A Look Back: Oregon’s Public Hospital Districts Adapt to Challenges of ACA Era

The clout of CCOs can create challenges, opportunities officials find at Bay Area, Blue Mountain, Coquille Valley, Curry General, Harney District, Lake District, Lower Umpqua, Pioneer Memorial, Southern Coos and Wallowa Memorial

These are challenging times for public hospital districts, especially the tiny taxpayer funded districts that serve some of Oregon’s most remote communities. Pressure is strong to cut costs and boost performance, but unlike in more populous areas, many of Oregon’s smaller hospitals are struggling to recruit doctors. And without the buying power of large chains, their expenses can often be higher, too.

That, of course, is why hospital districts exist in the first place. Governed by local voters, and often supported, in part, by property taxes, these districts can be the only way to support a local hospital that would lose money under a more traditional business model.

Though most of the districts in this story are small and distant from one another, three hospitals are an exception to that rule: Bay Area Hospital, Coquille Valley Hospital and Southern Coos Hospital and Health Center all operate in Coos County. With 129 staffed beds at Bay Area, compared to 25 at Coquille Valley and 19 at Southern Coos, it’s very clear which institution has the most clout.

That’s left the two smaller districts fretting about their relationship with the only coordinated care organization in Coos County, Western Oregon Advanced Health, which they fear is favoring the larger hospital to their detriment.

That’s among the findings in this ninth story in The Lund Report’s 2015 review of Oregon hospital finances.

For the third year, The Lund Report is digging into the money and operations of these major healthcare institutions. In our first eight stories, we examined Providence Health and Services, Legacy Health, Kaiser Permanente, Salem Health, Asante, Samaritan Health, St. Charles Health System, and PeaceHealth, and hospitals operated by Adventist Health, by Catholic Health Initiatives and by Trinity Health. We also looked into independent hospitals, including Columbia Memorial, Good Shepherd, Grande Ronge, Santiam, Sky Lakes, and for-profits McKenzie-Willamette and Willamette Valley.

The figures underpinning these hospital snapshots come from multiple sources:

  • Profit, revenue and charity care figures come from audited reports prepared by each hospital and submitted to the Office for Oregon Health Policy & Research.
  • The size and reach of each hospital, as summarized through available beds, and inpatient, outpatient and emergency room figures, are reported by hospitals to the state-mandated Databank program.
  • Hospital district board meeting minutes.
  • Financial disclosures filed with bond regulators.

Additional financial details about hospitals come from the systems’ own unaudited reports.

Unlike most of the other stories in this series, these snapshots do not include the most recent executive compensation figures for hospital leaders. In our earlier stories, those figures were obtained from 990 tax forms that nonprofits must file with the Internal Revenue Service. As public districts, these hospitals do not file those forms.

Bay Area Hospital

Bay Area Hospital’s origins lie in a 1952 Coos County vote to create the Bay Area Health District. The district once ran two separate hospitals, but combined them in the 1970s when it decided to consolidate and upgrade. In recent decades, the public district-owned hospital has made a practice of paying for growth itself, rather than seeking taxpayer backing to fund expansions.

In 2013, Bay Area finished a $45 million expansion. This year, Bay Area Hospital expanded its cardiology services through a partnership that brings electrophysiologists to Coos Bay once per week.

CEO Paul Janke has been at the helm since 2009. His 2012 base salary was $339,497.60, plus a $600 bonus – the same amount that all full-time hospital employees received when Bay Area exceeded its budget targets. His 2011 salary was $329,617.60. Those are the most current immediately available compensation figures for Janke.

Finances, year 2014:

Profit: $5.7 million, up 11 percent from 2013.

Net patient revenue: $141.03 million, up 11.3 percent.

Charity care charges: $3.03 million, down 66.8 percent.

Profit margin: 3.9 percent, compared to 4 percent a year earlier.

Size and Scope, as of 2014

Available beds: 129.

Inpatient days: 22,981.

Emergency department visits: 22,211.

Outpatient visits: 80,855.

Blue Mountain Hospital

The Blue Mountain Hospital District is governed by a board elected by Grant County voters, and in addition to managing Blue Mountain Hospital in John Day, it also oversees a 48-bed care center in Prairie City. OHSU residents and interns rotate through on a regular basis to boost staffing at this small hospital, which serves about 7,500 people in a 4,500-square-mile region.

