034 20,409 21,538 Less: Allowances (5,836) (6,504) (7,614) (8,550) (9,428) (10,388) (11,317) (12,183) (13,146) (14,047)Net Patient Revenue 4,329 4,844 5,125 5,474 5,906 6,226 6,525 6,850 7,263 7,492 Other Operating Revenue 143 153 192 211 199 206 226 199 262 270 Total Operating Revenue 4,472 4,997 5,317 5,685 6,105 6,432 6,751 7,049 7,525 7,762 Total Operating Expenses (4,358) (4,743) (5,043) (5,469) (5,901) (6,154) (6,473) (6,792) (7,205) (7,429)Income (Loss) from Operations 114 254 274 216 204 278 278 257 320 333 Non-Operating Revenue 28 (13) 234 181 123 238 169 (440) 391 316 Non-Operating Expenses (54) (67) (11) (14) (10) (22) (29) (45) (32) (38)Excess(Deficit)ofRevenuesOverExpenses 88 174 497 383 317 495 418 (228) 679 611

BALANCE SHEET Current Assets: Cash and Marketable Securities (77) (73) (76) (257) (317) 72 231 586 357 326 Net Patient Accounts Receivable 773 769 758 771 819 872 935 1,037 961 981 Other Receivables 24 22 32 40 31 97 64 94 33 67 Other Current Assets 90 96 119 198 193 192 313 202 226 244 Total Current Assets 810 814 833 752 725 1,233 1,542 1,920 1,577 1,618 Land, Building and Equipment Cost 4,830 5,069 5,391 5,643 5,946 6,335 6,852 7,497 7,956 8,341 Accumulated Depreciation (2,633) (2,691) (2,892) (3,030) (3,238) (3,437) (3,694) (3,982) (4,272) (4,572)Net Land, Building and Equipment Cost 2,197 2,378 2,499 2,613 2,708 2,898 3,159 3,515 3,684 3,769 Investments Held by Trustee 353 305 405 602 732 886 548 472 383 425 Deferred Financing Costs 3 1 1 2 2 2 2 1 1 2 Other Cash and Investments 436 408 471 589 605 645 728 593 1,022 1,086 Other Assets 1,071 1,095 1,328 1,503 1,616 1,785 1,710 1,362 1,662 1,835 Total Assets 4,870 5,001 5,537 6,061 6,388 7,450 7,688 7,864 8,329 8,735

LIABILITIES AND FUND BALANCE Current Liabilities 736 737 779 882 969 1,460 1,377 1,736 2,001 2,178 Long-term Debt 1,120 1,109 1,088 1,115 959 993 1,100 1,191 1,258 1,185 Other Liabilities and Reserves 238 271 284 277 283 276 309 678 361 232 Fund Balance 2,776 2,884 3,385 3,787 4,177 4,721 4,903 4,259 4,709 5,139 Total Liabilities and Fund Balance 4,870 5,001 5,537 6,061 6,388 7,450 7,688 7,864 8,329 8,735 Endowment, Specific Purpose and Other Restricted Fund Balances 132 130 146 179 181 183 215 173 186 206

FINANCIAL INDICATORS Operating Margin 2.55% 5.09% 5.15% 3.80% 3.34% 4.33% 4.11% 3.65% 4.24% 4.29%Profit Margin 1.95% 3.50% 8.96% 6.54% 5.08% 7.42% 6.04% -3.45% 8.58% 7.57%Return on Equity 3.17% 6.03% 14.69% 10.12% 7.58% 10.48% 8.52% -5.35% 14.41% 11.89%Mark-up Percentage (Charges over Cost) 133.2% 139.3% 152.6% 156.4% 159.8% 169.6% 175.6% 180.2% 183.2% 189.9%Allowances as % of Charges 57.4% 57.3% 59.8% 61.0% 61.5% 62.5% 63.4% 64.0% 64.4% 65.2%

1 In 2002, Barnes - Jewish Hospital’s ($21.2) million non-operating loss was included in non-operating revenue. In 2008, BJC HealthCare system’s ($477.6) million non-operating loss was included in non-operating revenue. St. Alexius and Forest Park hospitals were sold to Doctors Community Healthcare Corporation in 2004, and Success Healthcare in 2008. Due to the transfer in ownership, 2002, 2003, 2004, 2007, and 2008 data could not be verified.

Sources: Centers for Medicare and Medicaid Services Medicare Cost Reports and audited hospital financial statements. Note: Changes in previously reported data are based on most current information available including numerous restatements. All figures are rounded. All data in this table are not adjusted for inflation. Differences in accounting practices for expenses and investment income across hospital systems may understate some St. Louis hospital systems’ profits. Although consistent with accepted accounting principles, hospital systems may allocate 100% of certain expenses (i.e., executive salaries) and investment income proportionately to individual subsidiary hospitals while others retain some or all of these expenses at the system level. BHC has worked to collect this information and adjust for differences as possible but due to limited access to data, viewers should make comparisons with this in mind. BHC will continue its efforts to fully accommodate these differences in future reports and will adjust data retrospectively to allow trends to be evaluated.

Hospital Financial Performance 2001 - 2010Summary of Aggregate Financial Statements and Financial Indicators for St. Louis Area Hospitals

11

Aggregate Financial Performance


Profits robust despite difficult economy

In 2010, profit margins at U.S. hospitals reached a record-breaking 7.2%, the highest in 30 years. Operating margins were also the highest in decades at 5.5%.1 This was achieved despite the biggest yearly drop in admissions ever observed by Moody’s Investor’s Service. The American Hospital Association reported improvements in cost efficiency contributed to record hospital profits nationally. Robust outpatient utilization also helped make up for the decline, according to the Medicare Payment Advisory Commission (MedPAC).

Profit margins in aggregate for St. Louis hospitals reached 7.6% in 2010, the second highest in 15 years. While area hospitals collectively earned more than $600 million in profit, it was not shared equally among them, as shown on page 13. In addition, this profit margin is likely a conservative estimate given that system-level investment income is not reported in individual hospital results for both the Mercy and Tenet hospital systems. Investment earnings here were $316 million, a 19% decrease from the historic high set in 2009.

Operating margins similarly improved and varied across the region. Operating income improved by about 4% over the previous year to $333 million. This increase occurred despite a 3% decrease in inpatient admissions, much steeper than the 0.4% decrease nationally. Operating margins shown on page 15 ranged from a negative 10.9% to nearly 16%. Mercy had the highest operating margin at 5.8% despite the largest decline in admissions compared to other St. Louis systems. BJC Healthcare earned the second highest operating margin of 5.6% despite flat utilization.

