Bulletin E-Edition:
Economic woes hit area hospitals
CHC to examine hospital services for profitability
By Betsy Q. Cliff / The Bulletin
Published: November 20. 2008 4:00AM PSTAt meetings around St. Charles Bend in recent weeks, one question has been brought up repeatedly, said Executive Vice President Tim Bricker: How is the hospital’s financial situation?
There’s reason for concern. Over the past few months, things haven’t been going very well. Cascade Healthcare Community, which owns or runs hospitals in Bend, Redmond and Prineville, posted losses totaling more than $4.2 million from July through September. Though preliminary numbers for October look better, said interim CFO Mike McGinnis, the hospital is still being squeezed financially.
For the full year, said McGinnis, the organization is still profitable, thanks to gains made at the beginning of the year. Through September, the organization had an operating income - the amount of money left after expenses have been subtracted from revenue - of $3.4 million. Though in the black, said McGinnis, that number is below the budgeted amount and about half of the operating income at the same time last year.
In response, the hospital is looking at a number of changes, some of which could be dramatic.
“As far as what we have to do here,” said McGinnis, “everything is on the table.”
One thing the organization will do, said McGinnis, is look into the profitability of the different services that the hospitals provide. Traditionally, certain hospital services have made more money for hospitals than others. “We have to look at the whole mix of services that we have, and we have to make some decisions as to whether those services pay for themselves and, if they don’t, how much of a subsidy can the organization afford to make.”
The types of discussions occurring at CHC are going on all over the state, said Kevin Earls, vice president for policy and advocacy at the Oregon Association of Hospitals and Health Systems, a state organization that represents hospitals. “Hospitals are always under pressure. It’s just that the trends are becoming more severe and more threatening,” said Earls. “They’re having to make decisions that are really difficult.”
As an example, Earls cited Mercy Medical Center in Roseburg, where a lack of funding forced the hospital to close its inpatient mental health unit in the fall of 2007. “It was such a money-losing operation that they had to close that unit,” he said.
Last year, CHC ended the year with an operating income of just $1.5 million, a dramatic drop from the $17.2 million it made in 2006, which caused concern among executives. Then, executives attributed the drop to a number of issues, including lower than expected patient revenue, increases in salaries, increases in uncompensated care and spending on infrastructure improvements. Some trends, such as increases in uncompensated care, have continued into 2008, though there are new issues as well.
Finding a balance
One issue is that some of the services that are more profitable, primarily elective procedures, have dropped off. The procedures that are being done, said McGinnis, are more often the urgent diagnoses that don’t pay the hospital as well.
“People are deferring any kind of elective procedure,” said McGinnis. Anecdotally, he said, the organization has heard that people are worried about paying their co-pays and deductibles and, he said, “people are hesitant to take off work because they don’t know if they’re going to have a job to go back to.”
In addition, said McGinnis, the number of people with health insurance has dropped, which has increased the amount of uncompensated care at the hospital. In the first nine months of 2008, CHC provided $20.5 million in charity care, services provided for people who can pay none or only a portion of their bill and who are often uninsured. For the same time period in 2007, the hospital provided $11 million in such care.
Besides struggling with revenue through its hospital operations, CHC has also been hit by losses in the stock market. Its bonds, which CHC uses to borrow money, were caught up in the auction-rate bond market, which crashed in the wake of the subprime lending market collapse. As a result, the interest the hospital has paid on its loans has jumped to nearly twice what it was paying last year, and CHC has had to refinance the bonds.
As with many people, CHC’s stock portfolio has also been damaged. Through September, said McGinnis, CHC’s investment portfolio had lost $18.6 million. “That is just devastating the industry right now.”
That loss, said McGinnis, has affected a key measure of hospital health, the number of days the hospital could survive without taking in more money. Currently, the organization has 112 days worth of cash on hand. Other hospitals in its peer group, McGinnis said, have close to 200, and “that’s where Cascade needs to be.”
Despite their difficulties, McGinnis estimates the hospital will make more than it did in 2007. “This hospital continues to make money,”
In the same breath, however, he emphasized that it needs to do better. “It does not make enough money at this point to continue to grow services at the rate it has in the past, and it needs to get back to that point.”
Betsy Q.
Cliff
can be reached at 541-383-0375 or bcliff@bendbulletin.com.
ARTICLE ACCESS: This article is among those available to all readers. Many more articles are available only to E-Edition members. Sign up today!
blog comments powered by Disqus
