EUGENE, Ore. (AP) ? In a 24-hour period on a recent Friday, 212 patients were treated at Sacred Heart Medical Center?s emergency rooms at University District in the heart of Eugene and at RiverBend in Springfield.
Among them were a patient experiencing a mental health crisis who was admitted to the University District?s Johnson Unit, a woman in the throes of a difficult labor who was transferred from Douglas County to RiverBend, and a trauma victim rushed to RiverBend during the night shift.
Of those 212 patients, about 60 ? more than a quarter ? will receive medical services but will be unable or unwilling to pay the bill, according to officials with PeaceHealth, the nonprofit parent of the Sacred Heart Medical Centers here and of seven other hospitals in three states.
In the medical world, those unpaid bills are known as uncompensated care. And that uncompensated care, along with the cost of building the long-planned 338-bed RiverBend hospital three years ago and a woefully unprofitable University District hospital, is weighing heavily on PeaceHealth.
PeaceHealth took on heavy debt and tapped its cash reserves to build the $537.6 million RiverBend, which opened in August 2008, just months before the recession ripped through Lane County, leaving a trail of unemployed and uninsured people.
?We knew (?09) would be a down year,? said Roger Saydack, who leads strategy, innovation and development for PeaceHealth Oregon Region and will become the region?s chief operating officer on Sept. 15. ?We didn?t anticipate that the recession would hit that year.?
PeaceHealth lost $39 million in the fiscal year that ended June 30, 2009 ? its worst loss in two decades, said Wendy Apland, chief financial officer for PeaceHealth?s Oregon Region. It managed to eke out only a small profit ? $1.5 million ? the next fiscal year, which ended June 30, 2010. Figures for the year ending in June 2011 won?t be available for months.
What happens at PeaceHealth matters to the rest of Lane County: It is the largest health care provider in the area, with two hospitals in the Eugene-Springfield area, one in Cottage Grove, one in Florence, as well as clinics and labs. It also is the county?s largest private employer, with the equivalent of 5,300 full-time employees, and the county?s sixth largest taxpayer.
When the recession hit Lane County, it affected PeaceHealth?s bottom line in several ways. It reduced the organization?s income as people lost jobs and insurance, moved away, or put off surgeries and other treatment.
It delayed plans to replace profitable services that had been shifted out of PeaceHealth?s older hospital in downtown Eugene to its new sister at RiverBend.
And it significantly increased PeaceHealth?s uncompensated care bill ? which includes charity care for people who can?t pay and bad debt from people who are expected to pay, but don?t.
As a Catholic-sponsored organization, PeaceHealth?s mission includes a commitment to provide care to those who need it, regardless of their ability to pay.
PeaceHealth?s total bill for uncompensated care is immense: an estimated $173.8 million systemwide last year alone. More than half of that uncompensated care ? $92 million ? comes from its hospitals, clinics and other operations in the Oregon Region.
RiverBend is a huge contributor to PeaceHealth?s bottom line, accounting for more than a third of its $1.39 billion revenue in the last fiscal year.
But opening RiverBend drained the profitable services, such as surgery and cardiac care, from the 104-bed University District hospital, leaving low-profit services, such as treating emergency room walk-ins for substance abuse or mental health problems.
PeaceHealth planned to replace some of the profitable services that had left the downtown hospital through an $80 million upgrade that would have transformed University District into a modern specialty hospital and a center for health and education. But finances and expected further cuts in state Medicaid made officials postpone those plans.
University District ended up as the least profitable hospital in Oregon last year, according to a recently released Oregon Hospital Financial Profile Report. University District?s operating margin, a measure of profitability, was -26.41, the lowest among the state?s 57 hospitals.
Cottage Grove Community hospital, another PeaceHealth operation, ranked second on the least profitable list, with an operating margin of -21.19 percent.
Uncompensated care is a big factor in both those results. University District had uncompensated care charges of $15.98 million in 2010 ? $8.69 million of it charity care and $7.29 million of it bad debt, according to the Oregon Hospital Financial Profile Report, which reports hospital data for the calendar year. (PeaceHealth uses the fiscal year ended June 30 in its own financial reporting.)
?The emergency department is the front door for a huge amount of uncompensated care, especially at the University District,? which sees many patients experiencing mental health or substance abuse crises, PeaceHealth spokesman Jim Godbold said.
Among the top five diagnoses at University District last year were psychoses, depressive neuroses, and poisoning and toxic effects of drugs, PeaceHealth officials said.
Federal law generally requires hospitals to examine and stabilize patients who come to the emergency room with an emergency medical condition.
But the recession has meant more people who have lost jobs are turning to hospital ERs when they can?t afford to pay a doctor. ?Around the country, emergency departments have become urgent care clinics for people without insurance,? Godbold said.
Rather than tightening its charity care policies and dropping services that don?t make big profits, PeaceHealth has continued its policy of caring for all patients, regardless of their ability to pay, officials said.
About 35 percent of the patients arriving at University District?s emergency room and about 25 percent at RiverBend?s emergency room can?t, or don?t, pay, PeaceHealth spokeswoman Andrea Ash said.
From the first signs of the recession ? and soaring uncompensated care ? PeaceHealth tried to rein in costs by operating more efficiently, Saydack said. It also cut more than 100 administrative positions to reduce costs.
PeaceHealth is exploring other ways to try to strengthen its financial performance in this still-fragile economy. This includes further increasing hospitals? efficiency ? for example, lowering the average patient?s time in the hospital by discharging patients earlier in the day, when appropriate, said Apland, the PeaceHealth Oregon Region CFO.
PeaceHealth also is working with health care systems and insurers on several state and local committees to find ways to cut costs while still providing high-quality care, Saydack said.
Although PeaceHealth improved its bottom line in both fiscal years 2010 and 2011, the improvements aren?t coming fast enough for agencies that rate the creditworthiness of PeaceHealth?s bonds.
Both Fitch and Standard Poor?s downgraded PeaceHealth?s bonds earlier this year.
SP said it lowered PeaceHealth?s rating to an A+ from AA- because of weak margins, a strained balance sheet with high capital spending and planned increases in debt. SP?s rating scale for creditworthiness goes from a high of AAA to a low of D.
?Their rating is still a very good rating,? SP analyst Cynthia Keller Macdonald said. ?It?s nowhere near the speculative grade rating.?
Fitch lowered its rating to AA- from AA. Its scale goes from a high of AAA to a low of D. Fitch said it downgraded PeaceHealth?s rating because even though its financial performance had improved since Fitch?s last review in September 2009, it wasn?t up to the standards of a AA rating.
Fitch looks at trends, rather than one particular instance, when it decides to change a rating,? said Carolyn Tain, senior director of Fitch?s U.S. public finance, healthcare group.
What the downgrade means is that ?in this particular period of time there?s additional risk associated with PeaceHealth,? Tain said. A rating downgrade usually makes borrowing more expensive because banks providing loan guarantees will charge higher fees or buyers of bonds will want higher interest rates, said Craig Rixon, PeaceHealth director of finance. He added that in this particular case, PeaceHealth made other financing arrangements resulting in no net additional costs to PeaceHealth.
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Information from: The Register-Guard, http://www.registerguard.com
Article source: http://www.chron.com/news/article/Unpaid-bills-contribute-to-hospital-money-trouble-2155503.php
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Source: http://medicaltips.biz/2011/09/05/unpaid-bills-contribute-to-hospital-money-trouble/
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