If hospitals are providing fewer services, why are profits increasing? Sustained revenues in the face of declining utilization in 2010 suggest higher prices. Increased profits despite falling service use could also indicate rising prices or improved efficiency. Unfortunately data are not available to tell us what happened in the St. Louis market. Medicare losses increased at St. Louis hospitals in 2010 which may indicate continuing inefficiency based on findings from studies discussed below.

As cited in last year’s report, a 2009 study by MedPAC found hospitals in more competitive health care markets had become more efficient and were thus able to make money on Medicare admissions. Interestingly, these hospitals also produced consistently higher quality outcomes. Unlike hospitals in competitive markets, hospitals in the least competitive markets lacked the cost pressure to force efficiencies, so they lost money on Medicare and charged private payors even more to compensate for the losses. A new 2011 study looks at this issue in more depth and adds evidence to support these findings (see p. 14 for more on this report).

Nationwide and in the St. Louis region, hospitals and health systems report they are working to reduce their cost structures and improve their efficiencies so they earn a profit for providing Medicare services.2 Medicare spending is the largest single contributor to the growth in the federal deficit and hospital payments are the largest single contributor to rising Medicare costs.3 Given the perilous state of the U.S. economy and the rising burden of health care costs, it is imperative for hospitals to make the changes necessary to become more efficient, improving affordability and access to health care for all.

In 2010, profit margins outperform the national average for the second year.

1 A Selvam, “One for the record books, Hospital profit margins hit highest level in decades”, Modern Healthcare, page 12, January 9, 2012.2 P Betbeze, “In AL, Some Hospitals Thrive on Medicare”, HealthLeaders Media, April 4, 2012.3 J Robinson, “Hospitals Respond to Medicare Payment Shortfalls By Both Shifting Costs and Cutting Them, Based on Market Concentration”, Health Affairs, July 2011, 30:7.

Aggregate Hospital Performance - Total Profit ProfileSt. Louis Area Hospital Industry, 2001-2010

Millions

$750

$600

$450

$300

$150

$0

-$450

-$300

-$150

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

}Source: Medicare Cost Reports, audited financial statements, and MHA/AHA Annual Licensing Surveys.

Non-operating RevenueOperating Income


2010 Individual hospital and system results

Avail. Patient Avail. Avg. FTE per Net Profit Profit marginSystem Name (market share1) beds days occup. % LOS occup. bed profit margin net of deprec.BJC HealthCare (32.13%) Alton Memorial Hospital 152 28,852 52.0% 4.4 4.0 23,190,924 16.86% 23.40%Barnes-Jewish Hospital 1,214 295,187 66.6% 5.4 6.3 234,427,933 14.30% 19.55%Barnes-Jewish Hospital - St. Peters 117 29,633 69.4% 4.3 3.9 21,838,117 14.99% 21.56%Barnes-Jewish Hospital - West County 79 10,602 36.8% 3.6 4.2 7,872,916 7.93% 15.23%Christian Hospitals NE/NW 463 80,915 47.9% 5.3 4.2 14,563,572 5.13% 10.93%Missouri Baptist Hospital - Sullivan 58 8,787 41.5% 4.1 3.0 -2,077,146 -4.74% 3.45%Missouri Baptist Medical Center 437 98,639 61.8% 4.3 4.5 65,464,276 13.93% 19.32%Progress West HealthCare Center 72 9,735 37.0% 3.5 5.0 -9,158,664 -18.44% -3.21%St. Louis Children’s Hospital 312 71,134 62.5% 6.0 7.9 70,708,448 15.33% 21.33%Network Total 2,904 633,484 59.8% 5.0 5.5 426,830,376 12.81% 18.59%

SSM Health Care (20.70%) Cardinal Glennon Hospital 174 44,455 70.0% 6.8 6.9 25,064,502 9.85% 14.02%DePaul Health Center 422 110,092 71.5% 4.6 4.3 7,876,687 2.66% 5.74%St. Clare Health Center 159 45,051 77.6% 6.0 5.2 -2,076,062 -1.29% 6.23%St. Joseph Health Center - St. Charles2 410 76,359 51.0% 5.0 3.5 2,919,614 1.46% 5.86%St. Joseph West - Lake St. Louis 122 29,869 67.1% 3.4 4.3 6,615,974 5.64% 9.44%St. Mary’s Health Center 352 97,318 75.7% 5.0 4.5 26,542,438 9.11% 12.81%Network Total 1,639 403,144 67.4% 4.9 4.6 66,943,153 5.07% 9.30%

Mercy (10.63%) Mercy Hospital St. Louis 859 203,559 64.9% 5.5 4.6 59,007,831 7.26% 12.97%Mercy Hospital Washington 191 18,497 26.5% 3.6 4.7 -5,642,729 -5.86% 0.54%Network Total 1,050 222,056 57.9% 5.3 4.6 53,365,102 5.87% 11.66%

Tenet HealthSystem (5.88%) Des Peres Hospital 143 36,754 70.4% 4.4 3.4 10,090,973 7.66% 11.04%St. Louis University Hospital 324 85,891 72.6% 5.8 3.7 6,050,317 1.75% 6.61%Network Total 467 122,645 72.0% 5.3 3.6 16,141,290 3.38% 7.83%

Missouri Non-Merged (16.97%) Jefferson Regional Medical Center 202 48,735 66.1% 3.8 5.0 9,621,299 7.32% 12.16%Kindred Hospital 94 20,843 60.7% 27.2 3.5 -1,532,072 -5.14% -3.79%Lincoln County Memorial Hospital 25 4,798 52.6% 5.4 3.9 -1,002,440 -3.00% 2.52%St. Alexius Hospital-Broadway Campus3 195 43,365 60.9% 6.6 3.8 331,986 0.38% 1.45%St. Alexius Hospital-Forest Park Campus3 137 6,001 12.0% 7.1 6.0 175,445 0.86% 2.01%St. Anthony’s Medical Center 574 136,653 65.2% 4.9 4.8 -3,054,000 -0.71% 5.76%St. Luke’s Hospital 428 72,700 46.5% 4.3 4.8 18,059,000 4.34% 9.63%Total 1,655 333,095 55.1% 4.7 4.6 22,599,218 1.97% 7.16%

Illinois Non-Merged (13.69%) Anderson Hospital 149 29,981 55.1% 3.8 4.2 8,517,213 6.25% 10.53%Gateway Regional Medical Center 318 39,392 33.9% 5.0 3.5 2,308,651 2.47% 7.25%Memorial Hospital (Belleville) 316 62,332 54.0% 4.0 5.3 16,625,259 6.61% 11.47%St. Anthony’s Health Center (Alton, IL) 114 19,178 46.1% 4.7 4.7 4,523,261 4.57% 7.76%St. Elizabeth’s Hospital (Belleville) 260 57,153 60.2% 4.4 4.2 -11,514,448 -5.94% -0.44%St. Joseph Hospital (Breese, IL) 57 6,246 30.0% 3.4 4.9 6,614,964 13.04% 19.68%Touchette Regional Hospital4 127 15,622 33.7% 4.1 5.4 -1,795,151 -2.77% 0.70%Total 1,341 229,904 47.0% 4.3 4.8 25,279,749 2.84% 7.56%

