Published on May 02, 2016

Response to "A More Detailed Understanding of Factors Associated With Hospital Profitability"

A message from Scott Rathgaber, MD, chief executive officer, and Dara Bartels, chief financial officer:

A misleading article in the May issue of Health Affairs challenges Gundersen Health System's position as a high quality, integrated health system that values continuous examination of expenditures, reduction of waste and reinvestment in the communities we serve.

In "A More Detailed Understanding of Factors Associated With Hospital Profitability,authors Gerard Anderson, PhD, and Ge Bai, PhD, assert, using a single year's data (2013) from Medicare Cost Reports and Final Rule Data, "the 239-bed nonprofit Gundersen Lutheran Medical Center in La Crosse, Wisconsin, was the most profitable hospital in the U.S., earning a profit of $302.5 million, or $4,241 per patient."

The article uses incomplete data taken from our Medicare cost report, which doesn't include our full costs as an integrated health system. If the authors had looked at a complete set of data, we wouldn't have been on the list.

Take a family's finances as an example: You wouldn't judge their income and viability by only looking at the top earner's salary. Mortgage, car payments, mobile device bills and other expenses need to be considered, too. In short, income will always appears larger without factoring in expenses.

Our Finance team combed through data and found the contribution margin for our obligated group – the La Crosse Hospital, Clinic, Gundersen Lutheran Administrative Services and Gundersen Medical Foundation - has remained low since at least 2008. Our contribution margin in 2013 - the year analyzed by the article's authors – was 4.4% for our obligated group - and far less than the $302 million reported in the story. Operating margins for our entire system in the last few years are also in the four to five percent range.

We reinvested this revenue into healthcare programs, services, facilities, and staff in the communities we serve. These programs include care coordination – an effort to keep our sickest patients out of the hospital – behavioral health integration, charity care, education of our future health care professionals, advanced directive counseling, and many others.

Another important point that strikes at the heart of the article's inaccuracy:  Medicare cost reports are not uniformly reported, preventing a true "apples to apples" comparison between hospitals and health systems.  Analyzing Medicare cost reports of a single care center may have been relevant 20 years ago, but using the same methodology now for an integrated health system network isn't constructive, but is rather a necessary evil as required for Medicare reimbursement.

In addition, we are the market leader in a region, which includes the Mayo Clinic and its care network, Dartmouth Atlas has found to have among the lowest cost of care per Medicare beneficiary in the country. We are also a national leader in providing care in the last two years of life by: spending less per patient episode of care; shortening patients' length of stay in the hospital; having fewer patient complications; and making fewer patient safety errors.

We have more than 7,000 employees in three states who come to work each day with the single goal of providing high quality, affordable care to our patients and their families.   We are proud of them and their dedication to excellence.  As an integrated system delivering care across the whole continuum of care, we are succeeding at improving the health of the communities we serve. 

This article does not take into account the quality of care provided to patients.  As one of America's 50 Best Hospitals, we do not apologize for our constant attention to providing exceptional care or the recognition we receive for accomplishing this goal.  We make no excuses regarding the value we bring by working diligently to become more efficient and lower the cost of care to our patients, while retaining the high level of quality our patients have come to expect.

Love + Medicine

Every day, Gundersen Health System delivers great medicine plus a little something extra—we call it Love + Medicine.

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