Growth Strategies | September 27, 2012 | | David Rosenbaum

Why is a finance director involved in what seems to be operational minutia? Because operations drives finance.

But all hospitals share the same problem: an aging population.

“With an older population,” says Josh Gray, managing director of the financial leadership council of The Advisory Board Company, a health care and educational consultancy, “you get a higher proportion of medical as opposed to surgical care. Older people have fewer surgeries, and medical care is reimbursed more poorly than surgery. This places incredible pressure on hospital margins while costs are increasing.” (And they are. According to a recent New York Timesinvestigation, Medicare reimbursements to hospitals were $1 billion more in 2010 than five years earlier.)

Hospital margins are already grocery-store thin. At 2%,  Massachusetts’ Jordan Community Hospital’s is relatively robust, with a total 2011 surplus of a little over $4 million on net patient service revenues of $194 million. But Jordan Hospital is part of the Jordan Health System, which also includes 50-doctor Jordan Physician Associates, Cranberry Hospice, and a wellness center. As a whole, the Jordan Health System’s margin was under .5%, and its surplus was $900,000.