Aggregate for 33 St. Louis Hospitals 9,056 1,944,328 58.8% 4.95 4.76 611,158,888 7.57% 12.82%

1 Market share percentages listed by each network are based on total number of discharges for the hospitals in the network. Hospital network configurations are current as of 2012.2 St. Joseph Health Center & St. Joseph Hospital-Wentzville report on a combined basis. 3 In December of 2008, Forest Park and St. Alexius Hospitals were acquired by Success Healthcare. In 2009, Forest Park was renamed St. Alexius Hospital-Forest Park Campus.4 Kenneth Hall Regional and Touchette Regional Hospitals report on a combined basis. 5 Kindred Hospital, a long-term acute care hospital, is not included in the aggregate average LOS figure. 6 St. Louis average excludes two teaching hospitals, Barnes-Jewish Hospital and St. Louis University Hospital, that may have higher numbers of FTEs.


Private payers have long known they pay more for health care services than government payers. The private sector paid an average of 34 cents more for every dollar spent to cover services provided to patients covered by Medicare, Medicaid or to the uninsured, based on the most current national data from the American Hospital Association (AHA). This was the highest amount in more than 20 years.1 What is debatable is whether it has to be this way. The Medicare Payment Advisory Commission’s (MedPAC) 2009 report raised an interesting question. If hospitals in competitive markets were efficient enough to earn a profit on Medicare, could hospitals in less competitive markets do the same?

As shown in the upper right table, Medicare losses in St. Louis were $195.6 million in 2010, or about 2.9% of operating revenue based on the most current community benefit data available from the Missouri Hospital Association (MHA). This is up from $117.8 million in 2008, or about 1.9% of operating revenue, as shown in last year’s report. MHA did not report these data for 2009. These figures are net of additional subsidies Medicare paid to some hospitals. Subsidies represented 1.9% of operating revenue in 2010, down from 3.4% in 2008.

If Medicare losses are a marker of hospital inefficiency, results from St. Louis hospitals indicate room for improvement. While it would be overly simplistic to assume hospitals can control all of the factors that contribute to rising costs, MedPAC’s study suggests significant gains in efficiency are achievable.

A recent study provides further evidence to support the MedPAC perspective.2 Profitability was evaluated for hospitals located in markets with robust competition and in markets where hospital care was concentrated in only a few hospital systems.

Hospital profit was measured using the contribution margin for care provided to patients undergoing one of seven procedures. The contribution margin is the difference between the revenue received from payers and the direct costs of care. Administration, depreciation and charity care expenses are excluded. Therefore, the contribution margin is not equal to a profit margin.

Across all regions, the study found that Medicare patient costs were higher and payments were lower than for privately insured patients. While hospitals earned modest contribution margins for Medicare, margins were substantial for privately insured patients.

When the structure of the local market was considered, the differences were even more striking. The table below shows the contribution margins for four of the seven procedures. In concentrated markets, hospitals lost money on Medicare payments in three of the four procedures, however, these hospitals made up the losses through the higher contribution margins made on patients with private insurance.

On average, for these procedures, contribution margins for patients with private insurance were twice as high at hospitals in concentrated markets as compared to those in competitive markets. Similar market-related differences in contribution margins for Medicare and private insurance exist for the other three procedures in the study.

The Forecast Expanding coverage under the Affordable Care Act will be financed in part by slowing the growth of Medicare payment rate increases to hospitals and other health care providers. Medicare payments will also face downward pressure as the government works to reign in the federal deficit. Hospitals that focus their energies on process improvement will stand the best chance of thriving.

1 American Hospital Association, Trendwatch Chartbook 20122 J Robinson, “Hospitals Respond to Medicare Payment Shortfalls By Both Shifting Costs and Cutting Them, Based on Market Concentration, Health Affairs, July 2011, 30:7.

Medicare Losses, Operating Margins and Medicare SubsidiesSt. Louis Hospitals, 2010

Market dominance results in wide variation in payments

Source: Missouri Hospital Association (MHA) Community Benefit reports. Medicare losses are reported net of Medicare subsidies. Medicare subsidies obtained from CMS include Disproportionate Share Hospital Payments (DSH), indirect medical education, and graduate medical education payments. Market share is based on inpatient discharges. Hospitals that did not report to MHA are not listed yet are included in operating revenue, margin and Medicare subsidy aggregate totals.

Source: Data obtained from the value purchasing initiatives of the Integrated Healthcare Association and Aspen Health Metrics. Margins adjusted for patient-specific differences in age, diagnoses, comorbidities, complications, and discharge destination, plus hospital characteristics (procedure volume, staffed beds, teaching status, wage rate).

2010 2010 2010 Medicare Medicare Operating Loss as % of 2010 Subsidies asSystem/Hospital Name Revenue Operating Operating % of Oper.(market share) (000) Revenue Margin RevenueBJC HealthCare (32%) $3,037,203 2.6% 5.6% 2.8%SSM Health Care (21%) 1,318,874 0.6% 4.9% 3.0%Mercy (11%) 908,228 5.3% 5.8% 0.0%Tenet Health System (6%) 477,334 0.5% 3.4% 0.0%Missouri Non-Merged (17%) Jefferson Regional Medical Center 130,150 0.0% 6.4% 1.6%Kindred Hospital 29,799 158.5% -5.1% 0.0%St. Anthony’s Medical Center 439,279 1.4% 0.9% 0.0%St. Luke’s Hospital 414,255 0.9% 3.9% 0.0%Aggregate St. Louis (MO only) $6,775,569 2.9% 4.8% 1.9%

Contribution Margins for Medicare and Privately Insured Patients In Concentrated and Competitive Markets

Knee Hip Lumbar CervicalPayer replacement replacement fusion fusionHospitals in Concentrated Markets ($)Medicare -190 -303 -207 1,818PrivateIns. 13,731 15,938 28,185 13,020Hospitals in Competitive Markets ($)Medicare 1,700 1,023 1,575 914PrivateIns. 7,529 6,732 17,195 5,946


St. Louis Area Hospital Industry 2001 - 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Missouri Hospitals

Barnes-Jewish Hospital 2.79% 3.73% 4.34% 3.58% 3.75% 3.59% 2.18% 3.60% 3.45% 3.74%

Barnes-Jewish Hospital-St. Peters 11.25% 18.18% 19.08% 13.04% 14.13% 14.19% 11.78% 12.51% 17.77% 15.78%

Barnes-Jewish Hospital-West County 24.67% 26.86% 26.82% 23.29% 16.05% 18.33% 14.04% 11.80% 11.82% 15.57%

