Operating with success

Spokane hospitals began restructuring the way they operate and found new ways to make money and trim costs in 2005. It’s a practice they plan to continue this year.

The changes were quick and necessary after a difficult 2004 when both Sacred Heart Medical Center and Deaconess Medical Center lost millions of dollars in one of their worst financial years in memory.

This coming year should continue last year’s progress, hospital executives say, as long as there are no unforeseen problems.

The hospitals are now better prepared to deal with Spokane’s changing economy and what it means to the bottom line. For example, bad debts accrued from uninsured patients and traditional charity care write-offs may not ebb in 2006, but at least the hospitals now know what to expect.

That’s a departure from 2004, when several years of layoffs at large companies that offered good pay and good benefits started showing up on the hospitals’ books.

Companies like Kaiser Aluminum, Telect Inc., and Agilent laid off hundreds of people. Many were left without insurance.

The numbers of uninsured people seeking care at area hospitals has reached a plateau, according to Michael Banks, chief financial officer at Sacred Heart. The second-largest hospital in the state rebounded from a $3.9 million loss in 2004 to earn $15 million in 2005. This year Sacred Heart intends at least a match of its performance last year.

The Deaconess turnaround is more dramatic.

The hospital took a $35 million loss in 2004 but was on pace to earn a small profit of between $2 million and $3 million in 2005. Officials were so confident of success that Deaconess’ parent company, Empire Health Services, donated a half-million dollars to the Hurricane Katrina relief effort.

Those involved in the financial end of health care are averse to making bold predictions for 2006, yet Banks and Deaconess Chief Financial Officer Larry Laux say progress will continue even as concerns linger over low Medicare and Medicaid reimbursements.

Both Empire Health Services, which operates Deaconess and Valley Hospital and Medical Center, and Providence Services, which operates Sacred Heart and Holy Family Hospital, point to the things that they can control, from staffing levels to billing practices, and say they are in better position to regulate costs and find new revenue sources.

At Sacred Heart, consultants helped revamp the emergency room, which led to big changes throughout the hospital. The result was more patients and more appropriate staffing, according to managers.

At Deaconess, new management made tough decisions like closing pediatric services and the hospital’s well-regarded day care. The pediatric business was sent to Sacred Heart and affiliates.