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Audit (A-07-07-02734)

09-16-2008
Review of Profitability Analysis of New Orleans Hospitals Compared With Peer Hospitals

Executive Summary

On August 1, 2007, five New Orleans hospital groups (testifying hospitals) testified before the House Committee on Energy and Commerce that they had experienced significant operating losses following Hurricane Katrina in 2005. At the request of the committee, we analyzed the testifying hospitals' profitability trends. In this report, we compared profitability trends and characteristics of the testifying hospitals with three sets of peer hospitals.

The testifying hospitals experienced profitability trends that (1) differed from those of the peer hospitals and (2) reflected both the adverse financial impact of Hurricane Katrina and subsequent financial improvements after the testifying hospitals received Business Interruption insurance payments and additional Federal funding because of their hurricane damage. Specifically, the testifying hospitals experienced negative margins during both the fiscal year (FY) before the hurricane (FY 2004) and the FY in which the hurricane occurred (FY 2005). For the FY after the hurricane, the testifying hospitals experienced both positive and negative margins, but the negative margins were trending upward in comparison with those of the previous year. The margins for the peer hospitals during this time period were much more variable, though with generally less fluctuation from 1 FY to the next.

This was an informational report, and we made no recommendations.

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