Cardinal Glennon Hospital 7.60% 12.35% 9.93% 14.16% 11.43% 13.93% 15.64% 9.61% 9.79% 7.11%

Christian Hospitals -7.87% 6.92% 6.84% 4.78% 0.88% -4.38% -3.13% -1.79% 1.81% -0.55%

DePaul Health Center -0.47% 2.47% 4.43% 4.88% 7.55% 0.11% 1.67% 1.42% 2.41% 3.31%

Des Peres Hospital 11.61% 13.36% 11.95% 8.06% 7.33% 12.13% 10.43% 10.27% 9.44% 7.64%

Jefferson Regional Medical Center 1.25% -0.50% -0.80% -0.66% 0.73% 1.49% 0.85% 3.82% 6.31% 6.39%

Kindred Hospital -7.24% 7.71% 8.11% 19.60% 7.63% 7.14% 18.31% 13.93% 3.18% -5.14%

Lincoln County Memorial Hospital 4.97% 3.05% -8.53% -0.05% -5.19% -2.74% -2.45% 2.04% -6.19% -3.63%

Mercy Hospital St. Louis 0.62% 2.13% 3.44% 3.67% 1.73% 5.94% 8.37% 9.34% 7.97% 7.20%

Mercy Hospital Washington 4.88% 4.84% 3.04% 3.88% 3.25% 5.15% 2.68% 5.60% 0.33% -5.89%

Missouri Baptist Hospital - Sullivan -1.85% 2.17% 9.16% 13.10% 10.18% 0.44% -0.75% -11.35% -4.23% -4.33%

Missouri Baptist Medical Center 9.36% 15.96% 15.61% 15.36% 12.38% 8.05% 7.25% 9.05% 8.14% 9.06%

Progress West HealthCare Center n/a n/a n/a n/a n/a n/a -74.31% -38.49% -11.11% -10.89%

St. Alexius Hospital - Broadway Campus1,2 -9.63% -8.85% 0.37% -8.23% 0.49% 1.05% 0.33% 1.38% 2.58% 2.50%

St. Alexius Hospital - Forest Park Campus1 -1.45% 2.76% 2.64% -24.69% -6.03% -2.68% 1.46% 0.13% -0.87% -3.56%

St. Alexius Hospital - Jefferson Campus1,2 6.55% -8.84% -16.73% n/a n/a n/a n/a n/a n/a n/a

St. Anthony’s Medical Center -4.37% -8.47% 0.00% 2.06% 1.51% 1.82% 0.90% -0.85% 0.90% 0.87%

St. Clare Health Center n/a n/a n/a n/a n/a n/a n/a n/a -22.99% 1.07%

St. Joseph Health Center - St. Charles3 2.63% 2.74% 4.12% 1.27% 1.29% 0.07% 1.43% -2.85% 6.12% 2.54%

St. Joseph Health Center - Wentzville3 -25.25% -19.77% -13.93% -24.26% -47.21% n/a n/a n/a n/a n/a

St. Joseph Hospital West - Lake St. Louis 10.62% 10.70% 4.84% 3.15% 5.82% 2.97% 2.58% 0.22% 3.34% 6.44%

St. Louis Children’s Hospital 3.68% 5.01% 4.85% 8.23% 10.08% 10.02% 12.54% 10.57% 11.12% 8.71%

St. Louis University Hospital 12.55% 18.36% 7.95% -5.82% -7.86% -0.44% 2.17% 1.78% -1.80% 1.75%

St. Luke’s Hospital 4.83% 4.51% 3.58% 3.37% 3.13% 3.14% 4.04% 2.13% 2.54% 3.89%

St. Mary’s Health Center 2.11% 4.93% 5.23% 5.57% 7.00% 2.66% 0.63% 1.89% 6.81% 7.80%

Aggregate for Missouri Hospitals 3.08% 5.60% 5.58% 4.06% 3.58% 4.09% 4.22% 4.03% 4.52% 4.73%

Illinois Hospitals

Alton Memorial Hospital 11.15% 14.19% 15.44% 15.56% 13.11% 6.31% 5.90% 1.46% 8.15% 8.12%

Anderson Hospital 1.61% -0.15% -0.90% -5.48% 2.01% 6.23% 1.98% 1.47% 0.34% 1.21%

Gateway Regional Medical Center -11.21% 7.75% 7.60% 12.43% 15.13% 12.29% 10.08% 13.42% 7.76% 2.47%

Memorial Hospital (Belleville) -0.82% -0.56% -1.52% -2.01% -4.01% 4.83% 5.54% 3.91% 2.99% 4.53%

St. Anthony’s Health Center (Alton)4 5.46% 4.32% 0.36% -3.30% -3.21% 4.00% 5.08% -0.83% 0.58% 4.11%

St. Elizabeth’s Hospital (Belleville) -4.07% -1.36% 2.21% -4.22% -4.24% 0.16% -2.92% -7.66% -1.84% -8.31%

St. Joseph Hospital (Breese) 12.14% 10.72% 12.30% 11.82% 11.72% 10.29% 8.58% 8.92% 10.57% 5.35%

Touchette Regional Hospital5 -15.76% 0.36% 1.22% 3.37% -1.12% 20.33% 4.79% -1.27% -4.91% -4.62%

Aggregate for Illinois Hospitals -0.86% 1.79% 2.36% 2.11% 1.82% 5.80% 3.46% 1.17% 2.40% 1.28%

Aggregate for St. Louis Area Hospitals 2.55% 5.09% 5.15% 3.80% 3.34% 4.33% 4.11% 3.65% 4.24% 4.29%

1 St. Alexius and Forest Park hospitals were sold to Doctors Community Healthcare Corporation in 2004, and due to the transfer in ownership, 2002, 2003, and 2004 data could not be verified. In December of 2008, Forest Park and St. Alexius Hospitals were acquired by Success Healthcare, and due to the transfer in ownership, 2007 and 2008 data could not be verified. In 2009, Forest Park Hospital was renamed St. Alexius Hospital-Forest Park Campus.

2 Beginning in 2004, St. Alexius-Broadway Campus and St. Alexius-Jefferson Campus reported on a combined basis as St. Alexius Hospital-Broadway Campus.3 Crossroads Regional Hospital was acquired by SSM Health Care in November 2005 and renamed St. Joseph Health Center-Wentzville. In 2006, it began reporting on a combined basis with St. Joseph

Health Center. 4 Statistics for St. Anthony’s Health Center and St. Clare’s Hospital are combined under St. Anthony’s Health Center. 5 Beginning in 2009, Kenneth Hall Regional Hospital and Touchette Regional Hospital reported on a consolidated basis. Kenneth Hall Regional Hospital was closed by the end of 2009.Sources: Centers for Medicare and Medicaid Services Medicare Cost Reports and audited hospital financial statements. All data in this table are not adjusted for inflation.Note: Changes in previously reported data are based on most current information. Hospitals no longer in operation as of 2010 are not individually listed, but their results for 2001-2010 are included in aggregate figures.

