Counting the costs of care

Spokane County’s hospitals provided $128.1 million in free medical care to the region’s poorest people last year as unemployment, chronic disease and the high cost of health care continue to collide.

The total includes $69.6 million in charity care – medical costs that are written off by the hospitals because people can’t afford care, according to financial disclosure forms filed with Washington state. Another $58.5 million is considered bad debt, or unpaid bills that often snare the working poor.

The struggle to absorb these rising costs has become a common refrain for Spokane County’s four main hospitals. And it’s only going to worsen as government budget cutters turn to Medicaid and other health care programs, health care executives say.

Yet the county’s hospitals – with the exception of Deaconess Medical Center – all reported positive earnings, or profits, in 2010, according to reports filed with the Washington State Department of Health.

Providence Sacred Heart Medical Center’s dominance in the local market was highlighted by the data. With 644 beds and a payroll exceeding $244 million last year, Sacred Heart admitted 33,000 people, more than all the other hospitals combined.

The hospital envisions growing even bigger in the next several years if it can win expansion rights with state regulators.

Sacred Heart’s big numbers also include this: The nonprofit hospital reported a $35.2 million operating margin last year. In the business world such profits might be upstreamed to shareholders.

For Sacred Heart, said vice president of communications Sharon Fairchild, the money will be cycled back into the region in the form of charitable giving, construction projects and subsidized health services. Despite strong financial performance, Sacred Heart has in the past year laid off employees, shuffled staff and eliminated some programs.

The financial data collected by the state health department don’t account for Sacred Heart’s broader role as the centerpiece of Providence’s health care service in Eastern Washington, Fairchild said.

“You have to look at us as a complete, comprehensive, coordinated health care system,” she said, that includes several hospitals, nursing homes, medical research efforts, specialized trauma and children’s care, and other expensive programs and initiatives. Some of those services are included in the hospital’s financial figures, but Providence’s total impact on the community isn’t reflected in the numbers, Fairchild said.

Providence publishes a “community benefit report” every year that outlines how it compensates for some tax breaks afforded nonprofits by reinvesting in the community. Its $39 million worth of charity care is included in that equation.

And so is the $18 million worth of charity care given away by Holy Family despite logging an operating margin of $1.6 million.

As Sacred Heart continues to lead the region’s medical care, Deaconess Medical Center is emerging from its near financial collapse of three years ago.

Now owned by Community Health Systems Inc., the region’s second-largest hospital shaved its losses to about $520,000 last year and still gave away $7.7 million worth of hospital care to the poor.

William Gilbert, chief executive of Deaconess, anticipates turning a profit in 2011 and bolstering services to the poor at the same time.

“We think because of the commitments we have made that we will turn that corner,” he said. “We’re moving in the right direction.”

The hospital is still in the process of aligning with the Rockwood Clinic in a far-reaching deal that should help ensure a steady flow of insured patients with needed hospital care.

Deaconess is in the process of remodeling the top floors of its health and education building to house Rockwood’s cardiology, urology and general surgery services, along with newly acquired Inland Cardiology Associates.

While Deaconess lags far behind Sacred Heart in terms of charity care, profits, patients and nearly every other financial measure, state health regulators said they were impressed with the hospital’s major investments in technology, equipment upgrades and building improvements.

Community Health’s purchase of Deaconess and Valley Hospital and Medical Center came with pledges that the hospitals would continue their legacy of caring for the poor.

Specifically, Deaconess and Valley agreed to make every reasonable effort to meet or beat the community’s average cost of providing charity care.

Deaconess has fallen a bit short, state health officials acknowledged recently.

Yet the hospital is moving in the right direction.

Bart Eggen, executive manager of the health department’s office for certification and technical support, said his office notes the charity care numbers and guidelines and said Deaconess is already offering more charity care to patients under the new owners than the hospital did when it teetered on the verge of bankruptcy in 2007 and 2008.

“We’re pleased to see Deaconess make progress,” he said.

As Deaconess attempts to rebound, its sister facility, Valley Hospital and Medical Center, posted strong results for 2010. Valley earned a $5.6 million profit and gave away $4.8 million in charity care and absorbed $8.3 million in bad debts.