A Look Back: St. Charles Hospitals See Financial Gain from ACA Reforms

With uncompensated care down by more than half across Central Oregon chain, profits climb even when revenues dip

The Affordable Care Act appears to be bolstering the bottom line at the four hospitals in Central-Oregon based St. Charles Health System’s network.

Profits are up at the chain’s two largest hospitals. St.Charles’ two smaller hospitals, which were losing money prior to the passage of the ACA, have seen losses shrink.

At St. Charles Bend, revenue climbed and requests for financial help with bills dropped in 2014, contributing to a 86.2 percent increase in the hospital’s net income, also known as profit. St. Charles Redmond saw patient revenue drop 3.3 percent to $56.7 million – perhaps a sign of tighter negotiated reimbursement rates, or a push to treat patients outside of the hospital – but with uncompensated care down 61 percent the hospital’s profit still rose from $5.2 million in 2013 to $10.9 million in 2014.

Federal healthcare reform does not get all the credit for overhauling St. Charles Health’s finances. The nonprofit laid off key workers and slashed $2 million in annual spending last year. It has simultaneously been investing in capitol upgrades, with a new Prineville hospital building opening later this year and upgrades planned in Bend.

But the vast increase in the number of Oregonians who now have access to health insurance clearly played a major role in boosting St. Charles Health System hospitals’ financial health. Across the chain, fewer people are asking for help with their bills or failing to pay what they’re charged – uncompensated care has fallen by more than half at every single St. Charles hospital.

This is the fifth story in The Lund Report’s 2015 review of Oregon hospital finances.

For the third year, we are digging into the money and operations these major health care institutions. In our first three stories, we examined Providence Health and Services, Legacy Health, Kaiser Permanente, Salem Health, Asante, and Samaritan Health. For this story, we’re looking at St. Charles Health System.

The figures underpinning this story 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.
  • Executive compensation figures come from the IRS 990 tax forms that all nonprofits are required to file.
  • Additional financial details about hospital chains come from IRS 990 forms and from the systems’ own unaudited reports.

Once we’ve completed our look at the facts and figures, The Lund Report will follow up with stories that tackle difficult questions about profits, compensation and the cost of caring for the poor.

This review of St. Charles hospitals draws from the most recent available data. With executive compensation figures, that means we are relying on 2013 tax forms. But 2014 hospital-specific figures have newly been made available by the state, and those results are also included in this story.

Next week, we’ll look at hospitals in the PeaceHealth system.

St. Charles Health System

St. Charles Health System is a nonprofit network of hospitals and medical clinics serving Central Oregon.

Although St. Charles Health System was founded by nuns and is named for a saint, this Bend-based organization has not been officially aligned with the Catholic Church for the past five years. In 2010, hospital and church officials issued a joint statement announcing the severing of ties after a bishop with Eastern Oregon’s Diocese of Baker objected to tubal ligations - permanent sterilizations performed on women – offered at St. Charles Medical Center in Bend.

That decision won applause from The Source Weekly newspaper in Bend, which proclaimed “St. Charles Stands Up for Patients” in an opinion piece at the time.

Since going independent, St. Charles has grown from three to four hospitals. In 2013, the former Mountain View Hospital, which had been run by a public hospital district, joined the nonprofit and became St. Charles Medical Center-Madras.

Longtime CEO James Diegel retired in December 2014, after eight years at the helm of St. Charles Health System. He was replaced by Joseph Sluka, who had previously served as chief administrative officer and executive vice president of a South Dakota health system.

The most recent IRS tax filings available for St. Charles are for the 2013 calendar year, when Diegel’s total compensation was $1.1 million – not all of that in take-home payments. Diegel’s base pay that year was $578,918. He also made $117,691 in bonus and incentive pay, $105,452 in retirement and deferred compensation, $32,502 in nontaxable benefits, and $273,154 in other compensation

St. Charles Medical Center-Bend

St. Charles Medical Center-Bend, for which the rest of the health system is named, is by far the largest hospital within the network as well. Its $404.4 million in 2014 net patient revenue was more than the revenue of the other three hospitals in the system combined. And a $50.8 million profit last year was more than enough to offset financial losses in Prineville and Madras.

Last year, the hospital announced plans for a $27.7 million remodel aimed at upgrading, modernizing and expanding its 39-year-old structure. That project is expected to last two-and-a-half years.

Former St. Charles Medical Center-Bend CEO James “Jay” Henry was laid off in January 2014, as part of a broader cost-cutting and restructuring effort aimed at saving the health system $2 million.

In 2013, Henry’s total compensation was $495,442: $289,173 in base pay, $55,016 in bonuses and incentives, $46,825 in retirement and deferred compensation, $29,972 in nontaxable benefits, and $74,456 in other compensation.

