A Look Back in Time: As Hospital Chains Grow, Fewer Oregon Independents Remain

If Silverton Health goes through with plans to join Legacy, only seven independent nonprofit hospitals will remain in the state: Columbia Memorial, Good Shepherd Medical Center, Grande Ronde Hospital, Mid-Columbia Medical Center, Santiam Hospital, Sky Lakes and Tuality

Today, we’re looking at nine hospitals that, at least on the surface, appear to be independent – a remarkable feat in an era when hospitals face increasing pressure to merge and consolidate for survival.

Look closer, and you’ll see that they aren’t necessarily going to stay independent - and two actually are affiliated with larger East Coast chains.

Nonprofits Columbia Memorial Hospital, Good Shepherd Medical Center, Grande Ronde Hospital, Santiam Hospital and Sky Lakes are all still independent – though they also provide many community-integrated services that go beyond what hospitals once were expected to do. So is Tuality, which we examined in an earlier story in this series.

Silverton Health, also a nonprofit, will not likely be independent for long. It announced plans to join the Portland-based Legacy Health network, and is currently in merger talks.

For-profits McKenzie-Willamette Medical Center and Willamette Valley Medical Center say little about ownership online. McKenzie-Willamette touts the fact that local physicians are among its owners, and Willamette Valley promotes its board of local leaders. But both are part of separate Tennessee-based healthcare companies – hardly as independent as they seem. And McKenzie-Willamette could be under new corporate control in 2016.

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

Last year, when we examined independent hospitals, we also included Ashland Community Hospital, but that institution is no longer on its own. It has joined the Asante network, and was reviewed in part three of this series.

For the third year, The Lund Report is digging into the money and operations of these major healthcare institutions. In our first seven 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.

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.
  • Executive compensation figures come from the IRS 990 tax forms that all nonprofits are required to file. Click here to view a break-out of these figures.
  • Additional financial details about hospital chains come from IRS 990 forms and from the systems’ own unaudited reports.
  • Where information was available, we also looked up bond-agency ratings and dug into documents filed with the U.S. Securities and Exchange Commission.

This review 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.

Columbia Memorial Hospital

Columbia Memorial Hospital as it exists today has origins that can be traced back to both Catholic and Lutheran roots. Catholics built Astoria’s first hospital, St. Mary’s, in the 1880s. Lutherans, who founded Columbia Hospital in the 1927, moved into the St. Mary’s building in the 1970s. Today, Columbia Memorial is a nonprofit with a Lutheran affiliation.

It’s also expanding as it works to adapt to the ever-changing healthcare marketplace. Earlier this year, hospital officials announced a partnership with Oregon Health & Science University through which the two institutions are building an 18,000-square-foot cancer center on Columbia’s Astoria campus. The project’s scheduled completion date is in 2017.

Analysts at Fitch Ratings said earlier this month that they view Columbia Memorial Hospital’s partnership with OHSU favorably.

“CMH benefits from a clinical affiliation with OHSU, which has helped support a successful ambulatory growth strategy around specialty and primary care services,” Fitch wrote in an assessment of the Astoria hospital’s financial situation.

“Overall, Fitch views the relationship with OHSU positively, as it has supported CMH's ambulatory growth efforts and helped to stem unnecessary outmigration. Of note, CMH's revenue base has grown over 50 percent from 2009 - 2014. This relationship helps to offset the unusually high level of competition from area acute care providers within CMH's service area.”

But Columbia’s bond rating is a BBB-, still investment grade, but only just above speculative grade, suggesting that loans to the hospital are a moderate credit risk.

After an upgrade to its computer system, the hospital saw payments from patients, insurers and others slow down, with the average bill taking 83 days to get paid as of June 30. The hospital is aiming to get that down to 55 days.

Columbia Memorial Hospital CEO Erik Thorsen received total compensation in 2013 of $355,913: $304,513 in base compensation, $27, 895 in bonuses and incentives, $22,895 in retirement and deferred compensation, and $1,140 in other forms of compensation.

Finances, year 2014:

Profit: $4,780,225, down 2 percent from 2013. Net patient revenue: $75,819,625, up 7.6 percent Charity care charges: $1,139,916, down 63.7 percent. Profit margin: 6.0 percent, compared to 6.7 percent the prior year

Size and scope, as of 2014:

Available beds: 25.

Inpatient days: 4,900.

Emergency department visits: 13,189.

Outpatient visits: 162,634.