In the fiscal year that ended June 30, 2014, the hospital district showed many signs that things were improving compared to recent years, according to financial reports filed with bond regulators. It only had a single physician turnover, after struggling with greater turnover the previous year. And its net position - the difference between its assets and its liabilities - increased by $61,175, after decreasing by close to $2 million the previous year.

Since 2010, the hospital has seen steady growth in the number of outpatient visits it sees each year, while the number of days patients spend in acute care has been falling.

In 2014, the district received about 9.4 percent of its financial support from taxes. The funds went to support operations and retire bond debt. As a result of incorrect calculations given to the county assessor, the county will levy $350,612 more than required in 2014-15, according to a report by an independent auditor that reviewed the hospital board’s financial documents

CEO Robert Houser is employed through a contract with HealthTech Management Services, a national company that provides healthcare management expertise. He has been with the hospital since 1999.

Finances, year 2014:

Net loss: $555,899, compared to a net loss of $2.6 million in 2013.

Net patient revenue: $15.8 million, up 7.3 percent from the year before.

Charity care charges: $278,579, down 58.2 percent.

Profit margin: Negative 3.2 percent, compared to negative 15.9 percent the prior year.

Size and Scope, as of 2014

Available beds: 16.

Inpatient days: 9,017.

Emergency department visits: 3,106.

Outpatient visits: 15,044.

Coquille Valley Hospital

As a tiny hospital that serves a region of southern Coos County inhabited by about 13,000 people, Coquille Valley Hospital District is feeling squeezed by its much larger neighbor, Bay Area Hospital, about 20 miles to the north, and by how health reform has played out in the region.

In financial documents filed with bond regulators, the hospital’s management wrote that despite multiple efforts to negotiate a provider contract with Western Oregon Advanced Health, the exclusive coordinated care organization for Coos County, WOAH has not submitted a proposal – even though WOAH has reached an agreement with Bay Area Hospital.

Coquille Valley Hospital officials’ frustration is plain in their filing with bond regulators, which reads:

“Unfortunately, the situation with state health reform for us, having resulted in the creation of a sanctioned monopolistic franchise with a single insurer contracted with a single hospital, who together exclusively service close to 30% of the total population of the county and likely 90%+- of the eligible Medicaid population 'at risk,' makes it very difficult, if not impossible, for CVH to effectively compete for the Medicaid 'book of business.’ This is particularly true given the fact that we are a small rural provider, perhaps as much as 10 times smaller than (Bay Area), whose volume makes it much easier to drive economies of scale. Unlike David, we have NOT yet found a smooth stone to slay Goliath. Perhaps this is not so bad after all, since, given the high percentage of denials and low payment rate on what IS authorized on the emergent cases we do treat, the more Medicaid care we provide under the current framework, the more we lose."

Furthermore, under rules that went into effect Jan 1, Coquille Valley is being penalized for its historically positive financial performance, by having its Medicaid reimbursement capped at 3 percent of cost base reimbursement per year.

"Given the woeful reimbursement experience with WOAH, however, it's difficult to conceive of how this new categorization could be any worse than our current reimbursement situation,” the hospital wrote in its bond disclosure.

Despite its frustrations, the hospital prides itself on the results it gets, writing: "Within this maelstrom of change, Coquille Valley Hospital has historically recognized and actively strived to maintain a strategic position as a relatively low cost, high value hospital and health care provider"

The Coquille Valley Health District receives 2.8 percent of its revenue from a tax 0f $1.5299 per $1,000 of assessed value, the same tax rate that's been in place for 20 years. The hospital’s CEO is Karen Lautermilch, whose first day on the job was Aug. 3. She was formerly CEO of a New Mexico hospital system.

Finances, year 2014:

Profit: $702,344, down 33.4 percent from 2013.

Net patient revenue: $22.8 million, up 13.8 percent.

Charity care charges: $232,984, down 8.2 percent.

Profit margin: 3 percent, compared to 5.2 percent the year before.

Size and Scope, as of 2014

Available beds: 25.

Inpatient days: 2,312.

Emergency department visits: 6,167.

Outpatient visits: 23,776.

Curry General Hospital

Curry Health Network – the name adopted by the Curry Health District – is growing. Its Gold Beach Curry General Hospital is getting a new home, a 60,200-square-foot structure slated to open in late 2016, funded through a $10 million bond issue and a $19.1 million USDA loan. The district also hopes to expand its current territory, under a proposal that will go before voters in November through two ballot measures - one asking current district residents to allow the Brookings-Harbor area to join the district, and the other asking Brookings-Harbor voters to opt into the expanded district.