Bob Gomes, who had been CEO of Pioneer Memorial Hospital and St. Charles-Redmond, was instead made the CEO of the Bend and Redmond hospitals. See the St. Charles-Redmond snapshot, below, for Gomes’ 2013 compensation.

Finances, year 2014:

Profit: $50.7 million, up 86.2 percent from 2013.

Net patient revenue: $404.4 million, up 5.5 percent.

Charity care charges: $13.4 million, down 50.3 percent.

Profit margin: 10.9 percent, compared to 6.5 percent the previous year.

Size and scope, as of 2014:

Available beds: 261.

Inpatient days: 60,724.

Emergency department visits: 34,288.

Outpatient visits: 368,173.

St. Charles Medical Center-Madras

In January 2013, St. Charles took over Jefferson County’s only hospital, tiny 25-bed Mountain View Hospital, which had been operating at a loss. With a new parent nonprofit, the hospital took on a new name, St. Charles Medical Center-Madras.

St. Charles-Madras has continued to report financial losses, but those losses are shrinking – from a net loss of $1.4 million in 2013 to a net loss of $835,941 in 2014.

Although St. Charles-Madras has been largely integrated into the greater health system, its nonprofit parent had not yet begun reporting executive compensation figures for hospital CEO Jeanie Gentry in its 2013 tax filing, the most recent available.

Finances, year 2014:

Net loss: $835,941, compared to a net loss of $1.4 million in 2013.

Net patient revenue: $21 million, down 12.6 percent.

Charity care charges: $998,428, down 43.1 percent.

Profit margin: Negative 3.1 percent, compared to negative 5.4 percent the previous year.

Size and scope, as of 2014:

Available beds: 25.

Inpatient days: 2,567.

Emergency department visits: 12,215.

Outpatient visits: 36,807.

St. Charles Medical Center-Redmond

Redmond became the first Oregon city to form a public hospital district in 1951, a choice that gave birth to the Central Oregon District Hospital a year later. In 2001, that hospital merged with St. Charles Medical Center in Bend to form the organization now known as St. Charles Health System. (Initially it went by Cascade Health Services.) Since 2003, the hospital has been known as St. Charles Medical Center – Redmond.

Bob Gomes, currently CEO of St. Charles’ hospitals in Bend and Redmond, was head of the Redmond hospital and Pioneer Memorial Hospital in Prineville in 2013, the most recent year for which compensation figures are available. That year, Gomes had total compensation of $463,235: $284,111 in base pay, $47,199 in bonuses and incentives, $41,454 in retirement and deferred compensation, $28,271 in nontaxable benefits, and $62,201 in other forms of compensation.

Finances, year 2014:

Profit: $10.9 million, up 109.6 percent from 2013.

Net patient revenue: $56.7 million, down 3.3 percent.

Charity care charges: $2.6 million, down 57.4 percent.

Profit margin: 13.3 percent, compared to 7.5 percent the previous year.

Size and scope, as of 2014:

Available beds: 48.

Inpatient days: 6,572.

Emergency department visits: 19,568.

Outpatient visits: 112,964.

Pioneer Memorial-Prineville

Given Oregon’s history, it may not be surprising that there are two hospitals in the state named Pioneer Memorial. Pioneer Memorial in Heppner is operated by the Morrow County Health District, and will be

reviewed in a future story. Pioneer Memorial in Prineville joined the St. Charles family in 2008, under an agreement that keeps a community board in place to govern the hospital’s assets.

Still located in its original 1950 hospital building, Pioneer Memorial will be downsizing and upgrading simultaneously later this year, when it is scheduled to move into a new location and to take the name St. Charles Prineville. The new hospital has been designed to reflect the priorities of Affordable Care Act-era healthcare: focused on integrated teams of physicians and other care providers. At about 60,000 square feet, it will also be smaller than the inefficient 90,000-square-foot building currently in use.

In 2013, Bob Gomes was CEO of Pioneer Memorial, and also of St. Charles-Redmond. See the St. Charles-Redmond snapshot, above, for Gomes’ 2013 compensation. Jeanie Gentry is currently CEO of both the Prineville and Madras hospitals, but her compensation was not reported on St. Charles Health System’s 2013 tax return.

Finances, year 2014:

Net loss: $1.2 million, compared to a net loss of $2 million in 2013.

Net patient revenue: $21.9 million, down 17.7 percent.

Charity care charges: $1.1 million, down 46.3 percent.

Profit margin: Negative 3.7 percent, compared to negative 5.9 percent the previous year.

Size and scope, as of 2014:

Available beds: 22.

Inpatient days: 2,185.

Emergency department visits: 10,901.

Outpatient visits: 89,112.

Courtney Sherwood is on Twitter at @csherwood; email her at [email protected]

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