Low operating margin helps hospital break even on Medicare patients

At a time when nearly 60 percent of hospitals lose 20 cents on the dollar for every elderly patient, Providence Regional Medical Center breaks even. This, despite its high percentage of Medicare patients in an area where Medicare pays about $1,000 less per beneficiary than the national average.

By aiming for lower operational costs, rather than for maximizing revenues, the Everett, Wash.-based organization lowered its 2009 operating margin to 6 percent, even though Medicare represented 40 percent of its annual revenue and Medicaid represented an additional 13 percent. For comparison's sake, MedPAC estimated that the median operating margins for the 5,000 nonprofit hospitals in the U.S. stood at 8.4 percent in the second quarter of 2009, BusinessWeek reports. 

One way it keeps costs down: Using a "single-stay" ward approach, in which cardiac patients remain in one room for the duration of their recovery, rather than moving to multiple step-down units. Even testing equipment is brought to the patient when possible. 

Such measures have Providence ranking among the top 5 percent of all hospitals in the nation; the Institute for Healthcare Improvement also named Everett one of 70 regions out of 306 in the U.S. that delivers high-quality care at a fair price. 

To learn more about Providence:
- check out this BusinessWeek article