KMC sees surgeries rise despite rival

When local doctors announced their intent to open a for-profit surgical hospital in Post Falls, administrators at Kootenai Medical Center immediately voiced concerns.

They feared that Northwest Specialty Surgical Center would bleed their most profitable surgeries, leaving KMC – a nonprofit community hospital – with the poorest, sickest patients.

Nine months after the surgical center’s grand opening, however, the number of surgeries performed at KMC is on the rise.

A new heart center, four new specialists and Kootenai County’s rapid population growth helped offset potential negative impacts, said Joe Morris, KMC’s chief executive officer.

In-patient surgeries – where KMC figured it would compete most directly with the new surgical center – rose by 26 percent during the first six months of 2004, compared to the same period last year.

Morris gives most of the credit to the heart center: “It’s had a very positive impact.”

KMC began offering heart surgery last September, with the intent of plugging a revenue gap created by 300-plus North Idaho residents traveling to Spokane each year for heart surgery.

Since the heart center opened, the number of related lung and vascular surgeries performed at KMC has increased as well, Morris said.

He also attributes the rise in surgeries to sheer population growth. Kootenai County is adding about 2,000 new residents each year.

The doctors who invested in Northwest Specialty Surgical Center predicted that the new hospital would impact KMC’s revenues by only 1 to 2 percent.

“There’s so much population growth, it probably warranted a facility like this,” said Nick Jenna, CEO of Northwest Specialty Surgical Center.

Northwest Specialty Surgical Center is a joint venture between local physician-investors and Chicago-based National Surgical Hospitals.

The surgical center opened in late October. It offers non-emergency surgeries in four operating rooms and two out-patient procedure rooms. So far, patient satisfaction is running at 98 percent on surveys, Jenna said.

About 50 physicians have medical privileges at the surgical center. The physicians also perform surgeries at KMC, Jenna said.

The physicians like the option of scheduling elective surgeries at the surgical center, according to Jenna, because they can get an operating room faster.

KMC officials dispute the contention. Morris said KMC can still schedule elective surgeries in a timely manner, even with increased demand for operating rooms from the new heart center.

According to Jenna, the new hospital will meet its goal of grossing $7.5 million to $10 million during its first 12 months in operation. KMC, in contrast, had revenues of $134 million last year and income of nearly $8 million.

Specialty hospitals remain a subject of intense national debate. “It’s more than just a Coeur d’Alene issue,” Morris said.

Specialty hospitals have cropped up in states with liberal licensing laws, such as Idaho. In Washington, hospitals must demonstrate a demand for new or expanded services through a “certificate of need” process. Idaho has no regulatory process to prevent duplication of costly health care services, Morris said.

Last year, Congress approved an 18-month moratorium on physician investment in specialty hospitals in response to lobbying from the American Hospital Association.

The measure, included in the Medicare Prescription Drug Act, also limited expansion of existing specialty hospitals.

Full-service hospitals fear that specialty hospitals will siphon the most lucrative business, leaving them to shoulder the burden of money-losing services and indigent care with fewer resources.

“You can tell which areas are profitable,” Morris said, “because that’s where we face competition.”

KMC, for instance, makes money on scheduled surgery, diagnostic testing, chemotherapy and radiology. The hospital subsidizes its emergency room operations, its 90 mental health beds, and its obstetrics and intensive care units, Morris said.

Last year, KMC wrote off more than $12 million in charity care and bad debt.

Jenna, however, says specialty hospitals are misunderstood.

“The spin out there is that we’re picking the cream of the crop, that we’re cherry picking,” he said. “We don’t do that. We take Medicaid patients, we provide indigent care.”

Jenna said he won’t have figures on Medicaid and indigent care until the surgical center completes its first 12 months.

But according to figures from the Idaho Department of Health and Welfare, the surgical center has received more than $200,000 in reimbursement for treating Medicaid patients since it opened.

The center’s patients look a lot like a cross section of North Idaho, Jenna said: “We don’t deny care to anyone.”