On the mend

The region’s hospitals are beginning to see gains after years of financial restructuring.

Each reported improved profitability in 2006.

Though the final numbers haven’t been audited for public release, Sacred Heart Medical Center posted a modest operating margin of about 1.9 percent last year. That’s a slim $9 million profit from the region’s largest private employer, which has about 3,300 employees.

Though that result fell short of projections, Sacred Heart Chief Financial Officer Kevin Walstrom said 2007 holds more promise. The hospital will spend much of the year focusing on the complicated art of patient billing. Collecting the right data and making all the right decisions may seem an easy task, but it’s extraordinarily difficult because of multiple factors, among them varying government and private insurer payments, and changing patient diagnoses and allowable treatments.

Sacred Heart’s sister hospital in North Spokane, Holy Family, had a strong 2006, exceeding expectations because of a high number of patients.

Holy Family earned $7.8 million last year, exceeding budget expectations.

The hospitals, which operate as nonprofit charities, plow earnings back into building upgrades and new equipment and technology. Each also has decent cash reserves to help weather tough economic times or unanticipated problems.

Deaconess Medical Center and Valley Hospital and Medical Center treated more patients and finished 2006 in a stronger position, said Larry Lauxchief, chief financial officer for the hospitals’ parent organization, Empire Health Services.

At the end of 2005 Empire Health Services had restored to employees a 9 percent across-the-board wage rollback imposed several years ago.

In 2006 the organization handed out merit pay increases to some employees and boosted the pay of registered nurses to help the hospitals recruit and retain workers in those positions. Spokane is beginning to witness the same nursing shortage that many other parts of the country have been coping with for years, said Empire spokeswoman Becky Swanson.

Laux said employee turnover is beginning to ebb as pay increases. He said Empire’s marketing and advertising efforts are largely responsible for increasing patient numbers at Deaconess by 5 percent last year.

The other factor driving better revenues is what Laux called efficiency savings from the new business model the hospital has adopted under the leadership of Jeff Nelson, who became chief executive officer of Empire Health in 2004.

Laux predicted 2006 earnings at Deaconess between $4 million and $5 million would be bested in 2007.

Kootenai Medical Center in Coeur d’Alene had an exceptional year, based in part on increased Medicare reimbursements, said Chief Financial Officer Tom Legel.

KMC, which operates as a state hospital district, earned income of $11.1 million. That’s a 6 percent operating margin that beat last year’s budget projection.

In 2007 KMC expects to earn about $9.4 million.

All Spokane hospitals exceed new voluntary charity care guidelines adopted this year by the Washington State Hospital Association. Now they want federal and state lawmakers to respond by boosting reimbursement rates for Medicare, the federal program insuring seniors, and Medicaid, the federal/state collaboration the insures the poor and disabled. Also, the hospital association is pushing the state to further subsidize health insurance for children and other Washington residents struggling to keep paying what often amounts to a double-digit premium increases each year.

“It is kind of a teeter-totter that we’re trying to walk on,” Laux said.