Curry Health District Board Treasurer Ryan Ringer said in a statement that, while Curry Health Network is financially stable, partnering with the residents of south Curry County would expand services in the region, and would allow the district to offer care closer to home.

If approved, taxes paid within the current district would instead be distributed across the larger, expanded district -- thus current district residents would see property taxes drop, while new district residents would see those taxes rise. At present, the district tax is $1.43 per $1,000 of assessed value. If the district expands, it would be about 99 cents per $1,000 of assessed value.

Virginia Razo is the Curry Health Network’s CEO.

Finances, year 2014:

Profit: $7,882, down 99.3 percent from 2013.

Net patient revenue: $27.4 million, up 6.3 percent.

Charity care charges: $860,124, down 6.5 percent.

Profit margin: 0 percent, compared to 4.5 percent the year before.

Size and Scope, as of 2014

Available beds: 24.

Inpatient days: 2,307.

Emergency department visits: 4,500.

Outpatient visits: 51,099.

Harney District Hospital

A critical access hospital located in Burns, Harney District Hospital serves fewer than 8,000 people who are spread over more than 10,000 square miles. It is 135 miles away from the next closest hospital.

Its predecessor was built in 1920 by nuns from Indiana, who later sold it to a lumber company. In 1947, the facility was converted into apartments, and Harney County Hospital opened three years later.

In 1989, community members began looking into what it would take to keep the hospital intact and recruit doctors. Their conclusion: A hospital district, which was created the following year.

In 2008, Harney District Health finished construction of its current hospital building. In 2011, it joined the Oregon Health Network, allowing it to take advantage of telemedicine networks that can connect Harney to distant medical specialists.

In June, Dan Grigg became CEO of Harney District Hospital, replacing Jim Bishop, who retired. Grigg was previously administrator and CEO of the Morrow County Health District.

Finances, year 2014:

Net loss: 280,099, compared to a net loss of $393,018 in 2013.

Net patient revenue: $17.7 million, up 9.4 percent.

Charity care charges: $440,415, up 69.3 percent

Profit margin: Negative 1.5 percent, compared to negative 2.3 percent the prior year.

Size and Scope, as of 2014

Available beds: 25

Inpatient days: 1,525.

Emergency department visits: 3,240.

Outpatient visits: 34,313.

Lake District Hospital

The Lake Health District operates under the name Lake District Health, which runs both a hospital and other health care facilities.

Lakeview’s first hospital was built in 1913 as Lakeview General Hospital. It changed ownership several times over the following decades, until Lake District Hospital was completed in 1970.

In 2013, it participated in a community partnership unusual for a healthcare institution: An investment in geothermal energy.

First, Lake District Hospital underwent an extensive remodel so that it could accept a new source of heat. Then it partnered with four community schools to make use of a geothermal well. At a cost of $3.7 million up-front, the hospital and schools are now heated using 185-degree water. The heating system has won national awards, and its proponents hope to reap significant energy saving from their investment.

Lake District Health’s CEO is Charlie Tveit.

Finances, year 2014:

Profit: $1.3 million, down 32.5 percent.

Net patient revenue: $18.8 million, up 4.8 percent.

Charity care charges: $340,794, down 18.6 percent.

Profit margin: 6.1 percent, compared to 9.2 percent the prior year.

Size and Scope, as of 2014

Available beds: 24.

Inpatient days: 9,243.

Emergency department visits: 3,574.

Outpatient visits: 25,484.

Lower Umpqua Hospital

Until earlier this year, Reedsport-based Lower Umpqua Hospital had not committed to a coordinated care organization, and Western Oregon Advanced Health and Trillium Community Health Plan were both in the running. Now, Trillium has been selected, and according to the minutes of the Lower Umpqua Heath District board that transition is moving smoothly.

But Lower Umpqua Hospital seems to also be exploring how to ally with other small hospitals across the state to form a different type of collaborative health group – an accountable care organization. The district’s board in June voted unanimously to enter into an agreement to form an ACO.

It’s not entirely clear what how this ACO would work, and how it would be different from the coordinated care organizations that provide Medicaid-funded coverage across the state, but according to Lower Umpqua Health District board minutes Peace Harbor and Cottage Grove hospitals would join the Reedsport hospital in the planned ACO.

Lower Umpqua Hospital was opened in 1964 with the help of federal dollars, individual donations, lumber company contributions and tax funds. It has expanded services and undergone remodels several times in the intervening years.