15

Operating margin trends


Profit margin trends

St. Louis Area Hospital Industry 2001 - 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Missouri Hospitals

Barnes-Jewish Hospital 3.20% 1.41% 16.80% 11.58% 7.11% 12.50% 7.74% -32.40% 17.78% 14.30%

Barnes-Jewish Hospital - St. Peters 8.22% 14.96% 21.19% 14.35% 13.63% 14.46% 11.84% -8.39% 17.26% 14.99%

Barnes-Jewish Hospital - West County 15.12% 19.73% 20.00% 16.02% 15.42% 11.01% 8.28% 4.46% 3.71% 7.93%

Cardinal Glennon Hospital 8.29% 11.91% 10.22% 16.04% 13.77% 16.38% 21.19% 9.98% 13.79% 9.85%

Christian Hospitals -10.36% 3.86% 13.19% 8.73% 2.23% 1.52% -1.51% -7.93% 11.04% 5.13%

DePaul Health Center -0.43% 2.58% 4.51% 4.87% 7.81% -0.16% 0.79% 0.15% 1.21% 2.66%

Des Peres Hospital 6.15% 7.91% 7.78% 4.18% 3.29% 6.29% 6.41% 7.14% 9.47% 7.66%

Jefferson Regional Medical Center 1.62% 0.86% 0.71% 0.45% 2.01% 3.14% 2.28% 4.71% 7.16% 7.32%

Kindred Hospital -7.24% 7.76% 8.13% 19.64% 7.66% 7.17% 7.71% 13.94% 3.18% -5.14%

Lincoln County Memorial Hospital 5.90% 3.42% -8.34% 0.05% 3.20% 7.07% 3.80% 7.31% -0.73% -3.00%

Mercy Hospital St. Louis -0.79% 1.52% 3.42% 3.37% 1.79% 5.89% 8.52% 10.60% 8.19% 7.26%

Mercy Hospital Washington 4.74% 4.06% 2.95% 3.82% 3.48% 5.68% 2.69% 5.61% 0.35% -5.86%

Missouri Baptist Hospital - Sullivan -2.95% 1.35% 8.52% 11.11% 10.05% -0.38% -3.02% -14.17% -4.89% -4.74%

Missouri Baptist Medical Center 7.41% 14.69% 17.33% 17.08% 13.77% 12.06% 9.49% -3.20% 14.74% 13.93%

Progress West HealthCare Center n/a n/a n/a n/a n/a n/a -67.71% -54.00% -18.10% -18.44%

St. Alexius Hospital - Broadway Campus1,2 -9.39% -8.86% 0.37% -8.23% 0.49% 1.05% 0.33% 1.38% 2.60% 0.38%

St. Alexius Hospital - Forest Park Campus1 -4.07% -0.86% 2.64% -24.69% -6.03% -2.67% 1.46% 0.13% -0.87% 0.86%

St. Alexius Hospital - Jefferson Campus1,2 2.34% -7.94% -16.71% n/a n/a n/a n/a n/a n/a n/a

St. Anthony’s Medical Center -3.98% -7.31% 1.88% 7.79% 6.40% 5.08% 3.06% 4.08% 0.18% -0.71%

St. Clare Health Center n/a n/a n/a n/a n/a n/a n/a n/a -30.12% -1.29%

St. Joseph Health Center - St. Charles3 2.89% 2.91% 4.24% 1.21% 1.32% -0.35% 0.52% -3.95% 4.83% 1.46%

St. Joseph Health Center - Wentzville3 -25.58% -19.77% -13.93% -24.26% -47.21% n/a n/a n/a n/a n/a

St. Joseph Hospital West - Lake St. Louis 10.99% 11.23% 5.20% 2.92% 5.76% 2.32% 1.19% -1.49% 1.76% 5.64%

St. Louis Children’s Hospital 5.30% 3.39% 16.10% 15.19% 14.65% 14.94% 12.92% -10.48% 19.00% 15.33%

St. Louis University Hospital 3.45% 8.04% 7.73% -5.82% -7.86% -0.44% 2.17% 1.78% -1.80% 1.75%

St. Luke’s Hospital 5.90% 4.91% 4.16% 4.06% 4.20% 6.36% 5.43% 6.34% 4.25% 4.34%

St. Mary’s Health Center 3.58% 5.47% 5.74% 6.86% 8.15% 4.23% 4.13% 1.15% 8.45% 9.11%

Aggregate for Missouri Hospitals 2.04% 3.75% 9.55% 6.89% 5.24% 7.22% 5.94% -4.20% 9.20% 7.98%

Illinois Hospitals

Alton Memorial Hospital 12.98% 13.96% 21.63% 19.91% 16.89% 16.10% 13.22% 1.58% 22.48% 16.86%

Anderson Hospital 4.13% 1.12% 0.11% -4.28% 3.13% 7.72% 5.60% -1.19% 5.16% 6.25%

Gateway Regional Medical Center -9.99% 7.75% 7.60% 12.43% 15.13% 12.29% 10.07% 13.31% 7.76% 2.47%

Memorial Hospital (Belleville) 1.69% -1.53% 0.12% -0.31% -0.51% 8.96% 8.28% 4.65% 5.39% 6.61%

St. Anthony’s Health Center (Alton)4 5.42% 4.63% 2.18% -2.63% -2.08% 5.06% 6.01% 2.03% 0.69% 4.57%

St. Elizabeth’s Hospital (Belleville) -0.60% -1.04% 5.01% -1.04% -1.84% 1.00% -0.04% -8.03% -5.10% -5.94%

St. Joseph Hospital (Breese) 18.49% 11.33% 19.10% 18.94% 18.40% 12.64% 18.99% 6.58% -6.73% 13.04%

Touchette Regional Hospital5 -14.77% 0.76% 1.69% 3.96% -0.57% 21.25% 6.02% -0.52% -4.39% -2.77%

Aggregate for Illinois Hospitals 1.39% 1.82% 5.02% 4.23% 4.11% 8.63% 6.64% 1.16% 4.38% 4.72%

Aggregate for St. Louis Area Hospitals 1.95% 3.50% 8.96% 6.54% 5.08% 7.42% 6.04% -3.45% 8.58% 7.57%

1 St. Alexius and Forest Park hospitals were sold to Doctors Community Healthcare Corporation in 2004, and due to the transfer in ownership, 2002, 2003, and 2004 data could not be verified. In December of 2008, Forest Park and St. Alexius Hospitals were acquired by Success Healthcare, and due to the transfer in ownership, 2007 and 2008 data could not be verified. In 2009, Forest Park Hospital was renamed St. Alexius Hospital-Forest Park Campus.

