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Posted: Saturday, Apr. 21, 2012

How we reported this series

Published in: Prognosis: Profits

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Reporters from The Charlotte Observer and The News & Observer (of Raleigh) interviewed scores of patients, hospital administrators and health care experts.

They examined hundreds of documents, including lawsuits, financial audits and hospital bills, as well as Medicare cost reports, IRS returns and hospital community benefit reports.

Profit margins of individual hospitals are derived from figures compiled by the American Hospital Directory. Its figures come from data in Medicare cost reports, which hospitals must file each year with the federal Centers for Medicare and Medicaid Services.

Carolinas HealthCare System officials contend Medicare cost reports are misleading when trying to compare hospitals within large systems. “Our financial performance and financial results are only meaningful when taken as a whole,” the system said in a statement.

Medicare officials and other health care experts agree that cost reports are the best tool for comparison because they are reported consistently by hospitals, which must attest to their accuracy.

Carolinas HealthCare officials objected to the Observer’s focus on total profit margins, which include investment income that fluctuates with the market. A better measure, they argue, is “operating margin,” which excludes investment income. Operating margins at Carolinas HealthCare are “at or below the industry average,” CEO Michael Tarwater said.

Other experts say total margin provides more insight into the full financial picture.

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