• Commentary

Closure for a Hospital That Didn’t Have to Close

The requiems for Wellstar Atlanta Medical Center (AMC), which officially closed its doors on November 1, have been ongoing for months now. 

A facility that has delivered healthcare for over 100 years to a community doesn’t go quietly into the night after all. Along with the closure of Wellstar Atlanta Medical Center South in East Point, residents in the state’s most populous county have now endured two hospital closures in one year. 

Amidst ongoing concerns from citizens and local leaders suddenly forced to contemplate the impact of closing a safety-net hospital and Level I trauma center for the region, Wellstar executives have offered public defenses for its closure. Notably, this includes their failure to find a buyer for the facility given “AMC’s infrastructure and finances.”

While we might not be able to assess the facility’s infrastructure and capital needs, we can review the financial disclosures for Atlanta Medical Center and Wellstar Health System to determine what led us to this moment.

Using financial data* reported to the federal government and collected by the National Academy of State Health Policy (NASHP) as part of their Hospital Cost Tool project, we can examine key financial indicators for AMC. 

Wellstar acquired AMC from Tenet Healthcare on April 1, 2016. This transaction also included AMC South, North Fulton Hospital, Spalding Regional Hospital and Sylvan Grove Hospital in Jackson.

While AMC has posted a $26 million total operations loss since it was acquired by Wellstar, the hospital actually posted a total net profit of $13 million once additional revenue streams were accounted for. Far from hemorrhaging losses, the statements show that AMC managed to post a small profit. 

Just as the closure of AMC will have ripple effects beyond its immediate community, we should also consider the financial health of Wellstar Health System and what it means to be a nonprofit provider of community healthcare. 

Wellstar, which calls itself “the largest provider of uncompensated care in Georgia,” reported $2.7 billion in system assets minus liabilities as of March 2022. Many of its hospitals report profit margins in the tens, if not hundreds, of millions. 

Prior to the pandemic, Wellstar’s overall finances as a system were outstanding, posting systemwide operational profits of $420 million in FY18 and $496 million in FY19. As the pandemic began, they actually improved, rising to $598 million in FY20 and $698 million in FY21. 

Meanwhile, the system received $261 million in federal COVID-19 relief, $43 million of which was claimed by Atlanta Medical Center in 2020 and 2021.

Wellstar executives have noted the lack of hospital utilization at AMC as one reason for its closure, citing that less than half of the beds were in use. This is in line with data from 2020, which show that 55% of the inpatient beds were used. 

However, what these data also show is that despite AMC’s reputation as a safety-net hospital for the uninsured, commercially insured patients comprised the highest percentage of its payer mix (31%), with Medicaid patients the second most common (22%). What is also notable from the payer mix data is that only 3% of AMC inpatients were uninsured, well below Medicare (15%) or Medicare Advantage (14%). While 15% of patients received charity care, this cost is often offset by federal, state or local funding, and is required to maintain nonprofit status. 

Unquestionably, hospitals depend on patients with commercial insurance to survive. This is because these plans often reimburse twice as much as government payers, such as Medicare or Medicaid, that on average reimburse providers at cost.

Medicaid, CHIP, other low-income programsMedicareMedicare AdvantageCommercial
2017-3%0%0%11%
2018-3%-1%-1%12%
2019-2%-1%-1%16%
20202%0%1%9%
20210%1%2%10%

The nearby table shows the profit margins that Wellstar Atlanta Medical Center received from each traditional healthcare payer. These are mostly neutral or positive margins on reimbursements since its acquisition by Wellstar. When taking into account AMC’s typical payer mix, we can further see how AMC was able to remain profitable during this time period. 

This point is only further reinforced by NASHP’s “breakeven” point, which considers all hospital revenue streams, and not just what the hospital received from net patient revenue, to cover operating costs. Put another way, this figure represents what the hospital was actually paid compared to what it needed to be profitable. 

By this measure, AMC on average has received more than 150% of the revenue it needed financially to remain open since 2016. 

One benefit of a large health system is that higher profits at one facility can be used to offset smaller gains, or even losses, at another facility. One could even argue that a nonprofit system has that responsibility to its community. 

Given this broad look at the publicly available financial data for Wellstar and AMC, it is difficult to understand why closing this facility was deemed necessary.

*Hospitals are required to submit annual financial reports to the Centers for Medicare and Medicaid Services (CMS). These are certified by either the Administrator (CEO) or Chief Financial Officer at each facility. CMS then publishes this information in a nationwide database known as the Healthcare Cost Report Information System (HCRIS). Nonprofit hospitals are also required to provide audited financial statements as part of the 990.