2 Beginning in 2004, St. Alexius-Broadway Campus and St. Alexius-Jefferson Campus reported on a combined basis as St. Alexius Hospital-Broadway Campus.3 Crossroads Regional Hospital was acquired by SSM Health Care in November 2005 and renamed St. Joseph Health Center-Wentzville. In 2006, it began reporting on a combined basis with St. Joseph

Health Center.4 Statistics for St. Anthony’s Health Center and St. Clare’s Hospital are combined under St. Anthony’s Health Center.5 Beginning in 2009, Kenneth Hall Regional Hospital and Touchette Regional Hospital reported on a consolidated basis. Kenneth Hall Regional Hospital was closed by the end of 2009. Sources: Centers for Medicare and Medicaid Services Medicare Cost Reports and audited hospital financial statements. All data in this table are not adjusted for inflation.Note: Changes in previously reported data are based on most current information. Hospitals no longer in operation as of 2010 are not individually listed, but their results for 2001-2010 are included in

aggregate figures.


As mentioned earlier in the report, persistently high health care costs and the weak economy resulted in one of the biggest drops ever observed in hospital admissions nationally in 2010. St. Louis hospitals experienced an even larger decrease of 3%. This marked the first decline after years of flat utilization growth in the St. Louis hospital market.

Multiple factors are responsible for the decrease in excess capacity in the St. Louis market. These factors include transitions to more private rooms and the closures of some struggling hospitals. The graph to the left shows excess available beds by hospital network in 2010 based on data from Medicare Cost Reports. Tenet Health System and SSM Health Care’s excess beds declined 41% and 34% respectively over 2009 as beds were reduced and utilization increased. For years, SSM has been converting semi-private rooms to private rooms across the system. Declining patient volume and revenue at St. Alexius-Forest Park hospital resulted in the closure of the majority of its inpatient beds in 2010. As this report went to press, this hospital was slated for closure. Excess capacity was reduced further with the closure of Kenneth Hall Regional Hospital in the metropolitan St. Louis Illinois region in 2009. In contrast to the others, Mercy had among the largest increases in excess beds, 27%, as a result of a steep decline in utilization.

The table below shows utilization in the St. Louis hospital market by payer group: Medicare, Medicaid, and “Other” (privately insured and uninsured). Medicare and Other discharges decreased 1.3% and 6.6% respectively, while Medicaid discharges grew 2.2% due to the effects of the weak economy.

Despite declining inpatient utilization, St. Louis hospitals reported outpatient volume rose from the massive expansion of those services in recent years. Excess capacity on outpatient services cannot be assessed since data are not disclosed. With more expansion expected, understanding outpatient excess capacity and cost is imperative as it will affect the access and affordability of health care for all consumers in the future.

Excessavailableinpatientbeds at St. Louis hospitals decreased to 26% of available beds in 2010. This translates to an excess of 2,397 beds available at St. Louis area hospitals on an average day in 2010. It was the fewest number of excess available beds in five years. “Excessavailablebeds” measures utilization of inpatient capacity. It considers a hospital to be at “full” occupancy if 80% of available beds are used in a given year. The “excess” figure indicates the number of unused beds below 80% occupancy (see Technical Notes on p. 20).

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DischargesMedicare1 156,330 162,700 161,665 167,385 174,738 171,875 169,867 173,200 169,972 167,841

Medicaid1 56,924 59,781 64,016 65,926 64,037 63,467 67,233 68,946 69,534 71,084

Other1 158,128 160,464 163,122 162,236 162,422 168,091 160,450 161,123 166,503 155,460

Total 371,382 382,945 388,803 395,547 401,197 403,433 397,550 403,269 406,009 394,385 Inpatient DaysMedicare1 904,159 952,302 958,425 984,159 1,002,440 988,038 961,725 981,307 941,734 908,784

Medicaid1 281,161 308,338 327,463 337,555 330,412 325,863 345,857 358,661 360,938 355,382

Other1 656,763 650,086 678,304 677,869 668,704 671,091 670,110 655,541 667,802 680,162

Total 1,842,083 1,910,726 1,964,192 1,999,583 2,001,556 1,984,992 1,977,692 1,995,509 1,970,474 1,944,328 Avg. Length of Stay2

Medicare2 5.7 5.8 5.9 5.9 5.7 5.7 5.7 5.7 5.5 5.4

Medicaid2 4.9 5.1 5.1 5.1 5.2 5.1 5.1 5.2 5.2 5.0

Other2 4.1 4.0 4.2 4.2 4.1 4.0 4.2 4.1 4.0 4.3

Total 4.9 5.0 5.1 5.1 5.0 5.0 5.0 5.0 5.0 4.9# of Hospitals 35 35 35 34 34 33 34 34 33 33

Sources: Centers for Medicare and Medicaid Services Medicare Cost Reports and internal utilization statements. Hospital network configurations are current as of 2011. 1 Utilization categories are defined as 1) Medicare managed care (starting in 1997) and fee for service (indemnity) programs, 2) Medicaid managed care and traditional programs, and 3) Other, including

commercially insured, and the uninsured. Changes to previously reported data are based on the most current information. 2 Kindred Hospital is excluded from average length of stay because it is a long-term acute care hospital.

IllinoisNon-merged

554BJC

Healthcare735

SSMHealth

Care258Mercy

290

MissouriNon-Merged

514

Tenet HealthSystem 47

Excess Available Beds in 2010 by Network

Excess beds decrease to lowest level in five years


Public Sector Financing

18

Non-profit hospitals are required to provide community benefit in exchange for not paying taxes. However, the federal government has never clearly defined how much charity care hospitals must provide. Charity care as a percentage of operating revenue reported by St. Louis hospitals increased to 2.29% in 2010, up from 1.99% in 2009. This was expected, given the difficult economy. Eleven hospitals provided charity care above 3% of operating revenue as compared to nine hospitals in 2009. Five of those hospitals were members of the SSM Health Care system, and noteworthy by its lead, Touchette Regional Hospital provided charity care equal to 11.5% of operating revenue, well in excess of any other hospital. As in past years, BHC reports charity care higher than MHA due to certain methodological differences in how MHA determines charity care cost.

Two significant regulation changes in recent years attempt to provide greater accountability and transparency in charity care and community benefit reporting. The Accountable Care Act (ACA) set forth requirements for non-profit hospitals to retain their tax-exempt status. Hospitals are limited in the amounts patients can be charged (i.e., gross charges are prohibited) and they cannot engage in “extraordinary collection actions” (i.e., lawsuits and liens) prior to determining a patient’s eligibility for financial assistance. Hospitals must also conduct a community health needs assessment (CHNA) every three years and report how it has met the needs identified in the CHNA. The IRS will impose an excise tax of $50,000 if a hospital fails to comply with the provisions.