Good Shepherd Medical Center

Hermiston-based Good Shepherd Medical Center opened in 1954, making it a relative newcomer in Oregon. Initially paid for with a mix of community contributions and federal funding, Good Shepherd was first sponsored by Portland's Lutheran Welfare Association. Within a few years, however, the Lutheran Welfare

Association had handed control of Good Shepherd over to a locally governed community nonprofit.

The hospital’s current campus was built in the 1980s. Good Shepherd Medical Center is now part of a larger Good Shepherd Health Care System, a network of clinics, a pharmacy, and hospice as well as the hospital. With over 500 employees, it’s a major employer within its region.

Earlier this summer, Good Shepherd opened a $15.3 million state-of-the-art surgery center, with some surgery suites twice the size of those it had been using, and room for growth.

Good Shepherd President and CEO Dennis Burke earned total compensation of $410,254 in 2013: $333,876 in base pay, $22,000 in bonuses and incentives, $27,500 in retirement and deferred compensation, and $26,878 in nontaxable benefits.

Finances, year 2014:

Profit: $13,755,413, up 12.6 percent compared to 2013. Net patient revenue: $82,617,147, up 2.7 percent Charity care charges: $7,411,436, down 23.8 percent. Profit margin: 15.4 percent, compared to 14.0 percent the prior year

Size and scope, as of 2014:

Available beds: 25.

Inpatient days: 4,838.

Emergency department visits: 18,232.

Outpatient visits: 49,367.

Grand Ronde Hospital

Grand Ronde Hospital has been serving La Grande and surrounding communities in rural northeast Oregon since 1907. It’s the only hospital in Union County, and serves a population base of more than 25,000 people. Its surrounding mountain passes are frequently closed in the winter, and the next nearest hospitals are nearly 50 miles away.

To expand the services it can offer, the hospital has turned to telemedicine partnerships - physicians in Idaho support heart-attack survivors, endocrinologists consult from Walla Walla, Washington, and the Saint Alphonsus Health System offers consultations on neonatology and maternal fetal medicine, and other specialists also provide services.

Earlier this month, Grande Ronde Hospital affiliated with primary care clinics that had already been in the small communities of Elgin and Union - a move hospital officials said was made in part because growing regulatory demands make it hard for small practices to remain independent.

“Because our mission is to ensure that quality healthcare services are locally accessible within our entire region, we entered into negotiations with the South County Health District Board and the Elgin Health District Board to ensure access within the outlying communities remained viable,” said Jim Mattes, president and CEO of the hospital.

In its May 2013-April 2014 fiscal year tax filing, the hospital said Mattes’ total compensation was $355,594: $281,825 in base pay, $20,400 in retirement and deferred compensation, $28,869 in nontaxable benefits, and $24,500 in other compensation.

Finances, year 2014:

Profit: $5,967,180, up 63 percent compared to 2013.

Net patient revenue: $68,226,564, up 3.7 percent.

Charity care charges: $3,437,431, down 2.6 percent.

Profit margin: 8.3 percent, compared to 5.2 percent the prior year.

Size and scope, as of 2014:

Available beds: 25.

Inpatient days: 4,177.

Emergency department visits: 11,645.

Outpatient visits: 114,366.

Mid-Columbia Medical Center

Based in The Dalles, Mid-Columbia Medical Center serves about 50,000 people in both Oregon and Washington. The hospital was the first in the world to fully implement what’s known as the Planetree philosophy of care, a patient-centered, holistic approach to healthcare.

But Mid-Columbia was found negligent in a civil suit in April, despite denying responsibility for the actions of an anesthesiologist who assaulted multiple patients at the hospital. Dr. Fred Field was sentenced to 23 years in prison after pleading guilty to 11 counts of first-degree sex abuse and one count of first-degree rape.

In the civil suit settled this spring, a nurse became a patient at the hospital where she worked, filing a lawsuit after she was sexually abused while sedated, incapacitated and vulnerable, according to D’Amore Law Group. Despite working at Mid-Columbia Medical Center, the victim was unaware that Field had been accused of assault and harassment in numerous complaints over the preceding three years, her law firm said.

In addition to finding the hospital negligent, jurors awarded the victim $950,000 in damages.

In more upbeat news, The Dalles Chronicle reported that Mid-Columbia is growing, and the hospital recently invested in a business incubator aimed at boosting the local economy.

