Oregon Hospitals Outperform in Second Quarter

With their finances looking stronger than ever, the hospitals may realize they need to boost their image, so their trade association has launched a public relations push that’s airing on OPB.

Oregon’s hospitals are healthier than ever – with much higher profit margins, and witnessed a stupendous drop in charity care while their net patient revenue soared, regardless of whether they actually billed for services or received capitated payments.

Perhaps feeling the pressure now that their hospitals are doing so well financially, the Oregon Association of Hospitals and Health Systems has launched a public relations campaign –myoregonhospital.org -- just as the Legislature prepares to get underway. And they’re using the airwaves on OPB to broadcast their message, saying the “hospitals reach beyond their walls to help make the community a healthier place,” and touting the fact that they provided $1.9 billion in free care, wellness programs, research and other community health activities.

But not everything was rosy when the Oregon Health Authority released the latest data about hospital performance. The majority of hospitals actually witnessed a decline in outpatient surgeries during the first two quarters of 2014, as they struggled to compete with free-standing ambulatory surgical centers.

Emergency room visits, on the other hand, continued to spiral, despite the amazing drop of the uninsured population. Statewide, that number plummeted from 14% to 5% in the past year, according to an analysis by the Center for Health Systems Effectiveness at Oregon Health & Science University – due, in large part, to the Medicaid expansion boom. Now nearly 1 million Oregonians – 1 in every 4 – receives their healthcare through Medicaid, better known as the Oregon Health Plan.

At the same time, both charity care and uncompensated care – which includes bad debt – continued their downward spiral, no doubt due to the expansion under the Affordable Care Act. Statewide, total charity care spending fell by 47% during the first two quarters of 2014 compared to 2013, while the state’s 58 hospitals charged $337.8 million in uncompensated care through the second quarter of 2014; in 2013 that figure stood at $625.5 million.

Digging down deeper, The Lund Report compared the finances for all the hospitals in Oregon, using OHA quarterly reports, and analyzed all the data from the first of 2013 with the same period in 2014 – looking at net patient revenue, operating margin, total margin, charity care, uncompensated care, inpatient discharges and emergency room visits.

Willamette Valley Medical Center and PeaceHealth Sacred Heart Riverbend ended up with the highest total operating margin -- 16.30% -- which represented their overall financial performance including investments and tax subsidies. PeaceHealth rebounded well, after only recording a 4.2% total margin during the first half of 2013, compared to Willamette, which grew slightly, from an 11.7 percent margin in the same time period.

Three hospitals in the red

Just three hospitals found themselves in the red column when the second quarter closed last June – Portland Adventist was the only hospital to witness its margin decline from +0.1 to -2.30, while Samaritan Regional Medical Center was able to nearly pull itself out of the red -- -.5.3 to .1.50. The only other hospital landing in the negative column was Providence Medford, moving from -5.5 to -.1.10.

Providence Willamette Falls, Samaritan Albany, Tuality, Providence Portland, Asante Three Rivers, Providence Milwaukie, and Providence St. Vincent were able to turn around their performance and went from a negative operating margin in the first two quarters of 2013 to a positive operating margin in 2014.

Charity care as a percentage of gross patient revenue dropped significantly. The average of gross patient revenue spent on charity care in the first half of 2013 was 4.3%, while the average percentage of gross patient revenue spent on charity care in 2014 was only 1.9%.

Providence Medford, Legacy Mt. Hood, and PeaceHealth Sacred Heart University had the highest average charity care as a percent of gross patient revenue, all averaging between 5-5.25% during the first half of 2013 and 2014. McKenzie Willamette and Willamette Valley have the lowest average charity care as a percentage of gross patient revenue, at .75% and .5% respectively.

In line with these data point, total uncompensated care as a percentage of gross patient revenue fell for every hospital. The average in the first half of 2013 was 6.5% of gross patient revenue and that number declined to an average of 3%.

Legacy Mt. Hood, PeaceHealth Sacred Heart University, and Providence Willamette had the largest percentage of uncompensated care as a percentage of gross patient revenue with an average of 8.5%, 6.45%, and 6.12% respectively over the first two quarters of 2013 and 2014. Asante Rogue, McKenzie- and Willamette Valley had the lowest average of uncompensated care as a percent of gross patient revenue at 3.1%, 3.2%, and 2.6% respectively.