In 2009, non-profit hospitals began reporting more detailed information on the criteria for qualifying for financial assistance, the levels of charity care provided, how much the hospital lost on bad debt expense, adequacy of public program revenue and community building efforts to protect and improve the community’s health and safety. The information is included on Schedule H of the annual IRS Form 990 return for non-profit hospitals.

St. Louis hospitals’ most current IRS Form 990s indicate most require a patient’s income to be at or below 200% of the federal poverty level (FPL) to receive free care. This would be $21,780 in annual income for individuals or $44,700 for a family of four. To receive a discount for hospital care, income requirements varied between 200% and 600% of the FPL. Spending on community building efforts among St. Louis hospitals ranged from 0% to just under 1% of expenses.

Non-profitSt.Louishospitalsarenotsubjecttofederalincomeandcapitalgainstaxes;state,andlocalpropertytaxes;andstate and local sales taxes on purchases. Determining the value of these tax-exemptions is extremely complex. Yet, a recent report published last year estimated that St. Louis County forgoes more than $20 million in property taxes alone each year based on non-profit health systems’ land and capital improvements, and, as noted above these are only one piece of the forgone revenue.1 This lost revenue compromises governments’ ability to pay for needed services such as public safety and education and it contributes to a higher tax burden on businesses, families and individuals. Non-profit hospitals’ charitable missions form the basis of their compact with their communities. They will likely continue to be an intense area of focus.

St. Louis hospital charity care increased 15% in 2010.

Charity care has risen steadily since 2005 coinciding with intense national scrutiny on hospital charity care policies.

Hospitals’ charity and community benefit information now reported to the IRSCharity Care as a Percentage of Operating Revenue, 2001-2010

Source: Centers for Medicare and Medicaid Services Medicare Cost Reports, audited financial statements, internal financial statements, the Missouri Hospital Association (MHA) website missourihealthmatters.com, and MHA/AHA Annual Licensing Surveys.

MissouriHospitals

Only

1.0%

2001

1.18%

2002

1.14%

2003

1.17%

2004

1.19%

2005

1.16%

2006

1.42%

2007

1.58%

2008

1.76%

2009

1.99%

2010

2.29%

BHC2010

2.33%

MHA2010

2.27%

0.0%

2.0%

3.0%

1 J Doyle, “St. Louis County property tax exemptions worth $20 million to hospitals”, St. Louis Post-Dispatch, October 23, 2011.


2009 2010 2010 2009 2010 2009 2010 2009 2010 BHC Charity BHC Charity MHA Charity Missouri Missouri MO DSH MO DSH Operating Operating cost as % cost as % cost as % DSH DSH as % of as % ofSystem Name Revenue (000) Revenue (000) of op. rev.1 of op. rev1 of op. rev1 (000)3 (000)3 op. rev.3 op. rev.3

BJC HealthCare2 Alton Memorial Hospital $110,734 119,381 2.08% 2.27% 4.03% NA NA NA NABarnes-Jewish Hospital 1,361,911 1,460,060 1.98% 2.33% 2.13% $116,104 $127,260 8.53% 8.72%Barnes-Jewish Hospital - St. Peters 141,422 141,022 1.15% 1.33% 2.63% 4,363 4,245 3.08% 3.01%Barnes-Jewish Hospital - West County 89,947 99,278 0.89% 0.76% 0.95% 1,284 1,464 1.43% 1.47%Christian Hospitals 262,016 260,109 3.53% 4.75% 6.78% 18,399 21,713 7.02% 8.35%Missouri Baptist Hospital - Sullivan 41,859 43,608 3.20% 6.97% 6.79% 2,520 2,783 6.02% 6.38%Missouri Baptist Medical Center 426,756 437,260 0.68% 0.90% 1.53% 9,052 9,905 2.12% 2.27%Progress West HealthCare Center 44,636 49,219 1.39% 2.32% 1.66% 1,351 1,511 3.03% 3.07%St. Louis Children’s Hospital 417,822 427,265 0.60% 0.74% 0.06% 59,340 63,523 14.20% 14.87%Network Total $2,897,102 $3,037,203 1.67% 2.07% 2.27% $212,413 $232,404 7.33% 7.65%

SSM Health Care Cardinal Glennon Hospital3 $235,861 247,022 0.68% 0.54% 0.55% NA3 NA3 NA3 NA3DePaul Health Center 281,312 298,192 5.05% 3.87% 3.80% $23,141 $24,243 8.23% 8.13%St. Clare Health Center 112,629 165,174 4.70% 3.40% 3.28% 6,777 7,431 6.02% 4.50%St. Joseph Health Center - St. Charles 219,875 202,743 3.80% 3.00% 2.98% 12,330 11,405 10.95% 5.63%St. Joseph Hospital West - Lake St. Louis 107,679 118,413 3.55% 3.23% 3.18% 6,284 7,407 5.84% 6.26%St. Mary’s Health Center3 277,306 287,330 3.28% 3.42% 3.40% 65,416 68,429 12.75% 23.82%Network Total $1,234,662 $1,318,874 3.43% 2.90% 2.86% $113,948 $118,915 9.23% 9.02%

Mercy Mercy Hospital St. Louis $804,244 $812,030 2.06% 2.78% 2.81% $48,346 $49,988 6.01% 6.16%Mercy Hospital Washington 104,532 96,198 3.62% 5.98% 5.55% 8,934 9,262 8.55% 9.63%Network Total $908,776 $908,228 2.24% 3.12% 3.10% $57,280 $59,250 6.30% 6.52%

Tenet HealthSystem Des Peres Hospital $134,458 131,761 0.28% 0.82% 0.19% $6,678 $6,867 4.97% 5.21%St. Louis University Hospital 326,831 345,574 2.31% 2.37% 2.11% 39,800 45,391 12.18% 13.13%Network Total $461,289 $477,334 1.72% 1.94% 1.58% $46,477 $52,258 10.08% 10.95%

Missouri Non-Merged Jefferson Regional Medical Center $127,806 130,150 0.43% 0.78% 0.72% $7,125 $7,351 5.57% 5.65%Kindred Hospital5 32,059 29,799 0.00% NA 0.00% 3,271 2,986 10.20% 10.02%Lincoln County Memorial Hospital 28,930 33,196 1.10% NA 1.31% 1,249 1,566 4.32% 4.72%St. Alexius Hospital-Broadway Campus4,5 76,076 86,298 0.43% 0.44% NA 17,883 17,701 23.51% 20.51%St. Alexius Hospital-Forest Park Campus4,5 64,668 20,334 0.62% 0.09% NA 28,462 0 44.01% 0.00%St. Anthony’s Medical Center 427,983 439,279 1.50% 2.05% 1.89% 17,456 17,046 4.08% 3.88%St. Luke’s Hospital 385,597 414,255 0.42% 0.97% 0.93% 7,607 7,161 1.97% 1.73%Total $1,143,118 $1,153,312 0.84%5 1.29% 5 1.30%5 $83,053 $53,811 7.27% 4.67%