In 2013, Mid-Columbia CEO Duane Francis received total compensation of $751,835: $568,607 in base pay, $35,525 in bonuses and incentives, $114,705 in retirement and deferred compensation and $32,998 in nontaxable benefits.

Finances, year 2014:

Profit: $2,829,890, compared to a net loss of 2013. Net patient revenue: $106,966,794, up 11.4 percent Charity care charges: $5,994,875, down 11.5 percent. Profit margin: 2.5 percent, compared to negative 0.9 percent the prior year

Size and scope, as of 2014:

Available beds: 49.

Inpatient days: 7,137.

Emergency department visits: 15,908.

Outpatient visits: 210,828.

Santiam Hospital

Outside of Portland, hospital competition is rare in muchy of Oregon, but Stayton-based Santiam Hospital is a short drive from both Salem Hospital and Silverton Hospital. The three institutions collaborate on community health efforts, even as they compete for market share within the region.

Santiam opened its doors in 1953 after raising funds from more than 3,000 community members and businesses. In 2012, its west tower debuted, doubling the hospital’s size and housed the surgery center, family birth center and intensive-care unit. In 2013, the hospital changed its name, from Santiam Memorial Hospital to Santiam Hospital.

Santiam CEO Terry Fletchall’s total compensation was $321,077 in 2013: $166,163 in base pay, $64,583 in bonuses and incentives, $37,693 in retirement and deferred compensation, $40,864 in nontaxable benefits and $11,774 in other compensation.

Finances, year 2014:

Net loss: $2,521,335, compared to a net loss of $3,139,796 in 2013. Net patient revenue: $37,431,343, up 7.8 percent Charity care charges: $783,971, down 48.6 percent. Profit margin: negative 6.6 percent, compared to negative 8.8 percent the prior year

Size and scope, as of 2014:

Available beds: 40.

Inpatient days: 3,404.

Emergency department visits: 11,531.

Outpatient visits: 38,374.

Silverton Hospital

These are times of rapid change for Silverton Health, which operates Silverton Hospital. Its chief executive for the past four years was pushed out amid criminal allegations this summer. And now it’s getting ready to become part of the much larger Legacy Health system.

CEO Richard Cagen lost his job after he was arrested on public indecency charges after allegedly masturbating in his car at a Bi-Mart parking lot, according to reports in local media. He was placed on administrative leave by Silverton Health, and subsequently retired.

Sarah Fronza was named interim CEO.

She is now engaged in discussions with Legacy Health that could ultimately end Silverton Hospital’s independent status. Silverton Health earlier rejected a possible partnership with Providence, in part over concerns that a Catholic affiliation could limit health services offered in the community.

“Legacy has already shown a strong commitment to the communities we serve and shares our excitement in expanding the range of services we offer,” Fronza said in a statement.

Close to both Santiam Hospital and Salem Hospital, Silverton Hospital is located in one of the state’s more competitive healthcare marketplaces.

The hospital is the jewel in the crown of Silverton Health, its nonprofit parent, which also runs a network of primary and specialty care clinics. It was founded in 1918 in a two-story building where patients were carried from the ground floor to the operating room by stretcher. It has been at its current site since 1937s, through multiple upgrades and expansions.

Former CEO Richard Cagen received total compensation of $504,317 in 2013: $304,000 in base compensation, $1,520 in retirement and deferred compensation, $15,720 in nontaxable benefits and $183,077 in other forms of compensation.

Finances, year 2014:

Net loss: $1,642,188, compared to a net loss of $3,243,909 2013. Net patient revenue: $108,902,889, up 21.0 percent Charity care charges: $7,245,123 Profit margin: netagive 1.4 percent, compared to negative 3.5 percent the prior year

Size and scope, as of 2014:

Available beds: 48.

Inpatient days: 8,437.

Emergency department visits: 26,726.

Outpatient visits: 199,170.

Sky Lakes Medical Center

Sky Lakes Medical Center in Klamath Falls is the only full-service hospital in a 10,000-square-mile area of southern Oregon and northern California. Previously known as the Merle West Medical Center, it took the “Sky Lakes” name in 2007, when it opened a 100,000-square-foot inpatient care area.

Though it’s independent, Sky Lakes has a close relationship with Oregon Health & Science University, which is working to establish one of two new rural campuses in Klamath Falls. (The other rural campus will be in Coos Bay.)

