Local hospitals see financial improvement

The Affordable Care Act gave more people access to health care and provided local hospitals with greater cash flow in 2014.

Asante Rogue Regional Medical Center in Medford surpassed the $1 billion gross patient billing milestone for the first time, according to the Oregon Health Authority's annual data sweep.

"We did a little better (in Medford) than what we anticipated in 2014," said Patrick Hocking, Asante's chief administrative and financial officer. "We underestimated the impact of the Affordable Care Act, more than any single factor."

The gross patient revenue, however, is less important to hospital executives than patient revenue actually collected, a performance metric where the state's hospitals excelled in 2014.

Asante's hospitals in Medford, Ashland and Grants Pass, as well as Providence Medford Medical Center, saw healthy trends. Net patient revenue for Oregon's 59 hospitals amounted to $9.65 billion, operating income was $585.3 million and bottom-line income was $702.8 million. Operating margins rose on average to 5.4 percent from 2 percent in 2013.

Asante's flagship operation on Barnett Road in east Medford produced total patient revenue of $407.8 million and net income of $44.8 million — a 10.7 percent margin. Three Rivers Medical Center in Grants Pass generated $129.9 million total patient revenue and $7.6 million net income  — a 5.8 percent margin. Ashland Community Hospital was taken under Asante's wing during fiscal 2014 and had total patient revenue of $44.2 million, but lost nearly $5.6 million. Hocking said 75 percent of the loss was due to a one-time charge related to ACH's pension plan.

"This year there is a good chance Ashland will break even or better," he said.

Providence Medford Medical Center recorded $176.7 million in patient revenue, and $64,000 in net income in calendar 2014. Chris Pizzi, chief financial and operating officer at Providence, termed it a break-even year for the hospital.

"We’ve been responding to and learning from all the changes in the marketplace," Pizzi said in an email. "Those changes are a result of health care reform and the Affordable Care Act. We know more people now have health insurance and better access to health care. So, in 2015, we continue to look for opportunities to enhance our services and meet the needs of people in all the communities we serve."

Statewide, uncompensated care fell 32.7 percent from 2013, but Providence saw a 61.6 percent decline. Asante's three hospitals were in the 34.3-38.4 percent range.

"We had increased coverage (in 2014) and increased Medicaid coverage," Hocking said. "It did reduce the number of people we see with no insurance. We're among the 70 percent of hospitals in the state that took the pledge to keep our community benefit at historical levels."

Asante has added to its primary care physician roster to ensure it can handle the additional visits.

"We've been ramping up to where we can handle the newly insured," he said. "Over time we're seeing the competition (for primary care physicians) ratcheting up. To this point, we've been relatively successful in bringing them to the community. But over the next three to five years, we're likely to see a significant impact."

Hocking indicated the Medford hospital's 10.7 percent margin is likely to be short-lived.

"I always look at our entire system's results, where the margin was 3.8 percent," he said. "The fairly typical margin for us is 3 to 4 percent, so 2014 was a little better than average. Long-term we will struggle to maintain 3 percent. In another five years, most hospitals will be pleased with 2 to 2.5 percent; if anything, margins will be down from these levels."

With the government spending more on health care, he said, the pressure will be to spend less, in turn forcing hospitals to find cost savings.

"When it comes to the effort in driving down costs," he said, "we want to be part of the solution."

Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at https://www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/EconomicEdge

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