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Providence Health & Services Reaped Profits of $1.22 Billion after Buying Swedish Hospitals

This story has been edited to include the top salaries of Providence executives Greg Van Pelt, Jack Friedman and Shelly Handkins. Why do more and more of Oregon’s hospitals seem to be joining together as conglomerates? Is healthcare reform hurting or helping the profitability of the state’s rural hospitals? Are these institutions taking on too much debt? Any why is it so hard to figure out how much a medical procedure is going to cost? Finding answers to these questions requires first understanding what’s happening inside Oregon’s hospitals – how profitable they are, how many people they serve, and how much they pay their senior executives. Last year, The Lund Report published a multi-part investigation into Oregon’s 26 acute care hospitals. Today, we begin to expand upon that project by digging into additional data sources and looking at all 60 hospitals – both nonprofit and for profit -- in the state.
March 6, 2014

Why do more and more of Oregon’s hospitals seem to be joining together as conglomerates? Is healthcare reform hurting or helping the profitability of the state’s rural hospitals? Are these institutions taking on too much debt? Any why is it so hard to figure out how much a medical procedure is going to cost?

Finding answers to these questions requires first understanding what’s happening inside Oregon’s hospitals – how profitable they are, how many people they serve, and how much they pay their senior executives. Last year, The Lund Report published a multi-part investigation into Oregon’s 26 acute care hospitals. Today, we begin to expand upon that project by digging into additional data sources and looking at all 60 hospitals – both nonprofit and for profit -- in the state.

The 2013 stories only examined institutions classified as “diagnosis-related group” (DRG), a term applied to larger hospitals in Oregon based on how they are compensated by Medicare. This year, we added the state’s smaller, more rural hospitals (called “Type A” and “Type B” by the state, depending on how remote they are).

The project begins with a review of every accredited hospital in Oregon, assessing how each measures up on a set of key metrics. The stories you’ll read in The Lund Report will be unlike anything else you’ll find in today’s media outlets – we intend to closely scrutinize the profit margins of hospitals, their size, their reach and, of course, their executive compensation.

The figures underpinning these reviews come from multiple sources:

  • Hospital-specific profit, revenue and charity care figures come from audited financial 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.

In addition, the Lund Report is reviewing Medicare claims data from the American Hospital Directory and hospital debt information from bond databases.

After completing its look at the facts and figures, The Lund Report will then follow up with stories that tackle difficult questions about profits, compensation and the cost of caring for the poor.

The series starts with a snapshot look at Providence Health & Services and its eight Oregon hospitals.

Providence Health and Services of Oregon

Overview

Providence Health and Services is a five-state network of hospitals, clinics and health insurers that seems focused on boosting its prominence in the region. Already in 2014, the Renton, Wash.-based Catholic nonprofit has invested in feel-good advertisements about its role in promoting health that aired during local television network Olympic broadcasts on KGW-TV. Also this year, Providence paid an undisclosed sum to put its name on the soccer field where the Portland Timbers play. The field formerly named for previous sponsor Jeld-Wen is now called Providence Park. And as an Oregon Public Broadcasting sponsor, Providence has a spot airing on that network that highlights its health insurance plan.

Providence has not yet reported system-wide results for 2013, but its unaudited financial reports for the first nine months of last year portray a hospital chain that’s far less profitable than projected. Net income through the end of September was $155.6 million, far below the $236.7 million forecast in Providence’s budget. Providence's Oregon region reported net operating income of $59.4 million for the first nine months of last year- below budget, but ahead of last year by $6.4 million. The audited financial results from 2013 for Providence will not be available until later this year.

Looking at financial results for the last full-year available, in its five-state region, Providence Health & Services reported a profit of $1.22 billion in 2012, the year it acquired Swedish Health System’s five Washington hospitals.