In July, Sky Lakes took a public stand on the idea of a "living wage," when it boosted the pay of all employees making Oregon's minimum wage of $9.25 by 19.6 percent, declaring that the hospital system's minimum wage would be raised immediately to $11.06 per hour. Other employees who were already making slightly more than $11.06 were also promised pay increases. About 125 workers were affected.

“Purposeful work with worthwhile pay gives people a greater ability to support themselves with less reliance on government programs,” Sky Lakes said in a statement issued when it announced its “living wage” initiative.

“The senior management team here concluded that, to further demonstrate the leadership role of Sky Lakes in the community, we should set an example by paying a higher minimum wage,” said Sky Lakes President and CEO Paul Stewart.

Stewart's total compensation in 2013 was $557,591: $340,703 in base pay, $190,000 in bonuses and incentives, $12,500 in retirement and deferred compensation, and $19,596 in nontaxable benefits. His base pay climbed 5.4 percent from the year before, and his total compensation climbed 3.3 percent.

Finances, year 2014:

Profit: $19,600,985, up 39.9 percent compared to 2013. Net patient revenue: $188,278,660, up 10.5 percent. Charity care charges: $11,662,310, down 26 percent. Profit margin: 9.7 percent, compared to 7.8 percent the prior year

Size and scope, as of 2014:

Available beds: 100.

Inpatient days: 19,443.

Emergency department visits: 21,848.

Outpatient visits: 365,520.

McKenzie-Willamette Medical Center

As a for-profit company, Springfield-based McKenzie-Willamette Medical Center is a rarity among Oregon hospitals, which are mostly nonprofit. That means it’s able to keep many details about its operations private.

On its website, it says it is owned by a partnership that includes physicians who work on its medical staff. But documents filed with the U.S. Securities and Exchange Commission shine more light on McKenzie-Willamette’s ownership.

Franklin, Tennessee-based Community Health Systems Inc. told the SEC that in 2008 it acquired a non-controlling interest in McKenzie-Willamette, in exchange for $22.7 million in cash. At the time of that transaction, doctors in Oregon also owned a non-controlling interest in the hospital, Community Health Systems said, but it’s not clear what other investors may also have a stake.

Earlier this month, Community Health Systems announced it would spin off its interest in McKenzie-Willamette, along with 37 other hospitals in small

communities in 15 other states across the country, into a new publicly traded company, which will tentatively be called Quorum and will operate. The change is not expected to affect an $80 million expansion that will nearly double the size of the existing hospital over the next three years, officials told the Eugene Register- Guard.

From its opening in 1955 through 2008, McKenzie-Willamette was the only hospital in Springfield. Now it competes with PeaceHealth’s Sacred Heart-Riverbend, which is much larger, with 347-beds to McKenzie-Willamette Medical Center’s 113 beds. Even so, both hospitals have reported rising profits.

Because it’s privately owned, McKenzie Willamette is one of the few hospitals in Oregon not required to publicly disclose how much it pays its executives.

Finances, year 2014:

Profit: $27,251,120, up 61.5 percent compared to 2013. Net patient revenue: $149,763,338, up 12.1 percent. Charity care charges: $589,782, down 88.8 percent. Profit margin: 19.2 percent, compared to 13.4 percent the prior year.

Size and scope, as of 2014:

Available beds: 113.

Inpatient days: 20,686.

Emergency department visits: 35,901.

Outpatient visits: 72,962.

Willamette Valley Medical Center

Willamette Valley Medical Center is one of Oregon’s few for-profit hospitals in a state where most are run by nonprofits. That means it’s able to keep many details of its operations private.

Based in McMinnville, Willamette Valley Medical Center is owned by Capella Health in Tennessee, which prides itself on a decentralized approach to managing its hospitals. Though its owners are across the country, Willamette Valley is governed by a board made up of community leaders. It invested more than $1.8 million in local facilities, including an expansion of its emergency department, where it added three patient care rooms.

Because it’s privately owned, Willamette Valley Medical Center is one of the few hospitals in Oregon not required to publicly disclose how much it pays its executives.

Finances, year 2014:

Profit: $30,700,670, up 20.1 percent compared to 2013. Net patient revenue: $92,766,441, up 9.4 percent. Charity care charges: $1,087,956, down 52.8 percent. Profit margin: 33 percent, compared to 30 percent the prior year.

Size and scope, as of 2014:

Available beds: 88.

Inpatient days: 13,432.

Emergency department visits: 24,928.

Outpatient visits: 114,864.

Reach Courtney Sherwood at [email protected], or follow her on Twitter at @csherwood.

 

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