Illinois Non-Merged1 Anderson Hospital $130,074 129,380 1.39% 1.36% 1.21% NA NA NA NAGateway Regional Medical Center 110,070 93,503 NA 0.64% 3.92% NA NA NA NAMemorial Hospital (Belleville) 241,633 246,221 1.01% 0.76% 1.28% NA NA NA NASt. Anthony’s Health Center (Alton)6 95,893 98,429 2.66% 3.05% 2.23% NA NA NA NASt. Elizabeth’s Hospital (Belleville) 192,698 189,261 2.46% 3.42% 3.01% NA NA NA NASt. Joseph Hospital (Breese) 44,524 46,589 NA 0.62% 1.26% NA NA NA NATouchette Regional Hospital6 64,813 63,622 10.41% 11.52% 5.82% NA NA NA NATotal $879,704 $867,004 2.52%5 2.81%5 2.37%1 NA NA NA NA

Aggregate for St. Louis Hospitals $7,524,651 $7,761,955 1.99%5 2.29%5 2.31%5 $513,172 $516,638 7.85% 7.49%

1 BHC Charity care cost is the product of charity care gross charges times the cost-to-charge ratio. 2010 Missouri Hosp. Assoc. (MHA) charity care cost is reported on the www.missourihealthmatters.com website; MHA did not publish 2009 charity care cost for Missouri hospitals. 2010 Illinois charity care expense in the MHA column was obtained from the Illinois Health Facilities and Services Review Board.

2 BJC HealthCare charity care charges include an unspecified mix of full charge and discounted amounts. When the cost-to-charge ratio is applied, charity care costs may be understated.3 Disproportionate share payment (DSH) data obtained from the Missouri Department of Social Services. DSH payments are combined for Cardinal Glennon and St. Mary’s Health Center.4 In December of 2008, Forest Park and St. Alexius Hospitals were acquired by Success Healthcare. In 2009, Forest Park was renamed St. Alexius Hospital-Forest Park Campus.5 Operating revenue for Kindred, Gateway Regional, St. Alexius and St. Joseph Breese hospitals was excluded from 2009 and 2010 figures when charity care was not reported.6 Kenneth Hall and Touchette Regional Hospitals reported on a consolidated basis in 2009. Kenneth Hall closed after 2009. St. Anthony’s Hospital and St. Clare’s Hospital report on a consolidated basis.Sources: CMS Medicare Cost Reports, audited financial statements, and AHA/MHA Licensing Surveys. Note: In order to assess a hospital’s charitable commitment, it is necessary to evaluate 1) Charity care performance, 2) Bad debt expense, 3) Case-mix (especially as it relates to the Medicaid population), and 4) Other charitable programs in which significant allowances and discounts are provided. All figures are not adjusted for inflation. Changes in previously reported data are based on most current information available including numerous restatements. Hospital network configurations are current as of 2012.

Charity care profile & Disproportionate share payment (DSH) by network 2009-2010


Technical Notes

Mercy ** Mercy Hospital St. Louis 6/30 $805,826 $804,837 $752,376 $52,461 $53,450 6.52% 6.63%Mercy Hospital Washington 6/30 88,404 88,369 93,875 -5,507 -5,472 -6.23 -6.19Total $894,229 $893,206 $846,251 $46,954 $47,978 5.26% 5.37%

Other St. Anthony’s Medical Center 6/30 $484,903 $473,480 $468,330 $5,150 $16,573 1.09% 3.42%St.Elizabeth’sHospital(Belleville,IL) 6/30 175,028 169,608 195,231 -25,622 -20,202 -15.11 -11.54St.JosephHospital(Breese,IL) 6/30 58,364 48,582 45,726 2,856 12,638 5.88 21.65St. Luke’s Hospital 6/30 441,015 439,233 419,989 19,244 21,026 4.38 4.77Total $1,159,310 $1,130,903 $1,129,276 $1,628 $30,034 0.14% 2.59%

Fiscal Year 2011Financial Data (000)

2011 2011 2011 2011 2011 2011 2011 Fiscal Total Total Operating Total Gain from Net Operating ProfitSt. Louis Area Hospitals Year Revenue Revenue Expenses* Operations Profit Margin Margin

* Total Expenses include non-operating expenses that may have an effect on profit margins. Non-operating expenses are not used in the calculation of operating margins.** Mercy Health (f/k/a Sisters of Mercy Health System) is the parent organization for Mercy. Caution must be used when evaluating net profit and profit margins for individual Mercy Health hospitals since

they do not fully reflect investment gains and losses from Mercy Health.

Hospital Financial DataThe St. Louis Area Business Health Coalition (BHC) has analyzed hospital financial data for the last 29 fiscal years. Data for these analyses are gathered from hospital audited financial statements, licensing surveys and Centers for Medicare and Medicaid Services Medicare Cost Reports (MCR). The resulting reports are based upon standard accounting assumptions and procedures.

A financial profile is produced for each institution which is then verified by the individual institutions. When an individual institution disagrees with the financial profile, supporting documentation is submitted before changes are made to the profile. From the individual reports, aggregate tables are produced reflecting St. Louis area Missouri hospitals and St. Louis area Illinois hospitals.

In some situations, prior year data are updated based on revised MCR and/or current hospital audited financial statements. As a result, the data presented in this document reflect the most current information available to the BHC and may differ from previous reports.

Financial Formulas (For Leap years: Use 366 for all formulas using days)

OPERATING MARGIN (Total Operating Revenue - Operating Expenses) Total Operating Revenue

PROFIT MARGIN Excess of Revenue Over Expenses (Total Operating Revenue + Non-operating Revenue)

RETURN ON EQUITY Excess of Revenue Over Expenses Fund Balance

MARK-UP PERCENT Total Gross Charges Total Operating Expense

ALLOWANCES AS Allowances PERCENT OF Total Gross ChargesCHARGES

COST TO CHARGE Total Operating Expenses RATIO Total Gross Charges

-1

OCCUPANCY Patient Days PERCENTAGE Number of Beds x 365

Calculation Methodology for Excess Available Acute Care Inpatient Beds (2010)

1. Total Bed Days Used* 1,944,328 365 365

2. Total Beds Used Per Day 5,327 80% Occupancy .80

3. Total Available Beds Minus Available Beds Required for 80% Occupancy 9,056 – 6,659

= Excess Capacity (2010) 2,397* Total Bed Days Used = Inpatient Days

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