The most significant recent hospital expansion was completed in 1998, and included the addition of a radiology suite. In 2000, Lower Umpqua Hospital District opened a new medical office building. It implemented an electronic health record system in 2011, and acquired a physicians’ practice in 2013.

Rather than a CEO, Lower Umpqua Health District is led by an administrator, Sandra Reese.

Finances, year 2014:

Net loss: $39,541, compared to a profit of $233,881 in 2013.

Net patient revenue: $16.99 million, up 8.3 percent.

Charity care charges: $878,833, up 59.3 percent.

Profit margin: Negative 0.2 percent, compared to 1.2 percent the prior year.

Size and Scope, as of 2014

Available beds: 16.

Inpatient days: 1,362.

Emergency department visits: 828.

Outpatient visits: 4,558.

Pioneer Memorial Hospital, Heppner

Operated by the Morrow County Health District, Heppner’s hospital is one of two in Oregon to bear the name Pioneer Memorial. (The other, in Prineville, is part of the St. Charles Health system, and was examined in an earlier story in this series.)

Pioneer Memorial Hospital, Heppner, opened in 1950, and was previously operated by Morrow County itself. In 1994, local voters handed control over to a newly created health district. In addition to the hospital, the district operates rural health clinics, countywide home health and hospice services, and emergency services throughout the community.

Nicole Mahoney, who is also the hospital’s chief financial officer, has been serving as interim CEO since her predecessor, Dan Grigg, left to become CEO of Harney District Hospital in June.

Finances, year 2014:

Profit: $319,127, down 52.7 percent from 2013.

Net patient revenue: $7.2 million, up 6.9 percent.

Charity care charges: $128,587, up 30.4 percent.

Profit margin: 3.5 percent, compared to 7.7 percent the prior year.

Size and Scope, as of 2014

Available beds: 21.

Inpatient days: 2,332.

Emergency department visits: 781.

Outpatient visits: 14,780.

Southern Coos Hospital & Health Center

Bandon-based Southern Coos Health District was founded in 1955 by a public vote, and its first hospital opened in 1960. Today’s Southern Coos Hospital & Health Center opened in 1999. The hospital serves southern Coos County and northern Curry County, where about 10,000 people live.

Southern Coos Health District recently completed a new outpatient services clinic and a new business office.

As with Coos County’s other small hospital, Coquille Valley, Southern Coos have shown signs of frustration in the past with Western Oregon Advanced Health, the community’s only coordinated care organization. WOAH secured a relationship with much larger Bay Area Hospital, but appears to have been slow to cover patient referrals to Southern Coos or Coquille Valley.

According to health district meeting minutes, Southern Coos Hospital officials have so far felt that proposed WOAH payments options are "not as good as Medicare," but that having a contract in place with the CCO will allow physicians to refer patients to Southern Coos services who cannot currently receive care at the hospital. This May, the most recent month for which board meeting minutes are available, the hospital's leaders were still negotiating with WOAH.

Charles Johnston has been CEO at Southern Coos since mid-2013.

Finances, year 2014:

Profit: $2.2 million, up 515 percent from 2013.

Net patient revenue $13.6 million, up 3.9 percent.

Charity care charges: $154,783, down 37.9 percent.

Profit margin: 13.1 percent, compared to 2.5 percent the prior year.

Size and Scope, as of 2014

Available beds: 19.

Inpatient days: 1,281.

Emergency department visits: 3,845.

Outpatient visits: 16,127.

Wallowa Memorial Hospital

Enterprise’s first hospital opened in 1918 in a former high school building. Wallowa Memorial Hospital opened in a new location in 1950, with a construction price tag of $250,000.

In 1992, a public vote created the Wallowa County Health Care District. Already, local leaders were urging upgrades or a massive remodel. In 2007, the health district opened its new $23 million hospital.

Wallowa County Health Care District serves about 3,150 square miles in Oregon along the Washington and Idaho borders, an area inhabited by 7,000 people. The next nearest hospital is in LaGrande, nearly two hours by car on mountainous roads.

Finances, year 2014:

Profit: $656,538, up 312 percent from 2013.

Net patient revenue: $16.2 million, down 3.2 percent.

Charity care charges: $224,609, down 24.4 percent.

Profit margin: 3.9 percent, compared to 0.9 percent the prior year.

Size and Scope, as of 2014

Available beds: 25.

Inpatient days: 2,370.

Emergency department visits: 2,281.

Outpatient visits: 18,212.

Courtney Sherwood can be reached at [email protected]. Follow her on Twitter at @csherwood.

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