From 2011 to 2012, the chain’s eight Oregon hospitals became financially more similar. The two hospitals that posted losses in 2011 – Willamette Falls and Seaside – reported tiny profit margins in 2012. The two that were most profitable – St. Vincent and Milwaukie – narrowed their profit margins.

Hospital leaders expect the Affordable Care Act to begin boosting health insurance enrollments in 2014, but recent history shows the toll of caring for the uninsured. In 2012, Providence’s eight Oregon hospitals spent $192.6 million on charity care, healthcare for the poor and uninsured that the chain is not trying to collect. That was a 14.3 percent one-year boost in charity care spending.

In 2013, Dave Underriner became regional chief executive of Providence’s Oregon operations, but compensation data for last year is not yet available. Underriner’s predecessor, Gregory Van Pelt, had an official base pay of $717,021 in 2012. According to Providence tax returns, Van Pelt received $458,901 in bonus and incentive pay. In addition, Providence awarded him another $411,729 in deferred compensation – usually pay an executive collects later, when his or her tax rates are lower. All told, Van Pelt’s 2012 compensation was $1.63 million. (A year earlier, in 2011, Van Pelt’s total compensation was $4.26 million, largely due to bonuses and retirement pay.)

In 2012, Greg Van Pelt, the CEO of Providence in Oregon took home $1.63 million, including retirement, bonus and deferred compensation, while Jack Friedman, the CEO of Providence Health Plans, earned close to $1 million -- his overall compensation was $906,913, and Shelly Handkins, the chief financial officer, was paid $787,373.

Click here for last year’s report on Providence. 

Providence Hood River Memorial Hospital

At first glance, profits seem to have skyrocketed at tiny Providence Hood River Memorial Hospital, but maybe “stabilized” would be a better term. Higher patient revenues allowed the hospital to bring its profit margin up to a healthier 3 percent.

Finances, year 2012:

Profit: $2.04 million, up 93.4 percent from 2011.

Net patient revenue: $67.1 million, up 4.6 percent.

Reported charity care charges: $5.8 million, up 12.7 percent.

Profit margin: 3 percent, compared to 1.5 percent a year earlier.

 

Size and scope, as of 2012:

Available beds: 25.

Inpatient days: 4,314.

Emergency department visits: 8,206.

Outpatient visits: 152,187.

Providence Medford Medical Center

One of two Medford hospitals (the other is Asante Rogue Regional Medical Center), Providence Medford may have lost ground against the local competition in 2012. While Providence Medford’s net patient revenue declined by 4.8 percent, Rogue Valley’s climbed by 6.8 percent to $375.8 million. Providence Medford’s profit margin was 3.3 percent, compared to Rogue Valley’s 16.1 percent.

Finances, year 2012:

Profit: $5.3 million, down 67.6 percent from 2011.

Net patient revenue: $157.6 million, down 4.8 percent.

Reported charity care charges: $25 million, up 15.7 percent.

Profit margin: 3.3 percent, compared to 9.5 percent a year earlier.

Size and scope, as of 2012:

Available beds: 124.

Inpatient days: 24,772.

Emergency department visits: 27,850.

Outpatient visits: 324,579.

Providence Milwaukie Hospital

With 66 staffed beds, Providence Milwaukie is the smallest acute-care hospital in Oregon, and sees far fewer inpatient visitors than most hospitals in its class. But, it remains busy with outpatient and emergency room visits, in which it ranks 13th and 14th, respectively, out of 58 hospitals in the state.

Finances, year 2012:

Profit: $5.7 million, down 46.6 percent from 2011.

Net patient revenue: $86.2 million, down 8.1 percent.

Reported charity care charges: $12.5 million, up 10.8 percent.

Profit margin: 6.5 percent, compared to 11.2 percent a year earlier.

Size and scope, as of 2012:

Available beds: 66.

Inpatient days: 9,266.

Emergency department visits: 30,399.

Outpatient visits: 200,266.

