April 12, 2009 in City

Low patient count threatens Shriners Hospital

National board cites shrinking endowment
By The Spokesman-Review
 

The problems facing Spokane’s Shriners Hospital for Children are daunting: too few patients, high costs, falling donations.

It’s a troublesome scenario that has put the hospital on the short list for closure as its parent organization staggers from massive investment losses that threaten to wipe out one of the best-known philanthropic organizations of the past century.

“Either we close six hospitals now, or we might have to close all 22 in a matter of five to six years,” national Shriners board Chairman Ralph Semb said last week.

“Our entire system is at stake. There’s no easy fix,” he said.

The Shriners endowment – built from decades of donations, bequests and fundraisers – has fallen to about $5 billion from $8.5 billion within the past year because of the stock market collapse and a drop in new cash gifts.

Furthermore, the 22 Shriners hospitals had to draw $350 million from that endowment to balance their budgets, Semb said.

Spokane’s hospital employs 170 people and has an annual operating budget of about $17 million – all to treat about 8,000 children a year. On average, only six of the hospital’s 30 patient beds are filled each day.

Such underuse has been problematic for decades, said Ken Boni, a North Idaho Shriner and chairman of the local hospital’s board of governors.

Semb said if the Spokane hospital’s patient count were 50 percent higher – still less than half-full – it wouldn’t be on the closure list.

But underutilization is not a problem only in Spokane. As of last week, there were about 375 patients at all Shriners hospitals. Combined, the hospitals have about 1,100 beds.

Still, supporters believe the hospital serves a critical purpose. There are ways to boost patient numbers, they say.

At a July 6-8 national meeting of Shriners in San Antonio, Texas, Boni will ask members to keep Spokane’s hospital open and argue that its charitable mission that has served more than 1 million children can be preserved by billing insurers.

Semb is skeptical.

“Some people say, ‘Yep, there’s a golden egg out there to the tune of $130 million a year for us,’ ” Semb said. “But there’s a downside, too. We’ll become in direct competition with all of the local hospitals out there and they won’t refer children to us for care.”

Shriners hospitals have always been free. The hospitals were founded to help and heal poor children with orthopedic conditions and polio. As the needs grew along with the endowment, the Shriners began to accept all children in need of specialized orthopedic care.

Parents never received bills. The Shriners often covered transportation costs and even lodging for patients’ family members.

Upending that tradition by billing insurers and Medicaid would be a major shift. “We would become more federally guided by what we can and can’t do,” Semb said. “It would be a whole different culture.”

A less-discussed proposal – a 30 percent budget cut – faces criticism from hospital administrators, who say such cutbacks would compromise the hospital’s mission and ability to continue research and purchase modern equipment.

The Shriners’ board of trustees voted last month to lay off 40 administrative employees and close four of its eight research centers.

The Shriners also are looking at shedding costs by exploring new partnerships with major hospitals.

“That’s one of the things we’re looking at, where we just give up our bricks and mortar, and our doctors move into the medical centers,” Semb said.

That would allow Shriners to keep their brand and charity alive, albeit diminished.

“No question that’s a model we’re looking at,” he said, without speaking directly about Spokane.

In Spokane such a change could mean Shriners finds a home within Providence Sacred Heart Medical Center and Children’s Hospital. Or it could strike a partnership with Deaconess Medical Center, which closed its pediatrics unit years ago and sits across the street from Shriners and is already linked by a skybridge.

If the Spokane hospital closes, children who need Shriners care would be referred to centers in Portland or Salt Lake City.

The Portland hospital, adjacent to the Oregon Health and Sciences University, is in the process of a $74 million expansion. The two groups are collaborating on research and patient care.

Sally Mildren, the public relations and marketing specialist for the Spokane hospital, said branding and patient recruitment have been difficult. She has a $40,000 annual budget; about $6,000 of that is available for advertising across a region stretching from the plains of eastern Montana to Vancouver, B.C.

“It’s like the little boy with fish and a loaf trying to feed thousands,” she said.

One problem is that the Shriners’ message has been muted as the number of men in the organization drops.

Like other fraternal organizations, the Shriners’ new membership has fallen. In 1979 there were 940,000 Shriners. Today there are about 350,000. Just as problematic, Semb said, is that 150,000 of the remaining Shriners are older than 70.

“We’ve needed new blood for a long time,” added Kurt Kimberling, leader of El Katif Shriners in Spokane and a middle school teacher.

With fewer feet on the street, fewer children are being referred to the hospital, he said.

At one time about 40 percent of the patients were referred to the hospital by Shriners members. Today it’s about 8 percent.

Mildren said the vast majority of patients are referred by doctors. She has targeted pediatricians and school nurses as recruiting grounds.

Despite the Shriners’ 85-year history of treating children, Mildren said, most people in a position to refer patients don’t know the range of services offered by the Spokane hospital.

Semb and other Shriners officials said the firing of the three top officers at the Spokane hospital in 2006 had no bearing on the selection for closure.

A lawsuit filed by former patient care services director Cheri Hollenback remains active. She alleged her firing was in retaliation for exposing an inappropriate relationship between another executive and a staff member.

Semb called Spokane and the other hospitals on the closure list – including Shreveport, La.; Erie, Pa.; Springfield, Mass.; and Greenville, S.C. – fine hospitals that simply have too many vacant beds.

Since the news of a possible closure broke, scores of parents and former patients have written in support of keeping the hospital open. They, along with Shriners from areas where hospitals are on the closure list, promise to rally in support of the facilities. It takes a two-thirds vote by the Shriners board to close the hospitals.

The overriding financial problems aren’t going away.

Semb said keeping all hospitals open and continuing to operate them as they’re run now would require an endowment of $12 billion by 2014.

“Unfortunately we’re getting to the point where we can’t afford to do this anymore,” Semb said. “The cost of medicine has outgrown what our income possibilities are.”

John Stucke can be reached at (509) 459-5419 or johnst@spokesman.com.


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