Asante Rogue, Sky Lakes, and Asante Three Rivers had the largest percentage change from the first two quarters of 2013 to the first two quarters of 2014 in outpatient discharges, seeing a 24.7%, 20.2%, and 16.5% growth respectively. Providence Medford, Providence St. Vincent, and Providence Willamette Falls had the largest decrease in outpatient discharges seeing a -14%, -22.4%, and -43.7% decrease in discharges.

St. Charles, McKenzie Willamette, and Good Samaritan Regional had the largest percent growth in emergency room visits with 17.5%, 14.8% and 12.9% growth respectively. Asante Three Rivers, Oregon Health & Science University, Tuality, Mercy Medical, Bay Area, and Providence St. Vincent all saw decreases ranging from -.8% to -11.1%

The average length of stay in days has remained unchanged, at an average of 4.1 days per stay.

Comparing the first two quarters

Not surprisingly, Kaiser Sunnyside had the largest percentage of outpatient discharges at the end of June, compared to the first quarter of 2014 – a 133.3% growth rate. Next in line, St. Charles Medical Center in Bend, 17%, while several other hospitals also saw their numbers soar into the double digit column – Asante Rogue Medical Center, 15.4%, Sky Lakes, 10.7% and Mercy Medical Center, 10.2%

The majority of Portland-area hospitals felt the sting from the independent ambulatory surgical centers, watching their tnumbers take a significant decline. Providence Willamette Falls fared the worst -- -48.4%, while three other Providence hospitals found themselves on the same treadmill – Providence St Vincent, -22.6%, Providence Milwaukie, -18.7% and Providence Medford, -12.7%.

Willamette Falls, which had the largest operating margin, 16.3%, also fell into the negative column when its outpatient surgery volume dropped by 7.6%, while Salem Hospital, with a -4% just saw a slow in emergency room visits, +2.6%.

The largest shift in emergency visits occurred in Bend, with St. Charles witnessing the largest gain, 17.6%, while its charity care plummeted to +1.6%. McKenzie Willamette also saw its emergency room grow by 14.8%; Samaritan Regional Medical Center, 12.9%; Asante Rogue Medical Center, 12.6% and Willamette Valley Medical Center, 10.6%.

Overall, the smaller rural hospitals, known as Type A and B, found themselves with the fewest number of people in their emergency rooms, compared to their urban counterparts. Coquille Valley led the way, with a 11.2% decrease, while Good Shepherd was close behind, -8%, and two hospitals tied, with -5.4%, Tillamook County and St. Alphonsus.

These smaller hospitals also didn’t do very well on the outpatient surgery front. Once again Coquille Valley suffered the greatest loss, -46.4%; Curry General, -35.9%; Harney District, -32.9% and Wallowa Memorial stood at -23.3% at the end of June.

Profitability continues to plague these rural facilities. Because they lack additional sources of revenue, such as investments, their total margins are much closer to their operating margin, according to the OHA.

Blue Mountain found itself at the low end of the totem pole in total margin, -3.5%, while Santiam North Lincoln ended up with a -2.6% and Wallowa Memorial was just slightly behind, -2.2%.

As hospital administrators reflect on their financial performance during the first half of 2014, they may want to heed the words of Larry Mullins, president of Samaritan Health Services, who told The Lund Report earlier:

“Those quarterly earnings don’t tell the whole story. There’s a bias in the state numbers that show the operating sites with everything loaded in whereas the system doesn’t survive that way.

“As of September 30, our unaudited results show that our system had $12 million in excess reserves. We thought that we’d come in at $3.7 million. In the third quarter of 2013 we were at a negative $9.4 million.

“So let’s be transparent. As a system, we’re in a much more positive position than this time last year because of our innovative approaches, and the majority of our hospital sites have turned into a positive position. Part of what pulls down our hospital operation earning numbers is that our physician practices are built in. If we separate out the physician side, we get a much different picture because physician practices are not as high revenue producers in hospitals.  When we blend everything together -- physician practices and hospitals – it has a negative effect that’s tougher on the hospital side.

“We generate about as much in non-operating income as we do in operating income. That’s the model we need to have as we shift toward more capitated care and population health models.”



To review the hospital financial reports released by the Oregon Health Authority, click here http://www.oregon.gov/oha/OHPR/RSCH/docs/Hospital_Report/Hospital_Quarterly_Report_2014_Q2.pdf


Diane can be reached at [email protected], and Jen can be reached at [email protected].


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