Providence Newberg Medical Center

With just 40 beds, Newberg Medical Center is one of Providence’s smaller hospitals, but it has deep local roots, and served its community for more than 40 years. In June 2006, Providence Newberg moved into a new hospital building.

Finances, year 2012:

Profit: $4.1 million, down 3.8 percent from 2011.

Net patient revenue: $81.4 million, down 8.6 percent.

Reported charity care charges: $10.2 million, up 20.3 percent.

Profit margin: 4.8 percent, compared to 4.6 percent a year earlier.

Size and scope, as of 2012:

Available beds: 40

Inpatient days: 7,035.

Emergency department visits: 17,290.

Outpatient visits: 197,817.

Providence Portland Medical Center

Providence Portland is one of the busiest hospitals in Oregon. It hosts the most outpatient visits of any hospital in the state, and ranks No. 3 for both emergency department visits (behind Salem Hospital and Providence St. Vincent) and inpatient days (behind OHSU and Providence St. Vincent).

Finances, year 2012:

Profit: $8.4 million, down 72.9 percent from 2011.

Net patient revenue: $588.8 million, down 3.1 percent.

Reported charity care charges: $61.6 percent, up 12.3 percent.

Profit margin: 1.3 percent, compared to 4.8 percent a year earlier.

Size and scope, as of 2012:

Available beds: 397.

Inpatient days: 102,696.

Emergency department visits: 53,244.

Outpatient visits: 1,205,357.

Providence Seaside Hospital

Founded in 1914, Seaside's hospital has been part of the Providence system since 1981. The largest primary care provider in Clatsop County, the hospital also hosts a community clinic.

Finances, year 2012:

Profit: $442,402, up from a $1 million net loss in 2011.

Net patient revenue: $44.8 million, down 6.6 percent.

Reported charity care charges: $5.7 million, up 6.1 percent.

Profit margin: 1 percent, compared to a negative margin of 2.2 percent a year earlier.

Size and scope, as of 2012:

Available beds: 25.

Inpatient days: 232.

Emergency department visits: 595.

Outpatient visits: 10,137.

Providence St. Vincent Medical Center

Providence St. Vincent is one of the busiest hospitals in the state, and is virtually tied with OHSU for having the most beds available for patient care. Only Salem Hospital reported more emergency department visits in 2012, only OHSU saw more inpatients, and only Providence Portland and OHSU outranked St. Vincent in outpatient visits. Hospital officials are proud of the recognition they have received, including designation for Excellence in Nursing Services from the American Nurses Credentialing Center.

Finances, year 2012:

Profit: $67.9 million, down 28.5 percent from 2011.

Net patient revenue: $760 million, up 1.4 percent

Reported charity care charges: $63.9 million, up 18.8 percent.

Profit margin: 8.7 percent, compared to 12.4 percent a year earlier.

 

Size and scope, as of 2012:

Available beds: 528.

Inpatient days: 124,235.

Emergency department visits: 73,290.

Outpatient visits: 777,451.

Providence Willamette Falls Medical Center

After several consecutive years of operating losses, Willamette Falls Community Hospital in 2009 merged with the Providence System. At first, the losses continued. But the Oregon City hospital seems to have finally turned its financial woes around in 2012, when it posted a tiny profit.

 

Finances, year 2012:

Profit: $3,434, up from a net loss of $6 million in 2011.

Net patient revenue: $88.8 million, down 2 percent.

Reported charity care charges: $7.8 million, down 0.9 percent.

Profit margin: Zero percent, compared to a negative margin of 6.3 percent a year earlier.

Size and scope, as of 2012:

Available beds: 89.

Inpatient days: 11,885.

Emergency department visits: 27,462.

Outpatient visits: 153,745.

Coming up: In the next installment in this series, The Lund Report will look at the hospitals of Legacy Health.

FOR MORE INFORMATION

To review the financial performance of each Providence hospital in the Oregon region, click here and here

To review the executive compensation of Providence hospital officials in Oregon, click here and here.

Courtney can be reached at [email protected].

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