A Quick Look at Michigan Hospital Finances
Memorandum 1139, March 2016

In Brief

• Michigan hospitals, in total, showed revenues from all sources exceeding expenses resulting in surpluses of $821.5 million in 2011, $1.3 billion in 2012, $1.6 billion in 2013, and $1.4 billion in 2014. Surplus as a percent of net patient revenue rose from 3.4 percent to 5.4 percent over the period. Of the 135 hospitals covered in this report, 65 showed a surplus in net income from patient care in 2011 compared with 50 in 2012, 44 in 2013, and 62 in 2014.
• Generally, reimbursements for inpatient and outpatient care did not cover the operating expenses of providing that care. Net income from services to patients reflects this deficit gap, which widened from $485.3 million in 2011 to a high of $869.9 million in 2013. By 2014, growth in operating expenses had slowed relative to patient revenue, mitigating the previous trend and resulting in a net patient income loss of $220.0 million.
• Net income from sources other than patient services fell from a high of nearly $2.4 billion in 2013 to $1.60 billion in 2014. When non-patient services income is added, 98 of the 135 hospitals showed surpluses in total income in 2011, 103 hospitals in 2012, 102 hospitals in 2013, and 99 hospitals in 2014.
• The Upper Peninsula experienced deficits in all years except 2012. All other Michigan prosperity regions experienced surpluses in each year in the aggregate.
• Of the 135 hospitals covered in this report, 86 were formally affiliated with an organizational entity in 2014.
• There were 16 hospital networks operating in Michigan for which data is available in 2014.

Introduction

Hospitals are organized in a number of ways: for profit, not-for-profit, and municipally operated.  Regardless of their organization, their financing is greatly influenced by state and federal laws and regulations. The federal Patient Protection and Affordable Care Act of 2010 and Michigan’s expansion of Medicaid in 2014 through the Healthy Michigan Plan are two recent examples of major policies impacting hospital finances.
The financial health of hospitals matters to the communities served in that it impacts their long-term sustainability, the ability to attract and compensate quality health care professionals, and the quality of care provided to patients. Examining the status of hospital finances individually, regionally, and at a statewide level has the potential to provide feedback regarding state and federal policies as well as signal important changes and trends that may impact hospitals’ ability to provide safe and high quality health services presently and in the future.